What must Starbucks do?

Howard Schultz’s battle cry email deriding decisions the company has made in order to grow is making the rounds. If you haven’t read it, you can read it here.

He’s concerned Starbucks is in danger of losing its soul, its uniqueness—its remarkability. Howard says the romance and theater of coffee have disappeared from Starbucks stores because Baristas now use push-button machines to make espresso drinks. That stores no longer smell like coffee and that every store looks cookie-cutter.

Howard closes the email by asking his executive team to get smarter about the business and to get more innovative to once again differentiate Starbucks.

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*** I am no longer accepting ideas. ***
Thanks to everyone who submitted ideas. The WHAT MUST STARBUCKS DO ebook will be available for download in early April. More to come...

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Hmm ... since we’ve all been to Starbucks (some of us more than once-a-day), we’re more than qualified to answer the same strategic question Howard asks of his executive team.

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So, send me an email with STARBUCKS in the subject line. Tell me what Starbucks must do to reclaim its uniqueness? To better connect with customers? To become the coffee company it once was?

My plan is to compile your answers into a free ebook. (Of course that’s contingent upon receiving good answers.) So in your responses … don’t ramble. Be brief. Be smart. Be fast. I’d like to have this ebook posted by the end of March.

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BLOGGER NOTE: Blatant inspiration from Seth Godin and his What Should Google Do? ebook.

Comments

[Brian]

I think Starbucks needs to embrace free wifi. All they have is that silly T-mobile pay service, and when there are several other coffee shops nearby that offer free wireless, I usually avoid starbucks!
B

[Vince]

John, I think it's funny that you said the book PUNK Marketing failed the Starbucks test for pointing out this very same flaw, and now we are on this very topic. Do you deem this as a legitimate concern, or not?

[johnmoore (from Brand Autopsy)]

Vince is paying attention. Nice.

Ya know, I really don't think the problem is the uniformity of store design. I might be playing my hand here but I think the visionary, Howard, is reveling in the company's history.

I riffled through my copy of Howard's book and came across a VERY INTERESTING quote that sums up what I think is happening with Howard. On pg. 306 of POUR YOUR HEART INTO IT, he writes:

"Perhaps I've set the bar too high. Like an overachieving parent, I want it all for Starbucks: success in all the conventional ways, plus an extraordinary level of innovation and style."

An "overachieving parent" ... that might best explain Howard right now.

Howard has some high expectations. Given the ubiquity of Starbucks today, it's gonna be very difficult to un-unbiquitize the ubiquitous. I’ve already received a lot good ideas from readers so who knows … so maybe Starbucks can pull it off.

[Adelino de Almeida]

Let's see the whole think for what it is: the current growth strategy is most likely not working, margins are stale and instead of activating "plan B", Starbucks' Marketing "leaks" a lamentation to the press.
The whole thing should be embarrassingly mawkish to the company: if something is not working... fix it, don't sprinkle the press with this piece of oblique self criticism.

Adelino
adelino.typepad.com

[johnmoore (from Brand Autopsy)]

Adelino ... you really think they leaked the memo? Starbucks has generally been a very guarded company as it relates to the media. I'm not sure I'm buying into your theory here.

[Adelino de Almeida]

I suspect that the "leak" may have been intentional. These are smart folks (they built a premier brand, didn't they?) so the idea that a memo as important as this would be leaked unintentionally seems far-fetched. My theory is that the whole thing is a planned marketing stunt

[Adelino de Almeida]

I've posted about it in more detail today, if that helps

[johnmoore (from Brand Autopsy)]

Adelino ... having worked in the SBUX marketing department, I gotta tell ya ... they are smart people but they don't get involved in marketing stunts. SBUX marketers are too busy handling day-to-day business than to concoct and implement a devious marketing stunt like this. Really, I'm speaking from experience here. What else have they done, marketing stunt-wise, to make you believe they are capable and devious enough to leak such an email?

[Adelino de Almeida]

There is nothing devious about it: this is actually a great PR stunt that generates free publicity:
1. Get a copywriter to mimic Schultz's style
2. Schultz approves the text
3. Schultz (or someone else for that matter)sends the email
4. a copy of the email is floated to the press
Voila, instant content for the WSJ, instant publicity for Starbucks, the true believers renew their faith, everyone basks in the warm afterglow.
Most marketing departments wish they could pull off a stunt like this.

[Ron Shevlin]

I found it interesting that the WSJ article says the memo was first posted on the Starbucks gossip site, but never said how it got there.

If this memo went from Schultz to the distribution list, then who posted it on the gossip site? If Starbucks has been so guarded, I find it unlikely that one of the senior managers would do it.

Starbucks knows its precious "experience" differentiation is slipping. I've said it before (on this site, John) -- the lines are too long, there's no place to sit, and the coffee isn't that good.

What better way to signal to its customer base that its taking this quality issue seriously than by "leaking" a so-called memo. As I blogged on my own site, this tactic is far more effective than if Starbucks took out TV and print ads and asserted it was going to fix the problem. Not as credible as a "memo" from the Chairman Howard. I agree with Adelino.

[Chris Sharkey]

It all revolves around being a public company. Schultz is a slave to two masters: The company shareholders and his "Vision" - and they are fighting each other. His vision was to grow this company as fast as possible. This requires money. So he took the company public. Shareholders want super-automatic machines, they get them. Just like any other public company, all decisions are driven by this question: How will this affect our stock price in the short term/long term?

[johnmoore (from Brand Autopsy)]

Bingo Chris ... BINGO! If a company goes public, it loses much of its ability to choose its own destiny. Public companies must meet (or better still, exceed) Wall Street's demand for profits, margins, and sales growth.

[greg]

Fascinating discussion going on, guys. As a Starbucks employee, I think Howard could learn a thing or two.

[Terry Starbucker]

I double bingo the bingo - being a public company changes everything. You can't go back. Here's what I said on my blog:

["Why all the fuss? Mainly, the "shock" of someone like Howard admitting that his vision is going off the track. When you are shooting for 40,000 stores, how can it not? While Starbucks is still a great experience, to be sure, and I remain a loyalist (and admirer) because of the consistency of the lattes and the friendliness of the staff, to go all the way back to hand-made espresso and open bins of coffee will be impossible as long as they are a public company with huge growth expectations. You can't fit a square peg into a round hole. I give Howard credit for at least keeping the original vision in the rear-view mirror, instead of the trash heap."]

Now that Howard has really sold his soul to Wall Street, the only alternative is to simplify the "experience" part to two quality elements - the product and the people. Keep the coffee good and the service bright and friendly. That should get them to 20,000 stores OK. As for 40,000, that's another story.......

Thanks for the provocative question!

[gianandrea facchini]

Terry, I agree with you when you mention the number of stores and the need to simplify, to get back to basic, in someway. To apply the same model to such a huge number of stores is almost impossible: how can you be consistent in quality and service on this large scale? Human factor, in a business like this, is too impactful to be replicated across the world without loosing something.

[Katie Konrath]

I agree with the comment about Starbucks needing to have free wifi in their stores. Both Caribou and Dunn Brothers offer wireless internet free of charge and by not offering the same consideration to their customers, Starbucks is falling behind. I used to meet customers at Starbucks and do my own work there, but I've found that Dunn Brothers is now a much better option.

Starbucks may want to focus on being an industry leader and creating a culture, but I'm willing to bet that free internet access is much more important to loyal customers than what music Starbucks recommends. It is to me!

The music and other offerings may get a shot of revenue for Starbucks, but wouldn't it be better to enhance your community of people who come in every day, settle in, and drink coffee all day?

[Alison]

I don't get why they haven't done the free WIFI thing. I don't even drink coffee, but I go to Caribou for the free wireless, and I buy COFFEE, and hot chocolate, and muffins, and scones, etc... while I am there.

[johnmoore (from Brand Autopsy)]

The Wi-Fi issue at Starbucks is interesting. I find many people assume it is free but it's not.

I find it also interesting that Starbucks has never shared financial revenue with Wall Street about their T-Mobile hotspots. On past conference calls with analysts, Starbucks execs only mention these wireless hotspots add to the overall Starbucks experience.

Having free wireless has become a cost of doing business for coffeeshops. It's become an expectation. Independent coffee shops certainly have a competitive advantage against Starbucks here.

I see Starbucks charging for wireless as a way to "self-select" their customer base. Seems as though Starbucks would rather have the 40 yr old customer using their company-issued laptop and their company paid-for T-Mobile hotspot account then they would the twentysomething customer who isn't interested in paying for wifi.

[Timothy Totten]

Here's a little perspective from a non-urbanite who lives in a small community of barely 17,000 people:

My local Starbucks is located in the (non-Super) Target store. "Becky" or "Brittany" gets out of high school and straps on her green apron in time to serve $4 lattes to soccer moms who've just dropped the kids off at the skate park.

And the place is always PACKED! Of course, I don't even stop anymore, because the "cool" is gone, but I think Starbucks has, at least in my small mid-Florida town, crossed into the mainstream.

They've become Clorox or Kleenex. They've built a name and a reputation. They've become everyday.

[Adelino de Almeida]

We may have coursed off topic, but ok.
What should Starbucks do??? Grow through product development? I guess that is too simple and not sexy enough.
Give up on on the silly "trying-to-be-a-QSR-without-being-called-a-QSR" approach and focus on its core business: coffee. Drop all the window dressing and just produce a decent coffee in stores that are attractive. Regionalize and instead of having a one-size-fits-all approach to store design, decentralize the layout. Quit wasting PR on this faddish MBA whining and do some real advertising.
As some folks have noted: if Starbucks is a publicly traded company, drop the pretense of a cultish environment and act like a real business.

[Rob Stevens]

The timing of this is eerie ... we were doing a Starbucks case study about a similar topic just a couple of weeks ago, so this whole thing has been on my mind a lot.

I blogged about it at my company's blog (http://blog.marketsync.com/2007/03/02/How+To+Fix+Starbucks.aspx), but in short, Starbucks needs to realize that the focus on efficiency is reducing the amount of time people spend interacting with the brand, so they need to find creative ways to increase that interaction without making the customer feel like their time is being wasted, like ...

- Extend the brand experience to the drive-thru. What you see at the drive-thru is VERY different than what's in the store.
- Find ways to extend the brand into the supermarket so that bottled drinks and ice cream are presented in a brand-consistent manner.

Other stuff like the coffee smell and height of the machines is easily remedied. But I also had the idea that Starbucks should start opening conference centers that serve Starbucks coffee and food. People are used to using Starbucks as a meeting place, and this would be the evolution of that.

[Valeria Maltoni]

John:

I like what Rob Stevens is saying here. Many companies make the same mistake: things have become so efficient that there is barely any time to get to know each other -- in this case the brand.

Test ideas:
The meeting space idea has merit. Perhaps to test it partner with a high-end event facility. In Philadelphia we have The Hub (http://www.thehub.com ), which has now opened an amazing space at the Cira center, right by the Amtrak train station [disclosure: I know the owners and have done events there].

Business:
Go private and reinvent the coffee business again -- back to basics.

People:
Hire creative bar tenders who can concoct wonderful coffee experiences on the spot -- who doesn't like custom? Hire smart bar tenders who can talk intelligently with business people as they are assisting them with their coffee choice. Why be afraid of interactions? Do more of them, make them meaningful and people will come back more frequently alone vs. when they are already with business associates.

[Rob Stevens]

Valeria's idea of "bartenders" reminded me of the other point I think got lost in the race for effeciency. It used to be that a "barista" was a coffee artisan, knew the lingo, knew what I liked when I walked in and wasn't afraid to tempt me with a new idea. With the push-button machines and the loss of their most talented baristas (due to attrition as well as the rapid growth), this almost never occurs now.

I think this is almost due to a cultural shift more than anything. The barista's see them as performing a task rather than crafting a drink. Given the people-orientation of the company, this is a particularly telling cultural shift.

Take the "Chantico" chocolate drink, for example. Why did it fail? It failed because the baristas weren't encouraged to experiement with it and suggest variations to customers. Couple this with the fact that reportedly the drink was a pain in the neck to make to begin with (the "task" wasn't fun), and you had a drink that they would never suggest to a customer. Thus, low sales and ultimately a failed product.

[kirsten]

Schultz should know that the best marketing solutions are simple.

A SIMPLE RECOMMENDATION:
Stop blasting loud music in Starbucks stores so SOHO (small ofc - home ofc) workers can visit and socialize when the mood hits, think, conduct conference calls, and do biz via WIFI.

WHY THIS MAKES SENSE:
Nearly half of all U.S. businesses are home-based (Source: http://washington.bizjournals.com/extraedge/washingtonbureau/archive/2006/10/09/bureau5.html?market=washington). And most companies owned by women are home-based. About 56 percent of women-owned ventures are home-based versus 47 percent for men.

kindly,
kirsten

[Kevin Dugan]

John: I beefed up my initial email to you and posted it here.

You'll see a lot of links and towards the end, most of them are to Flickr pics. There were more than 60,000 tagged with Starbucks and really support the concept of Giving Up the Brand to its customers.

Enjoy.

[Christy]

Timothy is right. I heard a couple of cashiers at the drug store bantering. One was going out to pick up snacks.

"Get me a Starbucks!" one called out.

"Starbucks?" I asked, knowing the nearest one was at least five miles away.

"Yeah, you know... those coffee drinks they serve across the street."

She pointed out the window to a Tim Horton's.

[Charles Edward Frith]

Starbucks is so mainstream.