Starbucks Has a Sneaky Way to Make an Extra $1 Billion

Starbucks pumps up its profits by customizing orders for customers.

Technology and coffee seem to go well together. The smart phone technology that makes it easy to order your favorite coffee ahead of time also allows you to customize that order and you can change it every day for up to 170,000 days.

The desire for something warm and cozy pared with the ability to choose the temperature, flavor, sweetness makes a trip into Starbucks  (SBUX) – Get Starbucks Corporation Report or through the drive though one that leaves customers feeling a warm sensation, and it’s not just the beverage.

Starbucks has claimed to be in the people business that serves coffee and allowing customers to make and create their own orders allows them to feel like they have the ultimate control. You are not customer 37, you are Hot Pumpkin Spice Latte Sarah. While it seems like such a small thing, being able to customize your drink order is just what makes the Starbucks experience, and the app makes it a seamless process to get your coffee fix.


Customization for the Win

Starbucks makes good coffee and has customer service, and while those two things make for a great customer experience they don’t always translate into profit. However, the ability to completely customize a customer’s order and deliver it repeatedly is what is delivering about a $1 billion more in profit, Starbucks executives said during an earnings call, Restaurant Business reported.

“There is no other coffee company anywhere in the world that has our ability to respond instantaneously to a customer’s request about customization,” said Starbucks Interim CEO Howard Schultz in an earnings call. “Nor is there a coffee company that has our ability behind the counter in terms of flavors, syrups, modifiers, foam, et cetera, to provide the customer what they want.”

This customization is what drives customers and apparently profits. The ability to order through the app tracks orders and customers together. Now Starbucks can see who is ordering and what they are ordering. This may not seem like a huge gain, but knowing the age of your customers helps companies determine forecasts.

One of the surprising details learned from the app tracking orders along with basic customer data is that the younger customers are ordering cold drinks with beverage modifiers. Schultz said that “Cold has certainly surprised us all at Starbucks,” meaning that having cold drinks served over hot drinks was a highly unanticipated finding.

Having key statistical data on customers tells Starbucks that its customers ordering cold drinks with modifiers are relatively young. Starbucks chief marketing officer Brady Brewer said, “the younger you go, the colder the beverage.” Schultz also said that “We’ve never wanted to see our customer base get generationally older. We want to see it get younger.”

Modifiers and Whatever that Means

The customization that Starbucks offers comes from being able to ask for a variety of things allowing customers to create their own beverage of choice. While coffee customization is not unique to Starbucks it’s certainly been in the driver’s seat for it. Coffee with cream or sugar is no longer the extent of the coffee customization.

Making the drink selection starts with the coffee itself, then whether to add milk or not. What kind of milk, whole, non-fat, almond, 2%, coconut, or soy? Then customers can choose a flavored syrup, but what flavor, and how sweet, how many pumps and maybe sugar free comes to mind next when creating the perfect drink. 

Customers might skip the flavored syrup and go for a different sweetness, like Splenda, Stevia, Sweet’N Low or Equal. So many things to choose from already, but customers can also choose to add whip or foam. The customization seems to never end, and the add ons aren’t always included with the price of the drink.

So, while customers are ordering their custom drink with the extra shot of espresso, the whip topping and chocolate syrup drizzle on top all come for a price. The customization continues to grow, and new flavors and combinations are possible. One pump of extra syrup pumps up the profits for the coffee company. Last quarter Starbucks cold orders were 76% of all sales and of those cold orders 60% of them were customized leading to higher profits just for offering some extras to the customers.

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