It’s not quite the age-old “chicken and egg question,” but in the world of mobile payments there is an interesting question involving chickens and coffee, more specifically why a leading US-based chain of coffee shops (Starbucks) has for years boasted of a wildly-popular mobile wallet, while a similarly successful company in the fast-food area (fried chicken specialist Chick-fil-A) has only recently began to focus intently on its mobile offering.
Initially released in 2009, the Starbucks app is nothing short of a phenomenon, reportedly accounting for more than 20% of turnover in the international company’s home market. By contrast, Chick-fil-A first offered a mobile app to customers in 2012, but it wasn’t until last week that it released one (called “Chick-fil-A One” – make sure to check out its dedicated website) giving customers a comprehensive array of features, including the ability to order and pay in advance. Amazingly, Chick-fil-A One rocketed to the top spot in the iTunes App Store after its launch, with more than a million downloads.
What makes the two companies’ different approaches to mobile especially interesting is the fact that they are both considered to be at the absolute pinnacle of achievement when it comes to understanding and serving customers. (Last year Chick-fil-A was named the most loved restaurant in America, and Starbucks was the only food or beverage company among Forbes’ list of most admired companies in the world.) In other words, they are as likely as any companies on Earth to know what they are doing.
One key difference is the number of repeat customer visits. The average Starbucks customer visits one of its outlets six times per month, more than the average Chick-fil-A customer visits its stores in a year. (Likewise, the top 20% of Starbucks customers go an average of four times a week, while the most devoted Chick-fil-A “fanatics” – who account for almost 50% of the company’s revenue – still go only once a month.) So from the dawn of the smartphone era it would have been clear that Starbucks had the repeat customer numbers to justify rolling out an app based on loyalty.
Meanwhile, over the same period Chick-fil-A has enjoyed a spectacular run in sales growth that has led to its position as the undisputed champ in sales per outlet among fast-food chains, at $3.1 million per restaurant, more than three times that of its key competitor KFC. But this amazing growth curve has led to amazing lines at its outlets during peak hours, which is apparently one of the key reasons for the introduction of its new app, which allows users to make orders (including custom orders) and pay in advance and avoid waiting in line. (While the Starbucks app also allows for pre-ordering, it is considered a secondary function, in part because customer traffic at coffee shops is spread out during the day.)
Intriguingly, the launch of Chick-fil-A One happened alongside an announcement by KFC that it will equip all of its outlets with mobile-payment-ready point-of-sale terminals, to cut wait times. At the same time, the company said it wasn’t quite ready to launch its own app, saying it wasn’t sure it solved a pressing customer problem.
On the surface KFC’s reluctance to launch an app may seem to make good sense, given that their own once-a-month “fanatics” – who would seem most likely to install and use a payment or ordering app – comprise just 3% of their overall customer base. That said, it is something of a baffling choice, given the overall size of KFC’s customer base, and the fact that measured as a multiple of average KFC customer spend (5.7), KFC fanatics are actually more “fanatical” than Chick-fil-A fanatics, who only spend 4.6 times that of average customers. This suggests that there may be millions of customers engaged enough to install and use a KFC app, which could cut wait times for other customers and otherwise help the company close the growing gap with its innovative competitor. It is also more than a little strange that any major company would in mid-2016 think it newsworthy that they are installing NFC-enabled POS systems, which have already been broadly adopted by retailers who face none of the time-critical issues KFC does.
Either way, the “chicken and coffee” question demonstrates that mobile wallet and payment technologies are not one-size-fits all. And unlike the chicken and egg question, we know what should come first: A mobile wallet expert listening closely to how merchants or financial institution actually run and want to grow their businesses.