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Starbucks SBUX -0.77% is doing something unique to improve sales. It is using mobile technology to increase repeat customers. Now, the online retail vs. brick-and-mortar conflict isn’t as clearly defined as it might seem.

Magical App Makes Coffee Headache Free

Starbucks has a very handy smartphone app that will guide you to the nearest store and hold your gift card balances. At the register, they just scan your phone and you’re done.

Better yet, the app now has mobile ordering. Before you even get there, you can order your drink — customized however you like — and it will be waiting on the counter for you. You just walk in and grab it. Magic.

This is where it gets interesting: The Starbucks loyalty program ties into the app too. It uses points to incentivize behavior, much like online merchants do.

It does this by sending personalized promotion offers.

This new approach to retail marketing isn’t the old shotgun advertising (pull the trigger and hope you hit something). It’s a sniper rifle aimed right at one’s weak spot.

Source: Starbucks

Source: Starbucks

Source: Starbucks

Personalized Promotions Draw You In

Standard retail promotions — 10% off, 2 for 1, etc. — have lost a lot of their bite.

They may or may not work. Some people would have bought the product anyway, even without a discount. Others didn’t buy, but would have if the discount were just a little more or offered on a different day.

What if the store could offer each customer precisely what it takes to make them buy, and not a penny more? That’s kind of what Starbucks is doing.

Every month or so, a message might pop up that says, “Buy these three products in the next week and get 100 Bonus Stars.” Normally, you would have to spend $50 to earn 100 stars. So this isn’t a negligible amount of money.

There’s a pattern to the three products too. Two are always items you bought recently. The third one will be something you’ve never bought before. They offer you a reward for trying it… and it usually works.

Another sales tactic is the “Star Dash.” It awards escalating Bonus Stars for making multiple visits in a defined period.

You can sense the goals here: Frequency of visit and average ticket size are key metrics for any retailer. The Starbucks app tracks those by customer. Then the loyalty program offers individualized incentives.

This is remarkably similar to the way online retailers customize prices and promotions based on customer data. But it’s happening in a physical store.

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Starbucks SBUX -0.66% is doing something unique to improve sales. It is using mobile technology to increase repeat customers. Now, the online retail vs. brick-and-mortar conflict isn’t as clearly defined as it might seem.