Starbucks vs. Peet’s: Why the IPhone matters more than the coffee.

The coffee at Peet’s tastes better than Starbucks (at least to me). Peet’s offers free wifi while at Starbucks you have to pay for wifi through AT&T.  The price of a medium Café Latte at Peet’s and at Starbucks (I refuse to call a medium a “Grande”) in Palo Alto is the same @ $3.35 . So at Peet’s I get better tasting coffee, free wifi and at the same price – yet I go to Starbucks more often.

Why you ask. It is because of technology and the IPhone !

For those of you that are IPhone users and coffee drinkers you will have no doubt downloaded the Starbucks locater application. An easy to use app with fully enabled location-based service the myStarbucks application finds the closest store, lets you know the store hours, get directions and even lets you invite a friend directly from the application. Now even though I prefer Peet’s coffee to Starbucks, when I am in an area I am not familiar with there is no way for me to locate a Peet’s coffee easily. As such, I simply press a couple of buttons on my IPhone and it instantly tells me the closest Starbucks and gives me directions on how to get there.

Now to make it even more easier, Starbucks is piloting a new mobile payment application that allows you to pay for your coffee using your IPhone.  Essentially you pre-load money into the application and after ordering your drinks swipe the barcode from your IPhone app over the barcode reader at the store and presto you are done. Starbucks is piloting this application at selected stores in the Silicon Valley and Seattle.

I am sure that because of these simple and easy to use IPhone applications Starbucks is attracting more customers to its stores.  It only costs $20,000 – $30,000 to build an IPhone application – a small amount compared to what I am sure is spent on traditional advertising.   You would think that Peet’s would figure this out and realize that they are losing customers to Starbucks simply because people find it harder to locate their stores.

Innovative, easy to use and relevant mobile applications are changing the way we work and play.   Companies that truly take the time to understand the needs of their customers and provide such powerful yet simple mobile solutions have much to gain.  



6 Responses

  1. completely agree!
    i am always astonished how long it takes some (most?) big companies despite budgets to react to innovations, and/ or use opportunities… because of too many people being involved in the decision process? too little courage? too big a price to pay for failure? all of the above?
    though the good thing is, that bevaviour gives little but agile companies a chance to succeed…
    sent from an iPhone, btw;)

  2. Bernd, thanks for your input. You are right, it is pretty amazing that at times the most obvious actions take the longest. I would love to understand why Peet’s coffee in this case does not think having a comparable application is worth it.

    If someone one from Peet’s reads this I would love to hear from you. I love your cofee, but pls make it easier for me to find your stores !!


  3. I partly agree with you, Zia.

    I assume you live in or around Palo Alto. So you would know the coffee places you like – Peet’s and Starbucks, without iPhone telling you where to go. And if you still go to a starbucks, then mobile app would not be the reason.

    However, you specifically might be travelling a lot and might need a locator app to find a coffee shop. But I do question whether a significant % of a given shop’s revenue comes from repeat customers or from road warriors . I think it is the former. And repeat customers already know where ths shop is – negating the effect of mobile app.

    I think incumbents have an advantage in food and beverages – even if they are more costly, people stick with them because of familiarity. If I see coke and a store brand soda – I always pick up coke.

    I am not saying mobile apps don’t add value – but I just don’t think it is a significant differentiator in your example.

  4. Vijay,

    Thanks for your input.

    I can only speak of how I use the Starbucks app. I tend to go to a lot of soccer and basketball games on the weekend for my daughters. At those time I ususally buy a coffee before the game. Almost always I use the Starbucks app to locate the closest store. I know several colleagues who do the same.

    You are correct about the brand aspect, no doubt about that. I can give you two more personal examples where mobile apps resulted in new revenue for the company I was engaging with.

    I use the new Chipotle app to pre-order 10 min prior and then just walk in and pick up my food. Now would I have gone there in any case – maybe – but this certainly made it a more popular choice for me.

    Last week I changed my ATT&T plan profile by adding unlimited text messages. Doing so was very simple through their IPhone app – especially since I was able to see exaclty how many text messages I was doing and how i could save by adding the service.

    Each of these examples are personal and certainly dont suggest that you can draw broad conclusions. But I do think smart mobile apps have positive ROI for companies and I think you will see them expand rapidly.


  5. @vijay:
    you are right that for most starbucks or peats most of the customers are repeat customers. so why bother? but then, what are à couple of ten thousand usd – or à couple of thousand lattes, for that matter – for all starbucks stores to get some extra customers? make that just 5 or 10 extra customers per store in the us, and that app should easily pay for itself 🙂
    … but maybe, like zia says, we don’t get something… or peats customers usually don’t use iphones!?:)

    anyhow, interesting question;)

  6. Don’t forget the viral effect. Even if Zia or other Starbucks loyalists would have gone there anyway without the iPhone app, they talk about it to others that arent Starbucks loyalists. So the depth of brand loyalty increases across the board.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: