Lessons from the Starbucks turnaround

Image via Wikipedia

Who would have wanted to be in Starbucks‘ shoes a year ago?  McDonald’s had launched low priced alternatives that had huge trial, the economy had stalled and consumers were balking at spending $4 per drink, even at a familiar place.  Howard Schultz announced that the company had “lost its way,” becoming too standard and corporate and less entrepreneurial, less like a local coffee shop.  The chain then closed stores on a broad scale for the first time.  Would Starbucks even be around in 3 years, or would it take its place among the dearly departed, driven by the tough economy?

Fast forward a year later.  Starbucks blows its Q4 numbers out of the water.  Get this – sales were up 4% to $2.7 billion, comparable store sales were up 4%, which was driven by both increases in store traffic and average ticket price. If that wasn’t enough, the company’s margins were up by 8.5% to 13%; as a result, the company earned 32 cents in the quarter, up from 9 cents in the year-ago quarter.  Starbucks now expects to launch 100 new locations in the U.S., and another 200 worldwide.  Wow!  Any more worries about the company’s viability?

One of the clues to Starbucks success lies in a phrase buried in their press release, “Starbucks’ consumer research shows higher satisfaction in every major indicator, such as value perception and experience, compared with a year ago.”  So the results were not driven by price increases alone (even though prices did go up), but by improvements in customer experience as well.

Starbucks customers have notices a series of improvements at the store from prior years, including reintroduction of the Pikes Peak blend and Via instant coffee  , more healthy snacks, improved staff engagement and a new, frequency-based loyalty card.

But I think there is something more.  Starbucks 2 years ago launched MyStarbuckIdea.com, a portal that permits customers to suggest improvements to the store, products, pricing, etc., and for other customers to vote and identify the most popular ideas.  Here is the kicker — real-life Starbucks employees actually respond to the ideas, suggest improvements, identify logistical issues and, when an idea is selected for development and launch (which they actually are!), providing timetables and commentary on the launch.  Imagine that — a company that asks customers for ideas, permits them to prioritize the ideas and actually assigned relatively senior people to engage in conversation with their customer community!

The site profiles Starbucks employees that are engaging with customers this week, highlights ideas with the most votes as well as the most recent ideas, and includes a small poll to gain some quick customer insight.  The question today is: What flavor of bran muffin sounds the most appealing to you?

So what can No Excuses Marketers learn from Starbucks that can be executed quickly, not break the bank and demonstrate value?  Here are three ideas:

1. Pull in your Best Customers and ask them questions. You can do this much less formally than focus groups, with all their formality and costs.  Invite 10 of your Best Customers to dinner at your offices or stores.  Get them to talk to each other as well as you.

2. Interview Best Customers who are heavy users or purchases of specific product/service categories. Ask them why they are so heavily into a specific category and not into others.  Find out about the competitive set and barriers to switching.

3. Set up a Facebook page and market it to your best customers. Facebook fan pages can be an easy way to get ideas out to your community and then to get their feedback in exchange.  Note — you have to maintain the page, which requires persistence.  Otherwise, go back to ideas 1 and 2.

Now, mystarbucksidea.com is not the sole reason for Starbucks’ success.  Clean execution, new products, a motivated salesforce all contribute in a big way to the company’s success.  The idea of soliciting ideas from customers is not new either.  But the execution is so clean, the relationship so transparent and results so clear for mystarbuckidea.com that I believe it helps to motivate Best Customers to return, refer and do all those other things that make Best Customers so important.

We can all improve our Best Customer engagement, and will see improved retention and profitability as a result.

Related articles by Zemanta

• The Mighty Return of Starbucks (slog.thestranger.com)
• Starbucks’ 1Q profit soars, beats forecasts (seattletimes.nwsource.com)
• Starbucks, Using a Start-Up Spirit, Sees a Turnaround (nytimes.com)
• Starbucks Profit Triples as Customers Return to Stores (dailyfinance.com)
• Starbucks reverses two-year sales drop (telegraph.co.uk)

Tagged as: Best Customer, best customer experience, best customers, Customer Centricity, Customer experience, Customer Management, Database marketing, Facebook, McDonald, MyStarbuckIdea.com, Retail experience, Starbucks