Starbucks Taps Digital Menus to Personalize the In-Restaurant Experience

Building on its mobile loyalty app, Starbucks is looking to take its data-informed personalization into its physical stores with digital menu boards.

On a call with analysts Tuesday (Aug. 1) discussing the brand’s third quarter FY2023 financial results, Laxman Narasimhan, CEO of the Seattle-based restaurant giant, which has more than 36,000 locations around the world, spoke to the company’s intention to personalize the experience across channels.

“We plan to move all stores to brand forward digital menu boards over the next couple of years to further sharpen personalization,” Narasimhan said.

Certainly, the brand’s digital efforts thus far have been successful at driving engagement — Narasimhan noted that rewards members accounted for 57% of tender in the United States, an increase of a few percentage points relative to last year.

Yet, for all the brand’s digital focus, in-restaurant innovation remains key. Research from PYMNTS’ study “Connected Dining: Rising Costs Push Consumers Toward Pickup,” for which we surveyed more than 2,100 U.S. consumers earlier this year, reveal that the majority of all restaurant transactions occur in stores.

For Starbucks, personalization is key to its efforts to drive frequency.

“We are revamping our approach to further accelerate digital innovation, including order, including payment and delivery enhancements in terms of speed, and personalization, which we believe leads to greater habituation by our customers,” Narasimhan noted.

The chain is a leader in the mobile ordering space, though its position has fallen somewhat in recent months. PYMNTS’ Provider Ranking of Mobile Order Ahead apps, which ranks restaurants’ ordering apps based on factors including loyalty and rewards program integrations, ordering options and usage data, has the Starbucks app in second place, just behind Domino’s. This standing marks a modest decline from the coffeehouse chain’s ranking at the time of its last earnings report, in a three-way tie for first with Domino’s and Taco Bell.

Overall, digital engagement with restaurants is on the rise. Additional research from the survey of nearly 2,500 U.S. consumers behind PYMNTS’ study, the “ConnectedEconomy Monthly Report: The Urban-Rural Health Divide Edition,” revealed that digital participation in the restaurant sector is up 9% year over year among high- and low-income consumers and up 2% among middle-income diners.

Also in the quarter, the brand’s 90-day active membership base increased 25% year over year in the quarter to 75 million. In the U.S., it grew 15% year over year to 31.4 million, though it seems that that growth has slowed in recent months, increasing only 2% relative to the prior quarter.

All told, about half of all restaurant customer use loyalty programs at quick-service restaurants (QSRs), according to data from PYMNTS’ study “Connected Dining: Consumers Like the Taste of Discount Meals,” which drew from a survey of more than 1,800 U.S. consumers.

Looking ahead, Starbucks is setting its sights on artificial intelligence (AI).

“As we approach the fundamental platform transformation underway with AI, we intend to invest to lead in this area, using our foundational Deep Brew capability as the launching pad,” Narasimhan said. “Our focus on these investments will remain on improving the path of experience, while elevating the customer experience and delivering productivity gains.”