Have you ever wondered how your favourite coffee shop uses data analytics and business intelligence (i.e BI) to deliver to you the unique ‘Starbucks Experience’? The largest and the most recognizable coffee brand is one of the places where business and data analytics solutions meet in the real world. So read on to know how intelligent business strategy lies behind your freshly brewed cup of coffee!
1. Deciding a new Starbucks store location
Don’t get surprised if you find Starbucks stores clustered near each other in most of the cities across the world. However, this seems contrary to common-sense expectation as it can negatively impact the profitability of these densely located stores. But, Starbucks is a clever market player in determining an optimal store location using data analytics.
So, you will find this coffee shop in some of the most prime and strategic locations all across the world. Hence, premium, high-traffic, high visibility locations near downtown, suburban retailers, work-spaces and university campuses are the major targets of Starbucks.
How BI helps a Starbucks store?
Starbucks acquires data from Atlas that is a mapping and BI platform developed by Esri. Esri (i.e Environmental Systems Research Institute) is a geographic information system (GIS) software company. This data helps to discover a potential new store location.
Step 1- Data to Insights
Starbucks carefully analyses data on parameters such as-
- Consumer demographics
- Population density
- Average income levels
- Traffic patterns
- Public transport hubs
- Types of businesses in the location under consideration.
So it connects this data with R and builds models based on pedestrian traffic and average customer spend of the location.
Step 2- Insights to Location
This coffee chain has an amazing BI team. Using the obtained insights, it determines the economic feasibility of opening a store in that spot. Thus, presenting a splendid example of transforming data into knowledge and knowledge into business strategy. The largest speciality coffee retailer in the world is undoubtedly becoming “The Third Place” between work and home due to the convenience of their locations.
2. Deciding Starbucks menu offerings
Are you a Starbucks fan? Your beloved coffee shop has been taking notes of your tastes! Not only does Atlas help it to bag an optimal store location but even assists in customizing menu offerings. Analyzing consumer data, Starbucks drafts its new line of products to supplement the habits captured from its own stores.
Coffee and Alcohol!
Moreover, Atlas also provided data to determine areas with the highest alcohol consumption. Based on this information, Starbucks smartly picked up its stores to serve alcohol as a part of a special menu called “Starbucks Evenings”. Launched in 2010 in Seattle, it has since been expanded to other stores in different cities.
Summertide? Grab a Frappucino!
In another example, this caffeine purveyor used Atlas to predict the arrival of heat waves in the city of Memphis (United States) and launched a local Frappucino promo to beat the heat.
These data-driven menu enhancements enable Starbucks to reach out a large customer pool. Eventually, achieving the market dominance!
3. Starbucks loyalty program
Starbucks has one of the most sophisticated loyalty programs in the world making it a marketing success.
Do you happen to be a part of “My Starbucks Rewards” ? If yes, Starbucks knows who you are and how you differ from others.
As a matter of fact, it has over 10 million loyalty program members in US and around 24,000 stores worldwide. To sum up, the largest coffee brand certainly roasts a lot of data!
How Starbucks uses this data?
Can you imagine the takeaways this international brew chain derives from your data? Below is a list of the few important ones. Starbucks-
- Identifies you by linking ‘What’, ‘Where’ and ‘When’ of the products you buy.
- Tracks down your product purchasing behaviour.
- Delivers targeted advertising and planned discounts directly to your mobile devices.
Using analytics and Business Intelligence (BI), Starbucks has successfully transformed 300 pages long reports into 11 KPIs for each store across the globe.
Did you know?
Starbucks was the second most valuable fast food brand worldwide in the year 2015 (Data analytics and BI played a major role)!
So, from a single storefront in Seattle to a global coffee phenomenon, the data-driven business strategy is the soul of this coffee company. Turning disloyal customers into loyal ones highlights Starbucks’ strong business intelligence. Thus, we can say that Starbucks brews every cup of coffee with strong data science and analytics beans!