Ok, I have to chime in on this topic.
Starbucks (SBUX) has lost its mojo. Customers are not coming back with the same frequency and new customers are proving harder to find. The world’s leading drug company unintentionally brought this on themselves when they forgot who they were.
Prevailing thoughts point to a high price being the main issue. In a down economy price plays into some of the problems. However, this is a symptom of the real problem, not the problem itself. Let me tell you how Starbucks lost its way.
I was a loyal Starbucks customer for 7 years. I wasn’t someone who went in for a special treat once in a while. Rather, I made the company a part of my morning routine on the way to work. Get up, brush your teeth, put on clothes, stop at Starbucks, goto work. I was their dream customer.
Over the years the lines started to get longer as the company struggled to make lattes fast enough to keep up with demand. I willingly waited, as I knew my drink would be made just for me. The Barista — the coffee expert behind the counter — would grind some espresso, pausing to press it, before pouring a perfectly timed shot. If the shot was too long - it would be bitter. In this case, the Barista, striving for the perfect shot, would remake it without customers even knowing. Milk would be freshly steamed to just the right temperature. Quality was everything. More than a coffee, Starbucks and I shared a morning connection. One day it all changed.
I’m sure it didn’t change overnight, but I failed to notice the small, telltale, signs leading up to heartbreak. At first, everything seemed normal. I walked in, the pleasant person at the front cash, recognizing me, called out my drink for the Barista on the bar. By the time I swiped my Visa my drink was waiting for me. Amused at this frighteningly quick process, I stuck around to watch the next person order. How did they do that so quickly?
Unfortunately, there was nobody in line. That didn’t seem to stop the Barista from steaming some milk. Curiously, I wondered for whom? Wait, is that a new espresso machine? Why does it look so high-tech? I waited. My answers would come as soon as the next customer came in.
After a few moments my wish was granted as customer fumbled for change while ordering a drink. Like a hawk my eyes focused on the Barista. He quickly pressed a button and the espresso machine automatically dispensed a shot of espresso.The Barista used preheated milk rather than heat milk for this individual drink after the customer ordered. The drink was awaiting the customer before he had finished finding enough change to pay for it. Gone were the hand-fresh grinds, perfect shots, and freshly steamed milk.
All of the sudden, the Starbucks experience felt different. My drink tasted different. The romance of my morning coffee was gone. Of course, chemically my drink had the same composition. (Often however the milk tasted burnt - a by-product of preheating milk that has to stay warm longer while it waits for a customer.)
If you remove the romance, Starbucks reverts to selling a simple, easily substitutable, commodity. After a few mornings of unromantic experiences, I wondered why I was forking out money for a latte that tasted so blah and I stopped going.
It took a few years, but I’ve recently found a great little coffee shop that makes the best lattes in town. The company offer fresh hand-measured (and timed) espresso shots, individually heated milk regardless of how many customers are waiting, and fancy designs on their lattes. They offer the romance I was missing.
Money and speed never played a factor in my decision - Starbucks fails to understand that. As evidence I submit a recent ad campaign. The promise? Better Coffee. Faster.
The company is now openly admitting they are selling a commodity. In the place of romance they are offering operational excellence. Starbucks only thinks they sell better coffee. True coffee lovers — the ones that can tell you where the beans are from just by sipping the coffee — avoid the company.
Starbucks sold romance, and that made their coffee better for all the people that could not tell the difference.
Howard Schultz, the head bean, warned in an employee memo last year that the commoditization of the Starbucks experience was the company’s biggest threat.
Most of the company’s problems are a direct result of failing to understand what they were selling.
Rapid expansion eroded the romance - something needs to be somewhat scarce to be romantic. A store on every corner is not romantic.
At Starbucks, coffee making was a highly visible process. It was a buildup; it was wanting something and having to wait for it. Rarely did I ever witness customers becoming impatient as a result of Starbucks making a custom coffee just for them. (There are a few exceptions.)
Borrowing a concept from poorly run factories, our beloved coffee company recently started using expediters. Again, this shows a clear lack of understanding of what the company ’sells’. The new Starbucks experience, true to the expediter, resembles a factory with a myopic focus on throughput. Without the romance, customers — slowly realizing they are now buying a commodity — are wondering why the prices are so high.
It’s only a matter of time before the brand becomes less relevant unless things change.
Starbucks, if you are reading this, it’s not too late. I’ll be happy to do some consulting for you and put my MBA to some use.
Disclosure: none
