Starbucks Uses AI for Direct Marketing, Sales, and Business Decisions
Thu, April 22, 2021

Starbucks Uses AI for Direct Marketing, Sales, and Business Decisions

Starbucks is easily one of the world’s major coffeehouses. Since it was established as a simple coffee shop in Seattle in 1971, it has grown to sell its products in thousands of locations across the world / Photo by: DAKALUK via Wikimedia Commons

 

Starbucks is easily one of the world’s major coffeehouses. Since it was established as a simple coffee shop in Seattle in 1971, it has grown to sell its products in thousands of locations across the world. A 2018 report showed that Starbucks had a market capitalization of $85 billion that year. Current reports show better results for the company as its market cap is at $107 billion – the highest in its history. 

Starbucks is now operating in 78 markets across the world, with the US as its largest market. As of September 2018, there were 8,575 company-operated Starbucks coffee shops in the country with an additional 6,031 stores. These make up 49.8% of all Starbucks locations. Its second-largest market is China with 16.76%. Statistics show that the average Starbucks customer visits the store about six times monthly. This means that a loyal 20% of customers go about 16 times per month.

Starbucks is also popular for its menu, which has more than 87,000 drink combinations. Of course, most of these combinations don’t appear on the menu. Lisa Passe, a Starbucks spokesperson, stated that going through all of those options would take a very long time. "If you take all of our core beverages, multiply them by the modifiers and the customization options, you get more than 87,000 combinations,” she said. 

Starbucks’ Shares and Store Sales

With over 90 million transactions per week in 25,000 stores across the world, it’s not surprising that Starbucks has managed to stay ahead of its competitors. The Seattle Times, the Northwest's most trusted source for independent journalism, wrote that the Seattle coffee giant reported net earnings of $802.9 million for the fiscal quarter ending September 29. This is an increase of 6.25 from over a year ago. 

Starbucks has gained $6.75 billion in revenues, up by 7% year over year. Its solid fourth quarter sent Starbucks’ shares up 3%, seeing a 6% rise in US comparable-store sales. Reports show that the increase is driven by the company’s announcement that it was lowering its earnings forecasts for 2020. CEO Kevin Johnson and other company executives have also emphasized Starbucks’ performance in China. Reports show that the fourth quarter same-store sales increased by 5% year year-over-year. Also, the number of stores in the country has grown by 4,125 from only 603. 

According to RIS News, the leading source for business intelligence and technology insight for retail executives, the US Starbucks Rewards loyalty program grew to 17.6 million active members at the end of the fourth quarter. This is a 15% increase year over year. “This is an important growth driver because we know from experience, that when customers join Starbucks Rewards their spend level with Starbucks increases meaningfully,” Johnson said. 

Introducing Deep Brew

Despite Starbucks’ continuous progress and nonstop success, the company still thrives to improve its sales and offer new products and services to its customers. It is continually pursuing the development of new beverages. For instance, it recently introduced its seasonal beverages like the Pumpkin Spice Latte, which has been outrageously successful. Aside from that, the company is leveraging artificial intelligence to improve its overall performance. 

In recent years, the coffee giant has been using AI and big data to help direct marketing, sales, and business decisions. AI investments have become a critical part of the company’s digital strategy and work to grow digital customer relationships. In 2017, Starbucks launched Deep Brew, a project that aims to deploy AI and machine learning across endpoints, including ordering and paying abilities on apps and drive-thru menu boards. 

According to QSR Magazine, the business-to-business magazine for the limited-service restaurant segment, this initiative has several functions. This includes ensuring locations have the right items available for every store, automating inventory and replenishment orders to save time, and predicting how much staff is needed in a particular store. Johnson stated that Deep Brew would “increasingly power our personalization engine, optimize store labor allocations, and drive inventory management in our stores.”

As of now, Deep Brew is being used to personalize customer offers and recommendations on the Starbucks mobile app. At the same time, it helps operators by anticipating equipment maintenance, sequencing orders, and streamlining supply chain logistics. “Deep Brew is a key differentiator for the future, and as we continue our quest to build world-class AI capabilities to better support partners,” Johnson added. 

Other Ways Starbucks is Using AI

According to Forbes, a global media company focusing on business, investing, technology, entrepreneurship, leadership, and lifestyle, the coffee shop is also using AI for menu updates. The menu depends on the location. For instance, the company would offer “Starbucks Evenings” in areas that would have the highest alcohol consumption to support the success of the menu update.

Starbucks uses AI to determine what products they should offer. The gathered data from its stores about how customers ordered their beverages serves as the basis of their grocery store product lines. The company can send personalized offers and discounts for its customers through AI as well. At the same time, they can send a customized email to any customer who hasn’t visited a Starbucks recently with enticing offers, encouraging them to visit the coffee shop again. 

AI is proving to be extremely useful for companies like Starbucks. It offers tons of functions and benefits that aim not only to boost sales and revenues, but also offer a unique experience to its customers. 

Starbucks uses AI to determine what products they should offer. The gathered data from its stores about how customers ordered their beverages serves as the basis of their grocery store product lines / Photo by: xxolgaxx via Pixabay