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Starbucks' Digital Flywheel Program Will Use Artificial Intelligence

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Global coffee giant Starbucks (SBUX - Free Report) is the latest conglomerate to announce a new business initiative that will utilize one of the hottest technologies of the moment: artificial intelligence (AI). And in this instance, Starbucks hopes to use AI to get you to buy even more coffee.

Called the Digital Flywheel Program, Starbucks will implement AI technology in its popular Starbucks Rewards members’ accounts, considering factors like order history, current weather conditions, time of day, whether it’s a weekend or a workday, and even if it’s a customer’s birthday in order to make drink and food suggestions.

The technology will also introduce new ways for Starbucks customers to order. According to the company’s global chief strategy officer Matthew Ryan, the Starbucks mobile app will start to integrate "real-time triggers and push notifications to engage customers more deeply, building on the momentum that is generating the higher spend per members,” he said during an earnings call on July 27. This means that Rewards members could order from a push notification on their smartphone or through a text message if they are near a Starbucks location.

In an interview with The Street, Brian Solis, principal analyst and futurist at Altimeter said that, “Starbucks is one of the best companies in the world that connects brand, user and consumer experience between digital mobile and the real world…They are still pushing forward, rolling out their Digital Flywheel strategy to be more dynamic to further integrate digital and real world."

Starbucks’ mobile growth has surged in recent years, and in particular, mobile ordering has been steadily on the rise. Last week, the company reported that in U.S. company-operated stores, Mobile Payment increased to 30% of transactions, while Mobile Order and Pay increased to 9% of transactions. Starbucks Rewards is growing just as fast, and this past quarter membership gained 8% year-over-year to 13.3 million active members; the program represented 36% of U.S. company-operated sales.

Coupled with this growth projectory, adding the use of AI technology is a smart move for Starbucks. It’s clear that more and more customers are becoming Rewards members and using their smartphones to pay for their coffee drinks; artificial intelligence and Digital Flywheel could very easily push both divisions even higher, spurring more spontaneous coffee purchases or adding in more food items that customers normally wouldn’t consider.

SBUX is hovering just above the flat mark in afternoon trading, and has lost about 2.7% in value year-to-date.

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