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March 05, 2007

Solving Starbucks Problems : One Post at a Time


The Setup
Howard Schultz, Starbucks Chairman, recently sent an email to key company executives warning them of how the Starbucks brand is being commoditized. He fears key decisions have led to “the watering down of the Starbucks experience." And he challenged his executive team to guide Starbucks back to its core roots of being a coffee company.

The email was leaked online for us all too see and to discuss.

And discuss is exactly what Paul Williams and I, two former long-time Starbucks marketers, have been doing.

We’ve talked strategy. We’ve talked tactics. We’ve taken an in-depth look at this marketing challenge. So for the next week or so, Paul and I are gonna share our exact thoughts on what Starbucks can do to follow-through on Howard’s challenge. That’s right. We are going to solve Starbucks problems one post at a time.

To play along, you’ll need to bounce between my Brand Autopsy blog and Paul’s Idea Sandbox blog. (Don’t worry, we’ll make this blog volley interesting and easy for you to follow.)

Gratuitous Backstory

Paul Williams and I are both former Starbucks marketers. Together, we have a combined 19-years of marketing experience with Starbucks. While we’re no longer working at Starbucks, we still think about and blog about Starbucks. The company played a major role in our lives—it helped shaped how we each approach marketing and business matters. And as Starbucks customers today, we keep close tabs on the company’s current marketing programs and business activities.

So when the Howard Schultz “battle cry” email was leaked to the public, the first person I contacted was Paul.

Much like the image above depicts, which by the way is a vintage year 2000 photo of me in my cubicle at Starbucks HQ, I was very surprised to read it. Wasn’t surprised at the content because every decision Howard singles out in the memo as being damaging to the brand has sparked countless debates inside Starbucks.

Paul and I traded emails back and forth and chatted over Skype discussing Howard’s email. We began to reflect on Starbucks current-day issues and quickly reverted to our old ways of sharing ideas and strategies.

You see, back in the day Paul and I would constantly riff off each other’s ideas. We’d be in a marketing meeting and all of a sudden an ideation session would breakout between us two. Paul would volley an idea to me and I would return volley. Amazingly, we managed to keep our “idea volleys” going for hours.

Needless to say, both Paul and I were ready to bear arms after reading Howard’s battle cry email challenging the company to “… make the changes necessary to evoke the heritage, the tradition, and the passion that we all have for the true Starbucks experience.

The gist of Howard’s email expressed his concern Starbucks is not the same company it once was. He fears key decisions have led to “the watering down of the Starbucks experience" and to the commoditization of the Starbucks brand.

For example, he laments the change-over to automated espresso machines. He regrets the decisions made which have reduced the presence and essence of coffee in Starbucks stores. He believes the stores no longer have the soul they once had from a design aesthetic. And, he expresses feelings the company has forsaken its coffee heritage in pursuit of more stores and greater sales.

Howard closes his email by challenging his executive team to guide Starbucks back to its core roots of being a coffee company.

That’s some fodder, eh? Ya sure, you betcha.

The Volley
As mentioned above, Paul and I are gonna share our exact thoughts on what Starbucks can do to follow-through on Howard’s challenge. We’re gonna volley blog posts back and forth with each post building off of what the other one says. At the end of our online ideation session, we should have a comprehensive strategic plan for Starbucks to use in order to make it the same company it once was.

So Paul, I just served up the conversation … the ball is in your court.

Psst!!! This is when you head over to Paul's blog to read our continuing conversation.


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Last week an e-mail, from Starbucks Coffee chairman Howard Schultz to his senior leadership team, was leaked and posted on the internet. In the note Howard outlines to his senior leadership team key issues leading to "commoditization of the brand." Ho... [Read More]

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For the same reason I refuse to buy coffee at Dunkin Donuts, most Starbucks' employees I've encountered have ZERO personality. Most of the time its some snobbish, I-hate-society artsy fartsy type who looks at you like you have 5 heads as if I'm annoying her by ordering a cup of coffee. Hiring down-to-earth, people their customers can relate to is the first I'd do if I was Starbucks.

I just read Paul Williams' Starbucks post and came over here to find out more, interesting "backstory", I'll be sure to follow this one...

A greater focus on the core product would help. Take a look at Chipotle's growth:

Adelino ... I'm a huge fan of Chipotle. And I appreciate their focused approach. But Chipotle is a much younger version of Starbucks. Chipotle is basically where Starbucks was in 1994. It'll be interesting to see how Chipotle grows in the years to come.

At some point ... mark it down here ... Chipotle will enter the Breakfast Taco market.

Chipotle stores are empty from 7am - 10am so adding breakfast taco options during that time would be a possibility. It would drive sales because no AM sales existed before so comps would rise. But, will that unfocus the company? Will that dilute the brand? Time will tell. Heck, they've haven't even entered the Breakfast Taco market but I can foresee that happening.

I think you're guessing correctly with regard to the long term strategy: once they have saturated the market, there will come a time when only day parts expansion will seem like the viable option.
Unlike Starbucks, however, Chipotle emphasizes it's product, not the "experience"; I don't remember this having been a theme in Starbuck's strategy.
I will be interesting to see how the brand develops

Adelino ... before Starbucks talked about the experience they actually talked about the coffee.

In the 80s & 90s, Starbucks promoted the heck outta the specialty coffee category. They had to. The only way the company could get people to appreciate the darker roast of Starbucks coffee was to first educate customers about specialty coffee. Starbucks spent a lot of its time in those days explaining why 100% Arabica beans are better than Robusta beans. They also frequently held coffee seminars in stores where more coffee knowledge was shared with customers.

Starbucks abandoned promoting their core product, coffee, in the early 2000s. And now, Howard Schultz wants the company to return to its coffee roots.

Again Adelino, I am a huge fan of Chipotle. The recent BusinessWeek article on Chipotle and how they rely on word-of-mouth marketing instead of traditional advertising was interesting. And your current post on Chipotel, McDs, and SBUX is also interesting.

This is a true story. In the summer of 1969, I was trying-out for the Canarsie High School (in Brooklyn, NY), football team. At the time, I was almost 16 years old, about to enter the 11th grade. I had recently transferred from Stuyvesant HS in Manhattan, where I was the starting quarterback on the JV (junior varsity), football team. I had an extremely strong arm for my age, and was able to throw a football almost 70 yards. I was not well received by the players on the Canarsie team, as they were a tight group of friends that had been playing together for years. I was good enough to challenge for the starting quarterback position, but my efforts to join the team met with much resistance. The other quarterback, already on the team, was extremely jealous of my talents, becuase it was acknowledged by the coach that I was the better player, and consequently had the inside track for the starting position. This did not sit well with the other quarterback, who went out of his way to physically hurt and humiliate me. There are two specific incidents which I can recall. To this day, they are still ingrained in my mind, as if they had just happened. One time, I was standing in front of a bunch of thorny bushes. The quarterback's best friend, "Meatball," sneakily knelt down behind me, as the quarterback violently shoved me into the sharp bushes. They laughed and taunted me, as I lay there bleeding and dazed. Another time I returned to my locker just in time to witness the quarterback urinating into my locker, pissing all over my personal belongings. He turned to me and laughed, "What are you going to do about it, huh?" I stood there, completely stunned, as he walked away, laughing hysterically. A few summers ago, I was at my high school reunion, where I struck-up a conversation with an old acquaintance. I was informed that this same person, the quarterback who tormented and humiliated me, is now the owner of Starbucks - Howard Schultz. I remember him as being a ruthless and despicable human being, who would stop at nothing to crush those who got in his way. It is common knowledge that untold numbers of "mom and pop" stores have been put out of business by the corporate monster known as Starbucks. Too, they employ over-sea/under-aged child labor to keep their operating costs at a minimum, all the while claiming to know absolutely nothing about unfair and illegal business practices. I do not patronize Starbucks, and anyone with a social conscience should not either. Both Howard Schultz and his company epitomize GREED. I remember watching his "crocodile tears" on a "60 Minutes" interview. Same old Schultz. A leopard never changes his spots...

I reall think that Starbucks is a great company, and I appreciated what is has done for its employees. I cannot wait to see if glass cups, new expresso machines, and no more bad break-fast smell help the business.

I must say too though. I got into St. Louis Break Company (Panera for people outside of STL), and my experience is great! Fresh Bread smells great, and they make their own sandwiches their too...Has Starbucks ever considered making different types of stores? Ones that have food one's that don't ones that are only drive-through...It seems like it could be a good a idea, but I wonder how well it could work. I don't know that much about running a business beings that I am only a student, but it seems like a good idea?

What I love about Starbucks. I love the coffee. And by coffee, I'm not talking Mochachino's and latte's (though I do like those). I got to my local Starbucks pretty much daily for -- the coffee. Grande Pike. House Blend. Guatamala. What I love about the experience? My local baristas are awesome. They are fun, friendly, they know my name, my order. Often, they surprise me with little things like heating my cream for me or sampling a treat. One of the baristas is an artist and they posted some of his drawings. They were great. They feel like friends. Speaking of design, I love to peruse all the cool Starbucks design work.

What I don't care for, or about? While the pastries and treats in the case look tempting... I don't order them. I checked online and they all pretty much have around 500 calories per. The lowest fat thing in there is the bagels. I don't need it. The pre-packaged sandwiches and breakfasts don't look appealing to me. If they offered something good that wouldn't totally kill my diet, I'd buy it. But they don't.

I love the gifts and often shop at Starbucks at Christmas for hostess presents and little things for friends. But here's the catch. I wish they would offer some more inexpensive options. I'm on a budget, and I can't buy $20-$30 gifts for every cocktail party hostess and co-worker I'd like to delight.

In fact, budget is a huge factor for me. I know that one of the easiest ways for me to save money would be to dump my $2-$4 a day Starbucks habit and brew at home. I know that adds up. But I love it too much. With gas and housing prices soaring through the roof and the credit crunch, I think a lot of people are trying to watch their pennies. If Starbucks is losing share, it's because of that. Forget spending millions refinishing their furniture... Starbucks legacy is the inexpensive indulgence. Unfortunately "inexpensive" is a different thing now than it was 5 years ago.

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