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Starbucks' loyalty program, Starbucks Rewards, is thriving, and it just a hit a milestone.
As of the first quarter of 2016, Starbucks had $1.2 billion in customer funds loaded onto plastic and mobile Starbucks cards, according to data from S&P Global Market Intelligence analyzed by the Wall Street Journal.
Starbucks Rewards, the company's loyalty program, operates on a prepaid system in which users load funds onto a Starbucks card, which they then use to purchase products. The $1.2 billion figure pales in comparison to the amount in deposits at major banks, but it's worth noting for a sense of scale that this figure is larger than the amount held at many smaller regional banks or prepaid card firms, according to MarketWatch.
The $1.2 billion points to the success of Starbucks' loyalty program, which had 12 million members in the U.S. as of Q1 2016. The $1.2 billion figure is almost double the $621 million it had it 2014, according to Bloomberg and Fortune.
The incentives the program provides gives customers reasons to use it habitually. In fact, 41% of Starbucks transactions in the U.S. and Canada came from a Starbucks card, and 24% of U.S. transactions occurred through the mobile app, according to MarketWatch.
To maintain that level of habitual use, customers must reload their cars, and they likely do this frequently because they can claim special offers after they spend a certain amount of money.
Starbucks is also planning to launch a prepaid Visa card in a partnership with JPMorgan Chase later this year, and customers can use it to buy non-Starbucks products and claim rewards. This type of card could further grow Starbucks' total holdings.
One of the biggest reasons for Starbucks Rewards' success has been Mobile Order & Pay, the company's mobile order-ahead service. Quick-service restaurants (QSRs) — also known as fast-casual restaurants — such as Starbucks have been turning to mobile order-ahead apps to extract higher sales, intensify customer loyalty, and heighten foot traffic.
Mobile order-ahead refers to a consumer-facing mobile payment platform that allows customers to order food remotely, pay for the items on their phone, and pick up their order at a specific restaurant location.
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Leading QSRs in the U.S. are beginning to adopt these platforms at an accelerated pace and are benefiting from them. Taco Bell sees 30% higher average order values on mobile compared to in-store, and Starbucks' Mobile Order & Pay already represents 10% of total transactions at high-volume stores, directly contributing to increased company sales.
Mobile order-ahead is still in its early days, but will be a $38 billion industry by 2020, accounting for 10.7% of total QSR industry sales. This will be driven by full adoption among the top QSRs in the US, the growth of mobile commerce, QSR adoption through aggregators like Grubhub, loyalty programs, higher average order values, and new buy buttons.
Evan Bakker, research analyst for BI Intelligence, Business Insider's premium research service, has compiled a detailed Mobile Order-Ahead Reportthatprofiles the companies that have proved the mobile order-ahead concept and analyzes the trends contributing to this new industry's growth.
Here are some key takeaways from the report:
- Mobile order-ahead apps — platforms that enable consumers to remotely purchase menu items for in-store restaurant pickup — are on the rise among quick-service restaurants (QSRs). We expect sales on these platforms to reach $38 billion by 2020, representing a five-year compound annual growth rate (CAGR) of 57%.
- Mobile order-ahead will ultimately have an additive effect on the QSR industry. Mobile ordering platforms have been proven to intensify customer loyalty, increase purchase frequency, and lift average ticket sizes through order customization and easier checkout options. This means that mobile ordering is not a simple substitution for in-store purchasing, but a channel that can enhance the lifetime value of QSR customers. This makes mobile order-ahead a critical channel contributing to the growth of the QSR industry.
- Alternative commerce solutions will help propel mobile ordering. Aggregators like Grubhub will onboard smaller fast-casual restaurants into the mobile ecosystem by offering them an existing app to integrate into, lowering the upfront costs of creating a mobile channel of their own. And in-store self-service kiosks will help popularize remote ordering and accustom users to less traditional forms of payment that don't require a cash register.
In full, the report:
- Forecasts the growth of the mobile order-ahead industry in the US from 2015 to 2020, including its share of total QSR sales.
- Profiles brands that are leading the migration to mobile ordering.
- Examines the alternative commerce solutions that could help popularize mobile order-ahead.
- Explains the risks and drawbacks to launching a mobile commerce platform.
- Assesses the ways both large and small brands can create a mobile order-ahead platform.
- Determines which types of fast-casual chains are in the best position to benefit from mobile order-ahead.
To get your copy of this invaluable guide, choose one of these options:
- Subscribe to an ALL-ACCESS Membership with BI Intelligence and gain immediate access to this report AND over 100 other expertly researched deep-dive reports, subscriptions to all of our daily newsletters, and much more. >> START A MEMBERSHIP
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The choice is yours. But however you decide to acquire this report, you've given yourself a powerful advantage in your understanding of mobile order-ahead.
