Can Yahoo Help Starbucks Bring In More Customers?

One thing you can say about Starbucks – this is a company that’s willing to take risks and reinvent itself, especially when it comes to the digital world. This week, Starbucks launched the “Starbucks Digital Network” in partnership with Yahoo! in 6,800 U.S. stores.

Starbucks introduced free Wi-Fi service to these stores in July, but now it is serving up a network available only in Starbucks stores that, the company hopes, will engage its customers in a new and novel way. Stephen Gillett, a Starbucks Executive VP and General Manager of Digital Ventures, says:

“Our customers are the inspiration for the Starbucks Digital Network. They’ve told us they want to be the first to know what’s happening in their neighborhoods and around the globe, to have an easy way to discover new music, great books and important films and find ways to be more involved in their communities. And they’re connecting with the brand digitally in numerous ways.”

Starbucks says this is “the first in-store network of its kind.” A welcome page shows up on a customer’s laptop or smartphone when they’re using Starbucks’ in-store Wi-Fi. The page, powered by Yahoo, offers premium content in six channels: News, Entertainment, Wellness, Business & Careers, My Neighborhood and Starbucks. Content providers include Bookish Reading Club, Foursquare, GOOD, LinkedIn, New Word City and The Weather Channel.

Beyond just mimicking Yahoo’s pages, Starbucks is using exclusive content as the hook. The network launch included free music tracks (exclusive free access to two songs and a video from iTunes), a movie clip (an excerpt from the film “Waiting for Superman” including a charitable tie-in with a ticket purchase) and a sneak preview of a novel (an extensive excerpt from Anita Shreve’s upcoming novel, “Rescue,” prior to its November 30 release date).

Starbucks is also getting into the eBooks business with the network. They will deliver a new series of short eBooks on business management, leadership and travel. Through the Bookish Reading Club, customers will get free access to books on a weekly basis via a new HTML5 reader. They can then order the books through a relationship with Apple.

Localized content will play a big role via the My Neighborhood channel, which includes DonorsChoose.org, Patch, Zagat, and Foursquare, which will offer web-based check-ins in every Starbucks store. Starbucks says it will increase the localized content and community features in the network over time, as well as offer “new ways to be rewarded” and add more premium content. This will also help Starbucks be able to push offers and highlight local events.

In the short term, it’s unlikely that the network will generate a lot of direct revenue, even though music, newspaper subscriptions, books and other items will be available for sale as well as various CPA offers. Obviously, revenue isn’t the primary objective – rather, it is differentiation. Starbucks needs to break itself away from such rivals as McDonald’s and Dunkin’ Donuts, who’ve eaten into the company’s profits with competitive specialty drink products, and hopes the network will make their coffee shops a destination.

The company could be on to something. Consider the fact that some 30 million people used Starbucks’ Wi-Fi service in September alone. That was a 30 percent increase from previous months, according to the company. More than half of those customers were smartphone users.

So the real motivation for the Starbucks Digital Network is making sure the huge customer base has a new and compelling reason to maintain its loyalty and return to the store to buy products, day after day.

While building a proprietary digital network is not something every retailer may be prepared to do, the Starbucks Digital Network does represent a view into the coming convergence of bricks-and-mortar retailers and the digital world. This can also be seen as a big win for Yahoo! who as a company needs some good news. Starbucks stores will be an interesting proving ground to see if the concept increases customer time in stores and thus sales. A win could mean new customers for both Yahoo! and Starbucks. If the idea catches on we may see more digital networks springing up in major retail chains in the future.

About Barry Silverstein

Barry Silverstein is a freelance writer/marketing consultant. In addition to writing for ReveNews, he is a contributing writer to Brandchannel.com, the world’s leading online branding forum. He is the author of three marketing books, The Breakaway Brand (co-author, McGraw-Hill, 2005), Business-to-Business Internet Marketing (Maximum Press, 2003) and Internet Marketing for Technology Companies (Maximum Press, 2003). Barry ran his own Internet and direct marketing agency for twenty years. You can find Barry on Twitter @bdsilv.

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