Starbucks Leverages Big Data In Its Business Strategy. (70 Characters)

Overview of Big Data and its relevance to Starbucks

Discuss about the Department of Finances and Deregulations.

‘Big Data’ is one of the important technological moves, which evaluates the study comprising of “unstructured” data utilizing its cost effective technology. Big Data is a phrase which is relevant with the progressing digital economy. It provides an opportunity for businesses looking for innovation and to be progressive in the present day economy. Starbucks Corporation, which is an American coffee company and a coffee house chain, was founded in 1971, in Seattle, Washington D.C.  It conducts 90 million transactions in a week and is spread around approximately 25000 stores in the world, in more than 65 countries. As per The Sydney Morning Herald (2015), If Starbucks desires for a better understanding about the aspects affecting its sales, it often consults the technological big end of the town – Big Data. So, it utilizes the data to track its customer’s likings and preferences. In this context, app and Starbucks prizes are important elements in its marketing and sales promotion. It’s mobile app has 17 million active users and its transactions amount to 7 million over a month. The active members of Starbucks prizes are about 13 million. With the help of this information, big data is able to collect data and analyses it to drive the desired results. (Australian Government, 2017).

With the help of Big Data, Starbucks is able to identify orders and understandings of the customer’s inclinations towards a particular product type, their time and mode of buying and by comparing its consumer data and business deals with the generally available information such as climatic conditions, financial growth and population, a better analysis of its effect on the sales can be evaluated, which would amount to better estimation of income and profits.

Big Data helps Starbucks to decide the new locations for its stores. It connects  to many external and internal APIs and links the information to build cannibalization models which will examine the effect on the current stores if another store is opened in that region.

Recently a new mobile app was launched by Starbucks for providing discounts and prizes to its customers on the basis of their buying history along with sending e-mails to the in active customers to hold their attention. The organization also focuses on the climatic conditions and the customer preferences to increase its profitability.

As per IBIS World (2015), the Café and Coffee business has developed rapidly due to Australia’s liking for coffee and its lively culture of this hot refreshing beverage. It comprises of serving food and non-alcoholic   drinks on its location to the consumers. Its major success factors consists of business proficiency of its operators and efficient cost and quality control. The Australian beverage trade contributes 0.6 % of the jobs provided by the Australian economy and offers around 16000 full time jobs. Starbucks, one of the popular coffee brand in Australia, is represented by its CEO Kevin Johnson and it distinguishes itself by its quality, taste and customer experience. In the modern times, it uses automatic espresso machines for effectiveness and safety. It provides approximately 87000 type’s drinks to its customers. 

Big Data helps Starbucks to understand customer preferences

As per Australian Beverages (2017), the Australian beverage industry comprises of   $7 billion non-alcoholic beverages all over the country. It consists of 95% of the production and provide a range of creative drinks to meet their customer’s needs. More than 46000 personnel is employed by this industry and it contributes around $1.2 million as taxes to the Australian Government. Amongst the employment generated by the Australian economy, it mainly contributes by creating employment in manufacturing, transport, merchandising and the primary industries.  As informed by the Australian Beverage Council (2017), the liquid refreshment trade contributes around $ 7 billion per annum to the economy of Australia. It imparted around $ 6.7 billion as revenue to the Australian economy in 2013-14. $450 million were paid directly as taxes in 2013-14, also the taxes paid through the supply chain amounted to $1.2 billion.

 As per the Annual Report of The Australian Department of Industry, Innovation and Science (2015), the food and beverage industry supplies its services and products to around 20% to other industries. The Coffee and Café Business is in its development stage in Australia. Its input in the country’s economy (Industry Value Added or IVA) is estimated to raise by 3.2% over 5 years by 2022-23, which would result in 2.5% growth in the GDP over the same time. Amongst its other competitors, Starbucks recorded its receipts of $ 19.2 Billion (17% growth over FY 14) and its earnings per share were $1.58 and it returned $ 2.4 Billion to its shareholders through dividends and buy back of shares. In FY 15, it financed $ 284 million in healthcare welfare and $ 167 million in Bean Stock. As per PWC, Australia (2012), by adapting the technology in their development and expansion strategies, there are various advantages to the organizations. 

Big Data helps Starbucks in aiming at its customers and comprehending their needs in advance .This is one of the important utilization of Big Data by the organizations in the modern times. The organizations are willing to enlarge their information with the social media data, sensor data, text analytics and browser logs to understand their consumers. So, with the help of Consumer Adaptive Retailing Model of Big Data, they are availing the greatest paybacks, especially from their online promotions. Big Data is also utilized for modifying the business mechanisms. The owners modify their stock based on estimations generated from weather predictions, web search movements and social media data. The specific business mechanism which can use and grow itself by using Big Data is supply chain and delivery route modifications. With the help of Big Data, the radio frequency identification sensors are utilized to trace the exact location of goods in transit and vehicles delivering them, by merging live traffic data etc. It helps in reducing their cost of sales thereby increasing their revenue by analyzing the situations when the customers are intending to purchase and what they are purchasing. It also helps in developing lucrative opportunities to attract the consumers and helps in selling third party goods and services directly to the consumer base.

Big Data helps Starbucks to identify new locations for stores

As per the Digital Economy Strategy Consultation Paper (2017) published by the Australian Government, the Australian Government is considering a  ‘forward looking plan’ to develop the role of Digital technology to increase the nation’s efficiency and effectiveness while neutralizing its negative effects. The term Digital Economy refers to the commercial and communal activities which are empowered by information and communication technologies .With the help of Digital Technology, the Australian economy can raise its GDP from $ 140 Billion to $ 250 Billion by 2025.

As per the Australian Government, Department of Finance and Deregulation (2013), Big Data Analytics implies to the data analyses that utilizes structured, semi structured and even unstructured data. The volume of the data utilized and the speed with which it is analyzed is faster than any other data interpretation or business analytical tool. It includes both structured and unstructured data including data generated from apps, GPS signals and mobile devices.

It treats data as an asset, thereby helping the organization to interpret it to get the desired result. Furthermore the data management policies enable privacy and security of data. It is also regulated by the Privacy Act 1988, which monitors the controlling of personal information all over the lifecycle of the information including retrieving, storage and protection, utilization, revealing and demolition. The use of Big Data does not alters the current securities that apply to the data ,but it increases the level of complexity in its risk management .it needs to be dealt in away so that it becomes ascertainable  ,available and operational.

As per the Article of The Harward Business School (2015), Starbucks utilizes data from Geographic Information Systems (GIS), which helps the brand to enhance its store locations. Along with this, it also differentiates in its menu offerings by locations thereby increasing its value. With the help of Big Data, it can provide customized menu offerings. It helps Starbucks to search for the areas with highest consumption of hard drinks. Thereby helping it to find the stores that would serve alcohol as a part of the special menu called “Starbucks Evenings” .It also helps Starbucks to determine the weather conditions of a particular place and to design the menu accordingly. It helps in enhancing its value besides charging some extra money on coffee.

As per the Article of The Harward Business School (2015), as a result of the digital age, where consumers demand connectivity all the time, it is able to sustain its global position by financing in digital technologies like free wife and customer loyalty app. With its stores all over the world, no other business entity is more universal, reliable symbol of free Wi-Fi, like Starbucks. Along with its unique menu, it has become a choice for a drink and internet signal all over the world.

Australian beverage industry overview

As per Marketing Week (2015), with the help of Big Data, it launched an app which was both a digital payment platform as well as customer loyalty program. With the digital card within the app, consumers are able to utilize their smart phones to make digital payment rather than using their wallets. Their buying changes into loyalty points, known as stars, which comprises in free products to the customers. With the additional feature to reload the car, it becomes customer friendly. By allowing tipping and receipts with the app, it becomes cost effective for the company and easy going experience for the customers.

The Industry receipts developed by an annualized 3.2% by 2014-15 and it is expected to grow by an annualized rate of 2.8% to attain $ 5 billion by 2019- 20.The coffee business is effected by variations in the incomes of the households. So, if there is any growth or reduction in the income of the households and their spending capabilities, it affects the receipts of the industry. The Growth of this industry also depends upon the factors such as increase in the family and work commitments and change in the business lifestyles .These have led to focusing on the pack and carry and home delivery services. This industry is expected to take more share of the food and beverages market as compared to eating outlets with formal dining due to their casual atmosphere and more convenient café style meals and snacks. 

Starbucks, the most famous coffee chain, launched its products and services, under the title of the Withers Group, which is the owner of the 7-Eleven brand. It already owns a large number of outlets, through its brand name, so it opened some joint or small casual stores. Also, it manages a large number of stores located at shopping malls and suburban centers, where there is a high intensity of traffic and gatherings are large. The use of technology has been integrated with its focus on effectiveness, which denotes that it is touching its mature phase in the café and coffee industry.

Nevertheless it has moved to the use of Big Data for its promotion of sales, thereby connecting with consumers with strong online presence. It has been accomplished through company’s website and social media and apps.  In the modern times, the consumers are preferring the online sources for choosing the eating outlets which suits their interests, with their capability to access the data regarding operating hours, variety of food available, prices and customer reviews. As per the Marketing Week (2015), it launched the Order & Pay feature, with the help of which the customers can order its products in advance without standing in lines. It provides an easy and secure payment opportunity and maximizes its revenue by modifying the labor register. So with the help of this option, 6 million orders are served by MOP each month. It has financed a large amount in digital technology, launching services such as mobile pay and order and digital loyalty programmers.

Big Data's potential in the Australian beverage industry

It is considering for partnerships for funding its digital platform and announced partnerships with The New York Times and Spotify. It is introducing an artificial intelligence powering system through which the customers are allowed to place their orders via voice command or message interface. Besides this, the liquid refreshment brand is also launching one –on –one personalized emails and apps. Starbucks has more than 40,000 types of e-mail reward offerings till now, has more than doubled customer response rates over previous system of e-mails campaigns. It also provides personalized offers to each of its customers on the homepage of the app.

According to the opinion of the AltexSoft, Inc. [US], for promoting digital technology, Starbucks Digital Ventures , has launched its “internal venture capital-style incubator. “It helps in focusing on convenience and implementation of connected devices and user voice interfaces (VUI).The organization is also planning to launch its Starbucks Rewards Prepaid Card with Chase Bank.

As per the report of Australian Council of Learned Academies (ACOLA) (2015), the technology helps in furnishing a convenient guide to deal with doubts and failures in procurement of raw materials and product evolution .As per Deloitte (2017), the adaptation of technology helps in development of the digital ecosystems across Australia.

A survey was conducted amongst 100 graduates with the intention of evaluating their awareness about Big Data and use of technology in the Australian Beverage Industry for their growth and development. It comprised of the answers – Yes, No, Can’t say.

The first question consisted of their awareness about Big Data. 70 % of them knew about Big Data, 15 % were unaware of it whereas 15 % answered as can’t say.

The second question was that do they believe that the use of technology has contributed to the growth of the café and coffee industry?

65 % of them answered as yes, whereas 15 % of them disagreed to the point and 25 % of them answers as can’t say.

The third question was Can technology pose a threat to the Industry’s data security and management systems?

 50 % of them answered as yes, 25 % of them as No, whereas 25 % of them did not know what to say.

Conclusion

Hence, to conclude, it can be said that in this digital era, it is crucial for every organization to implement digital tools and techniques in its promotional strategies, if it is desirous to outwit its international competitors (Taylor, 2012). Big Data is one such technique that can be used to analyses the customers preferences and providing the products and services as per their interest and   convenience, thus making them feel important. As per Cobanoglu , Yang,  Shatskikh & Agarwal  (2015),  customers are  permitting the organizations to use their personal data to approach their  activities and buying patterns, provided that their data is secured ,properly managed and they receive value in return.

References

ACOLA (2015) .Technology and Australia’s Future. Retrieved from https://www.acola.org.au/PDF/SAF05/SAF05_Report_web_17Sept.pdf

 Altex Soft Inc. [US] (2017).Digital Transformation Stories: How Starbucks, Walmart and Sephora Revolutionize Retail Industry. Retrieved from https://www.altexsoft.com/blog/business/digital-transformation-stories-how-starbucks-walmart-and-sephora-revolutionize-retail-industry/

Australian Beverages (2017). Refreshing our economy -The economic contribution of the Australian Beverages Industry. Retrieved from https://australianbeverages.org/wp-content/uploads/2016/03/Refreshing-our-economy-the-economic-contribution-of-the-Australian-beverages-industry.pdf

Australian Government (2017). The Digital Economy: Opening up the conversation. Retrieved from https://www.industry.gov.au/innovation/Digital-Economy/Documents/Digital-Economy-Strategy-Consultation-Paper.pdf

Australian Government. Department of Finance and Deregulation (2013) .The Australian Public Service Big Data Strategy Improved understanding through enhanced data-analytics capability. Retrieved from https://www.finance.gov.au/sites/default/files/Big-Data-Strategy.pdf

  Australian Government: Department of Industry, Innovation and Science (2015). Australian Industry Report. Retrieved from https://www.industry.gov.au/Office-of-the-Chief-Economist/Publications/Documents/AIR2015.pdf

Cobanoglu , C. , Yang, W. ,  Shatskikh, A.  & Agarwal, A.  (2015) .Are Consumers Ready for Mobile Payment? An Examination of Consumer Acceptance of Mobile Payment Technology in Restaurant Industry. Hospitality Review. 31(4).

Deloitte (2017). Australia’s Digital Pulse Policy priorities to fuel Australia’s digital workforce boom. Retrieved from https://www2.deloitte.com/content/dam/Deloitte/au/Documents/Economics/deloitte-au-economics-australias-digital-pulse-2017-010617.pdf

Harward Business School (2015) Connectivity and Coffee. Retrieved from https://digit.hbs.org/submission/connectivity-and-coffee/

Harward Business School (2015). Starbucks: Brewing up a data storm! Retrieved from https://digit.hbs.org/submission/starbucks-grinding-data/

IBIS World (2015).Cafes and Coffee Shops in Australia .Retrieved from https://www.konacoffeefarmers.org/wp-content/uploads/2015/05/Cafes-and-Coffee-Shops-in-Australia-Industry-Report-Apr-2015.pdf

 Marketing Week (2015).How Starbucks is using technology to boost revenue. Retrieved from https://www.marketingweek.com/2015/10/30/how-starbucks-is-using-technology-to-boost-revenue/

Marketing Week (2016).Starbucks lets customers order a coffee via a chatbot. Retrieved from https://www.marketingweek.com/2016/12/07/starbucks-ai-chatbot/

 PWC (2012) .Big Data – The next frontier for innovation. Retrieved from https://www.pwc.com.au/consulting/assets/publications/big-data-oct12.pdf

Taylor, A. J. (2012). Information communication technologies and new Indigenous mobilities? Insights from remote Northern Territory Communities. Journal of rural and Community Development, 7(1).

  The Sydney Morning Herald (2015). Sydney restaurants using big data to build picture of who you are and what you eat. Retrieved from https://www.smh.com.au/business/retail/sydney-restaurants-using-big-data-to-build-picture-of-who-you-are-and-what-you-eat-20150930-gjy3mo.html