Some time ago, innovation consultant to Fortune 500 companies and author Gregg Fraley blogged that “Starbucks is Dead.” He went on to acknowledge that his comment was a “bit of an overstatement.” But he made the observation because of his experience. According to Fraley, “Starbucks has gone from a ‘highlight of my day’ to one of avoidance. Why do I see Starbucks as dead? Because when I go its dirty, crowded, and often staffed by dizzyheads who don’t leave enough room for milk. And, this hurts the most to say, the coffee itself has slipped. I still find good cups at Starbucks, but not always.”
Given his expertise as a creative thinker, Gregg went on to note that in preparing his blog he “stumbled on My Starbucks Idea — a site for consumers to post ideas for Starbucks consideration. In just a few days participating I’ve noticed real ideation, real dialogue on the site. It’s a good signal. The heart stopped but it’s beating again. If they want to continue the recovery they’ll not only listen, they’ll take action on the ideas that have been posted. Lots of action! Good luck Howard!”
Now lets fast forward to the final quarter numbers for Starbucks in 2009 when the company reported a net profit of $241.5 million (a number almost 4 times greater than the same period a year before). Not only did Starbucks listen to the customer’s ideas of innovation but they also used the voice of the customer to regain their swagger.
Stuart Lauchlan writing for mycustomer.com notes “Starbucks’ CEO Howard Schultz is relishing the company’s reversal of fortune – and attributes the success to the firm’s focus on customer experience.”
According to the article Howard Schultz notes that,”The global economic crisis has profoundly shaken consumer confidence and retailers who want to stay relevant in the future will have no choice but to recognize and respond to this new reality. At Starbucks, we know that to continue and to accelerate our recent momentum we will have to continue to improve, continue to innovate, and continue to focus on strengthening our connection to our customers…Our holiday performance was among the best in our history thanks to improved merchandising, a highly-effective, well-designed in store customer experience, compelling value offers, disciplined inventory control and above all else, energized, passionate Starbucks partners who exceeded the expectations of our customers,”
Howard went on to note that “our customers responded enthusiastically to all of our holiday innovations and initiatives this year. Our holiday beverage platform which this year included caramel brulee latte was a big hit, delivering 30% up lift in holiday beverage sales compared to last holiday season. We offered a relevant and more focused merchandise selection, including a selection of gifts for under $10. A Starbucks card beat sales targets with over $500 million loaded in the first fiscal quarter and our legendary Christmas sled holding coffee, a seasonal favorite, celebrating its 25th Anniversary this year not only handily beat sales targets but also sold over 300, 000 of this extraordinary blend in one single day.”
In addition to seasonal product innovations, Howard spoke extensively about the success of Starbucks social media efforts, “We also advanced our partnership with Product Red by leveraging our strong Facebook presence to connect with consumers in 156 countries for a global, virtual sing-a-long to raise money for the global fund,” This effort was the largest global campaign ever on the Facebook platform and further strengthens Starbucks unique connection with our customers. I am particularly pleased to report that to date our partnership with Product Red has helped to provide over $7 million days of life saving medicine in Africa.
In the spirit of a classic comedy skit in Monty Python and the Holy Grail, it appears that “Starbucks is not dead yet.” While wounded by the recession, Starbucks has mended and returned to the basics of creating relevant innovations in product and customer experience design. How are using economic challenges to rethink your customer experience, to listen to the ideas and innovations of your customers, and to position yourself with a strong presence in the places your customers are and not where they have to come to find you?
Gregg Fraley, Starbucks listened and took action. Lots of customer-centric action.
Joseph A. Michelli, Ph.D. is a professional speaker and chief experience officer at The Michelli Experience. A New York Times #1 bestselling author, Dr. Michelli and his team consult with some of the world’s best customer experience companies.
Follow on Twitter: @josephmichelli
Joseph I’ve for many years been using Starbucks as an example of how the customer experience well executed can drive profitable growth. However from my experience in the UK and Europe I think Starbucks is still bleeding heavily perhaps not in the bottom line but certainly in return on the customer experience. I’ve yet to find a Starbcks that delivers on the promise. They are most often dirty, scruffy, crowded and staff are grumpy. I look forward to the time when I find one where I can relax with my latte and say “So this s the Starbucks experience?” Until then Howard has a lot more work to do.
Interesting piece, and yes, I would agree Starbucks is officially off life support. I think they have listened. Still, their current success is attributable as much to trimming a great deal of deadwood out of the system. It was necessary, and good on them for seeing the results.
However, I believe, that problems remain for them in truly getting back to the kind of experience that made them great. Schultz has shown great leadership in this time, but they must continue to innovate — and not just cost cut — if they want to sustain, and grow, profitability. I give them a lot of credit for taking some risks, for example their new instant coffee could be a huge winner.
I’m encouraged, and delighted — I love Starbucks! Thanks for your insightful piece Joseph.
Mark, thanks for your response here and your twitter mention. I will start following your posts. I still see the Starbucks Experience as an elevation of the QSR (quick service restaurant experience) in the US. I had a modicum of success with looking for the underlying principles of the company in my Starbucks Experience book. I think there is a bit of revitalization but it still lacks the consistent charm of a British pub where people truly “know your name.” Thanks for your post and engaging in this discussion.
Gregg, it’s an honor to build on your work. Nothing like calling you out by name (LOL). Thanks for being a sport about this. I know you wrote follow-up pieces on this issue but wanted to leverage off your provocative post of 2008. I truly enjoy your writings and must apologize for mispronouncing your name on the podcast version of this blog. I was bleary eyed from travel and read “Farley” not “Fraley” throughout. Thanks for this post but more importantly for pushing everyone who follows you to think and grow. With deep respect, Joseph