STARBUCKS' STRATEGIES FOR CONVERTING EVEN THE TOUGHEST CRITICS, AND THE COFFEE GIANTS SOCIAL MEDIA WEB CHANNELS

Love Starbucks or hate Starbucks, the company has done many things right in managing its business and brand over its history, and especially since the downturn in 2008. Even I have to admit this, despite my historically not being a Starbucks fan and someone who still doesn’t truly care for the coffee (sorry!). Yet, I have become a Starbucks brand advocate, and its brand development efforts have resulted in this change of heart, turning me into a believer.

There are several key lessons marketers should learn from Starbucks’ s
uccess:

Retrench and Recommit 

While Starbuck’s performance contracted with the rest of the economy, the company didn’t do what most would—completely shift course while limiting investments. To the contrary, while the company did step back and refocus, founder and CEO Howard Schultz instead reinvested in the brand, its heritage and its culture, reminding the company of its roots and values. Case in point: in an unprecedented move during the recession, he invested over $30 million to take 10,000 store managers and partners to New Orleans to do community service to remind them of the company’s character and values. Schultz said it well, 

“We reinvested in our people … and we reinvested in the values for the company. Another CEO would have focused solely on cutting costs.” 

He also didn’t follow the advice of one of the company’s institutional investors, who suggested that this was the one time the company could legitimately cut healthcare —an investment estimated at about $300 million. It’s this level of commitment to the brand and to the company’s employees that started to bring me into the Starbucks fold.

It's About Both Product and Brand

While quality product is critical to creating brand loyalty, you need to stand for more. In building brands, it’s important to remember that your product is not your brand and your brand is not just your product. Great brands have depth and thus are able to extend and grow beyond a single product line. Starbucks has demonstrated this reality well. A key initiative of its turnaround centered on reinvesting in its coffee’s market leadership, knowing this is crucial to the brand’s perception and to ward off competitors entering the space, such as McDonald’s. But at the same time Starbucks was solidifying its commitment to quality coffee, it emphasized that its brand had a broader definition. Schultz has said many times that Starbucks is in the people business, serving coffee, not in the coffee business, serving people. That’s a very different mindset than being narrowly focused on coffee. Starbucks has always focused on this people connection and creating the “third place” for people to connect with baristas and each other. In his recent book, Onward, Schultz writes, 

“We are in the people business and always have been.” 

This broader brand understanding allows the company to think beyond coffee and create a richer, deeper brand experience.

Seek Out Consumer Input

Brands today are not shaped by brand marketers in isolation; frankly they really never have been. But today it’s magnified: to build loyalty, brands must be owned jointly with consumers and must behave in a way that is open, social in nature, and dynamic. Building these “kinetic” relationships with their consumers requires brands to engage constantly with them and reward them for their involvement. Starbucks did this, recognizing it should reach out to consumers for input and feedback on what they wanted Starbucks do to make their experience that much better. MyStarbucksIdea.com was a significant initiative and a core focus of Starbucks’ Transformation Agenda. Customers submitted ideas, and others could then vote on them, helping Starbucks know which would draw the most interest. Only one week into launch, 100,000 people had voted on ideas, and after two months 41,000 ideas had been generated. The site also served as a feedback loop, letting Starbucks know which of the initiatives it launched were of interest to people. For example, Starbucks learned that one promotion it had launched, Treat Receipt, which allows a morning customer to get a drink in the afternoon for only $2, received significant positive feedback giving them the confidence to launch it nationally.

Innovate To Consumer Interest, Test, and Move On

Starbucks recognized that it had to stop focusing on growth as its guiding force and instead shift focus to be customer-centric. Starbucks identified key product needs its customers desired and set to work to bring them to life—from free wifi to providing healthier food options such as oatmeal, Greek yogurt, and the new bistro boxes. In doing so, Starbucks, perhaps unintentionally, actually extended its consumer reach, building affinity with secondary markets and attracting additional occasions. I can speak for this convert that these offerings have led me to become loyal to Starbucks as my third place to grab lunch on the road or conduct business while out of the office. Even better, Starbucks has been able to do this while deepening its relationship with its most loyal customers.

Lucky for Starbucks, it can test new concepts, such as those noted above, in its own “test kitchen,” trying out new offerings in a limited number of stores. If the experiments don’t work out, Starbucks simply moves on. Business literature talks often of learning from failures. Starbucks has embraced this philosophy, pushing products and services forward through real-world testing instead of getting stuck in early analysis.

Put a Face To Your Brand and Build Connection

Starbucks has a tremendous asset to help build its brand: all the people in its retail stores. Starbucks has always acknowledged this asset and has invested in training its people and giving them the ability to connect with consumers in an authentic way. In "Onward", Schultz states, 

“Starbucks is at its best when we are creating enduring relationships and personal connections. It’s the essence of our brand.”

 He recognizes what many leaders don’t—that passion is important and that instilling that passion and the company’s mission into Starbucks’ partners is critical to the brand’s success. In fact, a part of Starbucks mission statement reads,

“We’re called partners, because it’s not just a job, it’s a passion.”

Any brand leader in today’s consumer-driven world needs to find a way to build this type of personal connection with its brand and its consumer base, whether you have retail stores or not.

Follow these lessons from Starbucks, and you, too, might turn the non-believers into your brand advocates after all.

COMMENTARY:   Kathy Oneto doesn't have to apologize for not liking Starbucks.  I like it very much myself, it's too strong, especially if you drink it straight like I do, and I have said so several times in previous blog posts. For my money, Panera Bread's coffee is much better.  

You have to be impressed with the staying power of the Starbucks brand.  It's as popular outside of the U.S., as it is in the U.S. where the whole thing started.  Starbucks completely dominates the specialty coffee market,  while charging premium prices for a sub-par cup of coffee.

Schultz was so concerned that Starbucks might be losing its competitive edge and image as a people business, that he returned in January 2008 to serve as CEO again to reinvent the brand and improve sales  

On February 12, 2008, Schultz announced that all 7,000+ U.S. stores would close for three hours on February 26, 2011 for retraining.   Valerie O'Neill, a spokesperson for Starbucks said.

"We will have all new standards for how we create the drinks.  They will be trained in creating the perfect shot, steaming the milk and all the pieces that come together in a drink."

There was speculation that Starbucks would return to manual espresso machines, but O'Neil said the espresso-making equipment will be the same.

"It's really about ensuring that the customer experience that we provide is the best that it can be."

The Great Recession worsened during 2009 and hit Starbucks very hard.  Schultz had no choice but to trim labor, food, and other costs, and had cut $195 million through the first half of fiscal 2009.  Starbucks also closed numerous stores and renegotiated the leases for many of its 7,035 U.S. stores as of March 2009 at lower rents to reduce operating expenses.  In April 2009, Starbucks announced it was on pace to lower total costs by $500 million in the fiscal year ending September.    

In spite of institutional investors recommendations to eliminate company-paid healthcare insurance, Schultz retained it.  If you are going to be in the "people business" you must keep your employees happy.  As an astute business person Schultz knew that employees are an integral and very valuable part of Starbuck's brand.  Starbucks is known for its happy, enthusiastic and eager to please employees. That's really part of the overall Starbucks brand experience.

Starbuck's shift from a strategy of pursuing relentless growth to a more customer-centric business organization is clearly evident in its use of social media to create value for its business and engage with its customers.   In February 2010, Starbucks had over 700,000 followers on Twitter.  Today that number has grown to nearly 1.7 million.  Likewise, the number of Facebook fans has grown from 5.5 million to nearly 25 million.  

Starbucks’s social media strategy tenticles stretch across the Web from five principal customer touchpoints:

• Twitter - Starbucks began tweeting in November 2006.  It uses Twitter as an open communication channel with its customers, answer questions, and talk about the brand.  As of September 8, 2011, Starbucks had 1,675,571 followers and followed 78,379.
  
  
• Facebook - Starbucks uses Facebook as a social and content platform for uploading Videos, blog updates, wall posts, and photos and a place where the company can invite fans and people to events.   As of September 8, 2011, Starbucks had 25 million Facebook fans.
  
  
• foursquare - Starbucks uses foursquare  to build brand loyalty. Besides awarding badges for frequent check-ins, Starbucks awards discounts for becoming Starbucks store mayors.  On September 8, 2011, Starbucks had 233,000 foursquare followers.
• YouTube - Starbucks began uploading videos to Starbucks on November 5, 2005. Starbucks uses YouTube to post commercials and informational videos explaning the origins of the different coffee beans, the history of the brand and provide other nice tips.  As of September 8, 2011, Starbucks had 593,000 channel views and 6.9 million total views.
• MyStarbucksIdea.com - Starbucks uses “My Starbucks Idea” as a kind of social network where customers may share ideas to improve Starbucks’ service and users can see what others suggested, vote and feel part of the Brand. Their slogan is: “You know better than anyone else what you want from Starbucks. So tell us. What’s your Starbucks Idea?" Revolutionary or simple – Starbucks wants to hear the ideas from its customers and encourages them to share their ideas, tell them what think think of other people’s ideas.

 Courtesy of an article dated September 8, 2011 appearing in Popsop

 

Comments

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