Digital transformation and moments of truth
I hadn’t been aware of one of the more important CRM stories of the year until I was doing research for a new book. But it’s a great story and it deserves retelling, especially if you are like me and think that focusing on customers’ moments of truth is important. Thanks to Narina Sippy for pointing it out.
Back in April, Starbucks announced revenues for the just completed quarter that exceeded year-over-year attainment by a whopping 17.8 percent. Usually when there’s a break this big it needs explaining and often there’s a logical reason. Maybe it’s because one company bought another or it introduced a world-beating product, or it opened a lot of new stores. Starbucks did add 210 stores in the quarter under discussion but 210 out of 22,088 is not likely to move the needle in the way reported. Still, there was Starbucks announcing record revenues of $4.56 billion and the aforementioned 17.8 percent improvement. For a retailer in the restaurant business that’s just about unheard of.
Also reported in the earnings results was the fact of the company’s 10.3 million loyalty members, up 10 percent from the previous quarter. According to Starbucks, an average a loyalty member spends three times as much as a non-member. But most of the credit for the outsized (should we say grande?) increase came from technology, specifically a mobile app that enables loyalty members to get their orders faster and with less hassle.
The mobile app now lets loyalty members order and pay without standing in line; moreover, it serves as a marketing platform for people well disposed to upsells. This is a big deal and not simply because it exemplifies the digital revolution taking place. Like any hype-cycle, there will be impressive successes in the everything-goes-digital transformation of business and there will be failures. The difference, as is often the case, is in understanding the application of the new technology rather than implementing it just because you hear voices.
In Starbucks’ case they didn’t simply decide to build a mobile app. Instead they decided to understand customer moments of truth and then tried to figure out how to be there for their customers. As it turns out, waiting in line at a busy coffee shop not once—to place an order—but twice, to wait for your order as well, is a major time sink for busy people. Why not skip the lines all together and just head right to pickup? That’s part of the mobile app’s appeal. Best of all, you can order on your way so that your stuff is waiting for you when you arrive, and yes, you’ve already paid for it too—so be on your way.
Now, perhaps you are reading this and thinking well, of course, why not build a mobile app to do this? It seems intuitive but if it really was there would be so many examples of companies engaging this way that my book would have written itself by now. But that’s not the case. The Starbucks example does, however, show what moments of truth and digital transformation are all about and how they can work synergistically.
The transformation is really about finding ways to proactively reach customers with something of value for their consideration and that leads directly to capturing customer data so that the vendor can know before hand where the moments of truth are and then forecast which customers to prepare for, like eliminating lines.
The Starbucks example shows two things. First, it demonstrates the right sequence for the transformation, which amounts to listen to customers first, then act. The availability of powerful technologies made a mobile app possible but it didn’t do anything to change the moments of truth. Without Wi-Fi and mobile and all the rest, customers would have had the same moments of truth and eliminating the waiting would have still been an important thing to tackle.
Previously, solving such a problem meant putting more people on duty or buying more machines to crank up output but that was capital intensive. And if no other vendor was competing on reducing wait time, those investments might have proven to be wasteful or without acceptable ROI.
The second thing I learned from this example is that the mobile app is effectively a new channel, newer even than social networking running on your phone. As a channel the mobile app needs to be filled, it needs content but not just any content. The nature of this channel is highly personal so the content needs to be also. This channel needs to be able to predict customer needs well enough that the customer will always think a suggestion is valid even if that customer rejects it.
So that’s it in a small space. Digital transformation is about getting tighter with customers, it is not primarily about saving a few parts of a penny on a transaction. The transaction is already basically free—the customer buys the device and air time and supplies the labor of the interaction. The responsibility or duty for vendors now is to be relevant.