Evan Schuman: Starbucks and the art of persuasion
- 14 January, 2014 13:56
Business would be so much easier if we didn't have to deal with human beings, with all their fears, hesitations and general avoidance of anything new. Human beings have a tendency to resist all your great ideas to make things better, be they your employees saying no to your aggressive cloud program or your customers ignoring your attempts to move them to mobile payment or biometric identification. And it can seem that the harder you push, the more they resist.
Maybe the answer is to stop trying so hard. Maybe the model you should emulate is the go-slow -- you might even say decaffeinated -- approach taken by Starbucks. The coffee purveyor seems to have some insight into how humans think.
Starbucks is considered the most successful U.S. retailer when it comes to handling mobile payments and, for that matter, mobile anything. So what makes it so different from everyone else? Pretty much everything. Most retailers interested in moving their customers to mobile payment would have seen the 2013 holiday shopping season as an opportunity to push their mobile app and encourage their shoppers to load dollars onto the mobile apps of their intended gift recipients. Not Starbucks, though. Although it is very interested in moving customers to mobile payment, it chose to not push mobile at all during the holidays. Instead, it encouraged the purchase of old-fashioned, plastic Starbucks cards, the kind that fit neatly into holiday stockings.
But wait; how is that a mobile-payment strategy? Ah, well, as soon as January rolled around, Starbucks launched a massive campaign to encourage people to take those plastic cards and use them to pour digital dollars into a Starbucks app. How did things work out? For starters, Starbucks sold a lot of Starbucks cards. On just one day (Dec. 19), the chain saw 2.4 million new card activations. In the fourth quarter, sales of cards totaled $160 million, "a significant increase over last year," said Starbucks spokesperson Linda Mills, who declined to give an actual percentage. She added that while Dec. 19 is now the title holder for new card sales, two other days (Dec. 23 and Dec. 24) also broke company records.
And what about the conversion of all those Starbucks cards to smartphone payment apps? It's still early in the month, so Starbucks isn't saying. But this isn't the first year that Starbucks has pursued this strategy, and the company will say that January is typically its No. 1 month for mobile conversions. And as I said earlier, Starbucks is generally thought to be the mobile-payment king of American retail.
So just how did Starbucks come to be so far ahead of everyone else on mobile payment? Part of the answer is luck. Many years ago, it decided to get its customers to migrate from paying with credit cards and instead to use those stored-value cards. It was a pretty easy transition, from one plastic card to another. Starbucks had no intent at the time for that to be the first step in a mobile-payment strategy, but that's what it has turned out to be. Now, years later, it is just much easier to move customers to mobile because they have already gotten used to pulling out a Starbucks-only payment "device." They only had to master one new behavior (going from using a Starbucks card to using the Starbucks app) rather than two (stop using a credit card to do something retailer-specific, and that retail-specific thing is on the customer's smartphone, not a bit of plastic in his wallet) that other retailers were faced with.
What Starbucks has figured out is the power of going slow when trying to move people into uncomfortable tech arenas. It pushed the non-threatening plastic, with great success. Once it had sold millions, then, and only then, did it make any aggressive push for mobile. Yes, Starbucks' ultimate goal was to get its customers to load the mobile app, but it moved far more dollars to its counters by taking it slow. The drip-drip of the best coffeemakers also works well for making converts comfortable.
And you want your customers to be comfortable with what you're getting them to do. Your employees too. Everyone is more comfortable with evolution than revolution.
Starbucks' mobile app is itself an example of the evolutionary, go-slow approach. It isn't fancy -- or frightening. The company didn't adopt NFC or leverage Bluetooth. Instead, it simply takes a picture of the barcode on the back of a Starbucks cards and places that image in the app. Not only does this make the transition another exercise in gradualness, but it is also remarkably inexpensive for IT, since the very same scanning equipment that works on the plastic cards also works on the phones. (Over the years, upgraded scanners have made the system more phone-friendly, but those upgrades are the same sort of equipment that other retailers have deployed.)
What are the implications for your own technology transitions? Many. Repeatedly, companies push new technology on its employees and customers by touting the benefits, but rarely do they factor in the change in behavior the move entails. When Wal-Mart pushed RFID on its suppliers, demanding that they place an RFID chip in every product shipped, it was caught off guard by nearly universal resistance. It was true that the chip would ultimately benefit both parties, but that would come only after years of labor-intensive changes made at a huge cost.
The rush to get to the ultimate goal has doomed far too many technology rollouts. But speed has the unfortunate side effect of making a risky behavior change seem even scarier. Taking baby steps may mean a rollout takes years longer, but if its acceptance is sharply increased, doesn't that increase its effectiveness? I think it does, especially when the alternative is a simple refusal to budge.
"Consumers, like employees, can only handle one adjacency at a time. No more. I can't learn two things at once," says Todd Ablowitz, a payments consultant who is president of Double Diamond Group. "If you give people too much too soon, they can't handle it. The consumer will give you more if you give them more time, provided you're giving them something that they value."
Slow rollouts take far more corporate support, since they delay the promised ROI dollars. But any initiative that's launched "because we need the revenue to hit by the end of this quarter" is misguided at best. Your need for immediate ROI is not motivating for your customers or your rank-and-file employees.
"The realities of quarterly demands cramp how companies function. Corporate attempts at innovation are literally suffocated by it," Ablowitz says. "Few companies can adequately combat that, and Starbucks is one of them."
If you think this only applies to customers and partners, think again. Employees are not slaves. The employer's ability to dictate technology choices for employees has its limits, especially among knowledge workers. Anyone who thinks IT people will do what they're told because they are told to do it -- well, they probably haven't been in IT very long.
So the next time you plan to roll out new technology, to customers, partners or employees, take a cue from Starbucks: baby steps.
Evan Schuman has covered IT issues for a lot longer than he'll ever admit. The founding editor of retail technology site StorefrontBacktalk, he's been a columnist for CBSNews.com, RetailWeek and eWeek. Evan can be reached at email@example.com and he can be followed at twitter.com/eschuman. Look for his column every Tuesday.
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