Starbucks and Big Data

Starbucks Knows The business opportunity that Starbucks sought to pursue was to grow its market in the grocery space. By designing K-Cups that appealed to consumers’ tastes, Starbucks sought to compete with other companies, such as Proctor and Gamble and Smuckers. The idea was to get Starbucks brand ready-made drinks into peoples’ homes so that they could have them without having to go to the store.

As Sarah Whitten noted, “It’s a way for [Starbucks] to expand a brand that’s already owning retail and bring it into consumer’s homes…So, they can almost double consumption because consumers are going to want to drink it when they go to the actual Starbucks locations and now they have the freedom to drink it at home.” By analyzing customer data, Starbucks was able to identify a variety of drink formulations that would appeal to the largest segment of consumers.

The analytical methodology that Starbucks used to solve the problem was to obtain “data from several consumer-research firms in shaping its new grocery product line” (Whitten). Data analytics in consumer research are helpful for “categorization, abstraction, comparison, dimensionalization, integration, iteration, and refutation” (Spiggle 491). The goal of this method is to identify patterns of meaning that can be both qualitative and quantitative and then develop a product in response to those findings so at to appeal to consumers.

It is a type of use of Big Data that is made possible by the use of technology, which can “capture rich and plentiful data on consumer phenomena in real time” (Erevelles, Fukawa and Swayne 898).

Starbucks used Big Data to obtain information on how consumers prefer their drinks when they order at the counter—whether they add milk or sugar to certain drinks, whether they like tea sweetened or unsweetened, whether they add milk to iced coffee when they drink it in their own homes.

By understanding the preferences of their consumers, looking at the data, and relating it to sales and qualitative information gathered from surveys, questionnaires and consumer interviews, Starbucks was able to construct a clear picture of its target market consumer and what that consumer would be likely to purchase in the grocery store aisle. The goal of the expansion would be to compete outside of retail and double consumption rates.

By getting consumers while they shop, Starbucks would be able to build out its brand and become more than just a coffee shop with specialty drinks for people on the go. It could also become a beverage brand that people could keep in their fridge or cupboard. The end result was that Starbucks was forecasted to be able “to grow its revenues and EPS at an annual rate of 10 percent and 17 percent, respectively, through 2020” (Whitten).

In other words, Starbucks would be making big returns on its investment in K-Cups and specialty drinks that could be purchased in the grocery aisles and taken home for personal consumption at a later time. What had started out as a company that focused on providing good coffee for lovers of coffee houses had become a big business with investors looking for growth opportunities like the one that Starbucks took by focusing on grocery products that could be used to increase sales and double consumption.

The strategy was highly effective and efficient and not only.