Who knew that drinking coffee would become such a market-moving event? Starbucks CEO Howard Schultz added another steamy leg to his business model this week in a deal positioning Spotify to be the sole provider of streaming music for all 7,000 Starbucks stores. Starting this fall, U.S. Starbucks customers who are part of its rewards program can choose what music will play in the stores they visit. Plus, they can immediately pay for the music in-store with Starbucks rewards points – like plunking virtual quarters into a digital juke box.
Although Starbucks indicates that over time every visitor worldwide will have a say in its in-store playlists, Schultz notes the Spotify deal is the first stage of a massive, next generation music ecosystem the coffee franchise is brewing up. With Teavana and LaBoulange already part of its empire, Schultz’s master plan holds potential to appeal to wide swaths of Starbucks customers seeking to eat, drink and chat.
Schultz emphasized its vibrant Baristas will be pivotal to socializing the program to customers, commenting “We are reinventing the way our millions of global customers discover music.”
Three Digital Trends To Watch In Starbucks Deal
But make no mistake, what Starbucks and Spotify are really serving up here is a preview of coming digital attractions. As we head toward the mainstreaming of the Internet of Everything (IoE), the kinds of personally tailored, streamed digital connections Starbucks envisions in its stores will be showing up in every retail outlet, and every captive environment you can think of. Think Macy’s. Think W Hotel. Think the backseat of the Uber you’re riding in, or your Ford self-driving car. Applications that will take you on a personalized driving tour of your favorite city, or send you on a private shopping spree for your next gift-giving occasion. With this deal, Starbucks and Spotify are training us to welcome the next wave of digital experiences accessible via a simple tap on our smartphones.
Here are three hot trends heading our way as the IoE begins showing itself via digitally-savvy brands like Starbucks:
- Environments will offer different interactive experiences to customers on each visit. The Spotify deal is the first salvo toward ensuring every visitor has a new in-store experience every time they come to Starbucks. Whether you’re paying for java with points or requesting your favorite tunes, you’re operating in a digital environment that – thanks to the cloud - can become smarter and smarter with every visit. Young consumers want to engage with their environment using interactive devices, including watches and wearables, so music is just one layer of an even fuller experience Starbucks is masterminding as the IoE reaches into more technology platforms.
- Digital variety drives novelty even when the physical environment is unchanging. Even if customers visit the same exact Starbucks store every morning, the Spotify deal helps the Starbucks brand create novelty within an unchanging physical footprint. Shared playlists ensure that rewards members can access the music they prefer even if the music a customer has requested plays after finishing their latte. For retailers or automotive companies, digital novelty holds big strategic value when changes to a physical footprint are costly. Rather than constantly reworking the interior of an automobile or a store layout, streaming experiences will be the catalyst that transforms boring into brilliant.
- Digital payment systems will operate beyond standard currency in captive environments. Starbucks preferred rewards users already know how easy it is to rack up points, but now they can order up their music via a pay-with-points plan. We will start to see widening acceptance of "smart transactions" that don’t involve standard currency, particularly among brands that have global platforms. Expect to see companies like AT&T, Verizon and major hotel chains like Hilton using pay-with-points in ways that boost their customer loyalty, and provide competitive differentiation. These programs are only a step away from linking digital transactions to automobiles or "smart machines" that will be our constant companions in the IoE.
Don’t expect that Apple will be a bystander as these trends unfold. Leveraging iTunes and its revamp of Beats, Apple promises to be a big player in shaping digital customer experiences. Not every musical artist loves Spotify – witness Taylor Swift and Jay Z – so stay tuned for Apple’s response to the Starbucks music deal.
Although Schultz has been tight-lipped about what will follow the initial leg of the digital ecosystem, I predict that paying for a Netflix movie or cable show using Starbucks rewards points is only a sip away. Plus, Spotify just announced yesterday that it will be offering a new streaming video service. So perhaps Schultz will go back to Spotify for a second helping in a year or so - this time walking away with a video deal.
Like a bottomless cup of coffee, streaming digital experiences that leverage the IoE will satisfy us for a long time. But ultimately, the companies and brands that offer the most unique and easy-to-use array of digital choices will win the day. Savvy CEOs like Schultz are already laying the groundwork for other forms of entertainment and messaging to be served up in personalized, streaming environments that customers can control.
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