Starbucks Finds A CRM Reason To Postal Mail Giftcards

With today's overwhelming focus on digital goods, why on Earth would a chain choose to physically send giftcards through the mail anymore? Answer: It's arguably the last reliable—and consistently legal—way to get customer addresses.

Ironically, it's Starbucks—which was one of the first to try mobile payment and intrinsically understood the social media concept years before Facebook launched—that has embraced sending giftcards (for customer birthdays, which is another clever CRM touch) through the rain/sleet/dark-of-night people.

This issue actually combines two marketing devices popular throughout the 20th Century: snailmail and plastic giftcards/loyalty cards. (Retail Columnist Todd Michaud recently wondered when the plastic cards will go away and why they haven't already.)

When compared with E-mailing an image of a coupon to be printed or—better yet—a barcode or QR code that places the digital coupon in a shopper's phone, it's almost impossible to justify the cost of printing plastic cards, paying for the labor to place them in envelopes, coughing up postage, and then waiting days for those cards to arrive. That's true, unless there's some really valuable data there.

Until recently, the go-to technique for getting such address information was to ask for ZIP codes at the POS. There are two problems with that. First, it is far too easy for customers to lie and give a far away ZIP code, assuming they opt to answer the question at all. Second, some courts have been ruling such efforts illegal.

The courts have been inconsistent, though. Williams-Sonoma, for example, went before two judges in two states and was told emphatically "no" by one and "yes" by the other. The "no" involved California state law and the "yes" involved New Jersey state law. The courts' decisions were each based on wording differences within those state laws. But with 48 other states to go and lots more federal and state judges, few chains are willing to rely on ZIP code approaches.

What Starbucks did was to tell customers that it would give away free drinks to customers on their birthdays. All they'd have to do was bring in the birthday giftcard Starbucks was about to snailmail them. And it then reminded customers that they might want to go back and update their personal information. (To quote a favorite line from The Sting: "Give yourself a couple of seconds. You wouldn't want to lie to me.")

This is Starbucks' CRM equivalent of a triple latte. One: it gives customers a concrete reason to give their correct address. (Once hooked on caffeine, there's little a Starbucks fan won't do for free Java Juice). Two: It provides an incentive to reveal a birthdate and year (although little reason to necessarily provide the correct one. Still, many will anyway). Three: The campaign requires the associated card be "active," defined as being used within the prior year. That's a nice incentive to get someone to go in and buy a full-priced coffee to get a free one.

The point of having a correct address is not necessarily to send that customer a lot of marketing collateral via snailmail. The weak ROI of printing and distributing such material will soon enough make that no longer practical. No, the intent is purely to better understand where your customers are coming from, so you can better target campaigns.

Let's say a Starbucks in Florida is seeing a lot of requests for a particular drink that it has never seen much activity with. Are the local tastes in Florida changing? Or is this because a nearby business is working with a California company and those purchases are from California workers being flown in for meetings?

Web activity is another area where geography is challenging, especially for customers who travel a lot. Even mobile won't fully resolve this issue. Sure, its geolocation capabilities can tell you where that customer is at that moment—for that matter, so can a Web visitor's IP address, with a few limitations.

But it's often important to know where customers are based, where they are from. Without doing individual research, you really need to rely on customers' giving up accurate information. As for that individual research idea, Amazon was accused of trying it and that didn't turn out well.