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Consumer Vs. Producer Sovereignty

|Includes: MCD, Starbucks Corporation (SBUX)

"The consumer is king" (or queen) has been the watchword of American retailing for something over a century. It still represents a competitive advantage, although one that is being eroded.

Yesterday, after my favorite breakfast eatery closed down (these things happen from time to time in Manhattan), I went into a Starbucks and ordered a coffee to go with a "pre-packaged" breakfast. For the record, I have NOT considered Starbucks "big" on customer service.

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The coffee was handed to me in a cup with a lid, but without a bag. Worse yet, unbeknownst to me) the lid had a hole in the top (for a straw), meaning that I ended up spilling coffee on my shirt as I took it back to the office. After "cursing out" the joint, it will be a long time before I see the inside of a Starbucks again.

Not caring to repeat my mistake, I went to a McDonald's this morning for takeout. Here, the food is much more pedestrian, and much better served. My takeout coffee was put in a bag. And the plastic lid had no holes (although there were some areas that were deliberately weakened so you could punch a straw through if you were so minded).


One might have expected the reverse; after all, Starbucks is the "premium" operation, while McDonald's is low-budget. But that's exactly the point.

Starbucks is a pretentious company that operates by playing on the pretentiousness of its customer. It puts so much of its energy into creating a brand image that there is little left for service. Hence, they're better at giving the customer what they think they want (an upscale experience, complete with coffees in tall, grande and venti cups, that's small, medium, and large) rather than what they really want; convenient carryout and clean shirts.

McDonald's, on the other hand, knows that its food is "nothing special." What IS special about the company, is the consistency of that food, and of that service, in a well thought out set of procedures worked out by the current and former top managers of the company. (Fred Turner, President under Chairman Ray Kroc, spent a good deal of his time preparing and revising the training manual.) In the long run therefore, McDonald's does the better job of pleasing the customer. At least this one.

Which is the name of the game.