The product cycle is one familiar to every business looking to launch a new idea or tweak an existing one. You design something, you test it, and i it works, you go big on it and work it to get maximum value. Then you iterate the design, test, and decide iterate, test, decide… the cycle should be familiar to everyone.

Starbucks CEO Howard Schultz has followed that path with their mobile payment program. Their iPhone application replicates the functionality of their Starbucks Card, allowing users to carry credit on their iPhone and pay directly from the handset.

By working from a system that already works (the pre-paid loyalty card) and leveraging this system into a smartphone based mobile system is smart thinking. Apart from the ease of use for the customer, it offer a lot of advantages for Starbucks.

It all comes down to cost. By reducing the time of the in-store transaction, that increases the number of drinks that can be served. tiny savings, but multiplied over a working day, over all the stores, and it becomes very attractive. It also ties people in to thinking Starbucks because the have it on their phone, which also tracks a number of rewards for loyal customers and that keeps the customers thinking of Starbucks.

In other words this is mobile money application that stores and works with money, but also saves money.

The successful initial trial will have proven the above to management, and now it’s time to see if it can work ‘as-is’ outside the technology hubs of Seattle and the San Francisco Bay Area.

Right now putting out an iPhone application to the Silicon Valley crowd is a no-brainer in the success stakes. Taking out on a nationwide level is going to prove a much larger challenge in terms of promoting the use of the application and to a certain extent educating the user of the capabilities the smartphone variant of the card offers.

But the promise of a little bit more profit and more customer retention for the company, plus a better experience and rewards for the customer means that this will be a winning combination for everyone involved.