Beyond the Pike Place: Percolating Customer Connections with Starbucks’ Tech Brew

In a world where technology is revolutionizing every facet of business, the role of Chief Technology Officers (CTOs) has become increasingly vital. At the forefront of this technological evolution stands Vipin Gupta, the CTO of TATA Starbucks, offering invaluable perspectives on how technology intertwines with the broader organizational strategies of one of the world’s most iconic coffee brands. His insights unveil how Starbucks harnesses technological advancements not merely as tools, but as catalysts for transformative change. We delve into the realm of technology-driven strategies with Vipin Gupta, uncovering the secrets behind Starbucks’ success in navigating the digital landscape while staying true to its core values of community, connection, and the perfect cup of coffee.

As Starbucks CTO, how do you perceive the evolving role of technology in shaping and aligning with the overall business strategy at Starbucks?

The role of technology is fundamental in enabling and shaping the business strategy for any business. Not only does technology create cost and labor efficiencies across the value chain, it enables stronger customer and employee experiences, but also allows businesses to do things that otherwise are not possible. While Starbucks is gearing up for aggressive expansion in India, on one end we have developed systems that automate various processes in-store and enterprise functions, creating more access to data for various stakeholders for faster decision-making, on the other end we have endeavored to create differentiated customer experience through a loyalty mobile app. The app not only brings out the key brand elements around coffee, warmth, and connection, offers personalized experiences but also provides an easy in-store ordering experience. At the same time, we have also implemented next-gen wi-fi systems that provide differentiated connectivity experiences for customers in stores. Technology at Starbucks will continue to enable profitable growth and create consistent and differentiated experiences for customers.

We recently launched a subscription product where customers can buy a set of drinks at a relatively lower price only on our app.

What strategies or approaches do you employ to ensure that technology initiatives not only support but also drive Starbucks’ business objectives?

Our technology initiatives are strongly disciplined. Only those technology initiatives are adopted that will either create revenue or cost impact or enhance customer or partner experience. Given the current phase of business in India, there is a strong focus on creating newer digital products that will drive business. For example, we recently launched a subscription product where customers can buy a set of drinks at a relatively lower price only on our app. The drinks are credited to customers’ loyalty accounts and the drinks can be redeemed within a defined period. Another example is the use of advanced customer segmentation and omni-channel campaign management. Leveraging customer segmentation, businesses can develop a stronger understanding of customer behavior and create campaigns and offers for them. With the use of omni-channel campaign management, right communications can be sent to consumers on preferred channels (e.g. sms, email, app notification, whatsapp or social) at the right time. Customer segmentation can also be used to personalize messaging on our mobile app, showcase product favorites create more stickiness for customers and further drive the business.

Ways in which AI and data analytics are being leveraged to enhance consumer experience

i)             Making the customer experience more personalized

-              Identifying segmentations based on buying patterns and offering them personalized offers.

-              Identifying product favorites and enabling quick ordering on the App

-              Enabling personalized greetings on the App leveraging generative AI

ii)            Tracking customer experience time (i.e. entry to exit time) in stores (using computer vision analytics) to reduce friction points and identify the right staffing to enhance the customer experience

                Methods used for data collection

                Starbucks limits itself to largely first-party data that is aligned with regulatory standards. Few methods in place:

•             Loyalty registrations and associated transactional data.

•             Wi-Fi data

•             Google analytics, and vision analytics for online and offline behavioral data

•             App for customer feedback

iii)           Measures that are in place for data protection and security for customers

•             Starbucks follows global industry standards when it comes to data protection and security. This includes end-to-end data encryption while at rest and in transit and data masking

•             Our App also enables 2-factor authentication (similar to banking apps) for login.

•             Customer data is only captured via App, and not on POS

Industry-standard cyber security measures are also in place to proactively monitor, detect and respond as required

With the increasing emphasis on digital experiences, how do you envision technology’s potential impact on the coffee and retail sector, particularly in product innovation, customer engagement, or business operations? How do you anticipate the integration of emerging technologies shaping Starbucks’ strategies, offerings, or customer engagement over the next few years?

With recent advancements in technology such as mobility, cloud, analytics, generative AI etc., there is a potential to create a huge impact on product innovation, customer engagement and business operations.

Specifically

•             Use of social analytics, organizations can understand the recent customer trends, identify newer products that customers are looking for, capture feedback post-launch and quickly decide whether to scale up or not. The entire product cycle can be shortened enabling businesses to launch more innovations within the same period.

•             Mobility, cloud, analytics, and generative AI, organizations can create personalized customer engagements at scale. With the increased number of mobile users and internet penetration, mobility becomes a key lever to create brand presence in digital. Mobile apps can enable loyalty, in-store and delivery orders, disseminate coffee at-home techniques, reaching out to consumers for any new products and offers etc. Analytics and generative AI can enable personalization of content, menus, and offers that may not be possible otherwise.

•             Analytics and advanced automation can create efficiencies in business operations ranging from Finance, to legal to HR. In store development, it can help zoom in to the right locations and predict potential revenue from prospective store sites. Within the supply chain, forecasting both at store and warehouse levels can help reduce manual effort, wastage and product availability at stores. At stores, automation of daily routines of store managers, AI / ML driven labor management can free-up time for store managers to focus more on customer management. With edge computing and use of other technologies such as IoT and vision, more stores activities such as inventory management and in-store customer management can be simplified thereby creating more impact on business.

While there are many exciting technology developments, organizations will have to contextualize the use cases basis their specific business needs and investment appetite.

Are there any initiatives or explorations within Starbucks that delve into leveraging emerging technologies for business advancement or customer interaction?

We have revolutionized welcome messages for Gold customers! Now, each customer receives a personalized greeting tailored to their favorite drink, age range, and context. This ensures a unique and relevant experience, even for those who use the app daily.

At Starbucks, while the initiation selection is very disciplined, there is a continuous focus on being an early adopter on emerging technologies for business enablement. One such example is the use of generative AI to generate personalized content on mobile apps. We have revolutionized welcome messages for Gold customers! Now, each customer receives a personalized greeting tailored to their favorite drink, age range, and context. This ensures a unique and relevant experience, even for those who use the app daily. Thousands of messages are generated every day using such a technique.

We are also planning to use generative AI to generate weekly/monthly sales summaries for stores and the executive team - which takes in all possible variables, assesses which is most relevant, and creates a half-page summary. The users can then focus on actions rather than making sense of large amounts of data.

Use of vision analytics has already been discussed above where using GAIT analysis, customer behavior is captured inside the store -- Tracking customer experience time (i.e. entry to exit time) in stores (using computer vision analytics) to reduce friction points and identify the right staffing to enhance the customer experience

Methods used for data collection

Starbucks limits itself to largely first party data that is aligned with regulatory standards.

Few methods in place:

•             Loyalty registrations and associated transactional data.

•             Wi-Fi data

•             Google analytics, and vision analytics for online and offline behavioral data

•             App for customer feedback

                Measures that are in place for data protection and security for customers

•             Starbucks follows global industry standards when it comes to data protection and security. This includes end-to-end data encryption while at rest and in transit and data masking.

•             Our App also enables 2-factor authentication (similar to banking apps) for login.

•             Customer data is only captured via App, and not on POS.

Industry standard cyber security measures are also in place to proactivel y monitor, detect and respond as required.

How does Starbucks view the convergence of physical and digital experiences in the coffee and retail industry, and what steps are being taken to embrace this transformation?

Convergence of physical and digital experiences are an aspiration for all retailers across the globe. How we can ensure that physical and digital experiences are similar, how customers can seamlessly transition between the physical and digital world while interacting with the brand are some of the areas that all retailers are working towards. At Starbucks India, we are also working on the same and aspire to making it completely omni-channel in future. Our mobile app is a key platform where we have enabled:

1.            Mobile ordering: Mobile app and WhatsApp platforms tries to replicate the in-store experiences of connection and warmth with strong elements of digital avatars of baristas and coffee culture. Customers can order on the app from anywhere and pick up in-store while on the way to work or some other place. Customers are continuously updated about their order status from the store via app notifications. They can also purchase subscriptions on the App that is digital only product and redeem in stores.

2.            In-store ordering: All orders done in can be rated on the app, order history and card balances can be tracked on the mobile app. Baristas also see customers’ full loyalty profiles, favorite drinks to enable them to have a conversation with customers.

3.            Loyalty and gift cards: All loyalty related activities – earn and burn, gift cards and offers can be conducted and tracked on the app regardless of channel where the activity was initiated.

4.            Wi-fi: With a new upcoming feature, customers can connect to wi-fi via mobile app directly without requiring an OTP

As customer preferences evolve, we are continuously endeavoring to further increase the customer services that are converged in physical and digital world.

How do you collaborate with other C-suite executives to integrate technology into the broader organizational strategy at Starbucks?

We strongly believe that technology is both an enabler and driver of business. Close collaboration both at leadership level and operating teams and building trust via strong delivery is key to effective change management for technology adoption. Technology now a days has to go beyond the traditional realms of receiving a business requirements document, doing development and managing go-live to having a first-hand strong understanding of various business processes, specific function needs, proactively identifying the technology interventions that can further enable their work, implementing, change management and demonstrating business benefits of a particular implementation. We have a concept of ‘smart project managers’ where a typical IT personnel is expected to have three key skills – knowledge of one or two key business functions, ability to executive projects in an agile way, and managing vendor relations strongly. This way we are able to execute fast and with accuracy leading to credibility and trust building with other functions.

We strongly believe that technology is both an enabler and driver of business. Close collaboration both at leadership level and operating teams and building trust via strong delivery is key to effective change management for technology adoption.

Technology strategy is driven from broader organizational strategy. Close collaboration with other C-suite executives enables ‘technology / digital first’ culture and higher speed to digital transformation at Starbucks.

Vipin Gupta

CTO, TATA Starbucks

aanchalg@cybermedia.co.in