April 30, 2015
Starbucks made lemonade from lemons during POS outage
Maybe it’s just me, but nothing says a merchant cares more than free stuff, even if that free stuff is coming my way because the store’s POS system has gone down. If others feel the same as I do, then Starbucks earned a lot of love last Friday evening as stores gave free drinks to customers after an internal glitch caused the chain’s POS terminals to go down in the U.S. and Canada.
After calling Starbucks "the best in technology" on CNBC’s "Squawk on the Street" earlier this week, Jim Cramer said the chain’s "customers were thrilled with the free coffee" handed out by baristas. The outage "didn’t mean anything" to investors, said Mr. Cramer, after Starbucks announced same-store sales increased seven percent during the latest quarter, well ahead of analysts’ expectations.
According to a Nation’s Restaurant News report, Starbucks management was pleased with the response of stores to the technological glitch. A number of people took to the Starbucks Partners Twitter page to tweet their appreciation.
Source: Twitter
- Point of Sale Register Outage Resolved; Starbucks Stores Opening Normally – Starbucks
- Cramer: Starbucks outage means nothing for stock – CNBC
- Starbucks back in business: Internal report blames deleted database table, indicates outage was global – GeekWire
- Restaurant Operations Watch: Starbucks pours ingenuity during POS outage – Nation’s Restaurant News
Discussion Questions
What lessons can be learned from the way Starbucks’ store staff handled the recent POS outage? Can the way Starbucks responded be applied to all retailers or are they in a unique position in that respect?
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I did some research and it seems like the district managers made their own decisions in the heat of the moment. Some went the free route, others took only cash. Regardless, the entire employee base had the customer in mind. They turned a bad situation into an opportunity to “wow” customers. Howard should be proud.
Interesting to note free coffee was not a corporate call but a local level call. I wonder if companies should plan ahead and have a plan in place in case POS systems go down.
Free coffee was a winner in this case. Wonder what the positive PR would have cost if you could have bought it?
A best-in-class response for a quick service restaurant and a testament to the solid management in place at a local/store level.
I guess we can add the cost of the lemonade to the IT budget, no biggie. Even though some might like to see the company’s executive committee bonus plan chip in a little, as in, all of the losses. What ever the reason for this debacle the root cause for a total blackout is high-level mismanagement. There are simply no positives from this mess even through all of the smoke, mirrors and of course the spin it is a mess that the company can not demonstrate will not occur again. A corporate vision with no view of the company imperatives is a demonstration of reckless abandonment and should never be canonized as a success of any kind.
Nice pick George. I agree. The incremental cost of that free coffee is minimal. The response and loyalty and word of mouth by the customers is, as they say, PRICELESS.
There is an excellent book by Gordon Bethune, From Worst to First, about the turnaround at Continental Airlines. It is about how he changed the culture from a management orientation to a customer orientation. But more important was the process. He essentially moved the decision making from a headquarters buried in financial statements to the people on the front line. Decisions could be made by counter attendants, baggage handlers, pilots, flight attendants and anybody else who came into contact with customers. The mantra was “use common sense.”
I love the way Starbucks responded. They didn’t say, “Our cash register is broken so we can’t sell you anything. You’ll have to get your coffee down the street.” Instead they thought, let’s just give the coffee away instead of inconveniencing or losing the customer. The short-term loss is a long-term gain. The customer appreciates them. And look at all of the good PR. I bet that would cost more than the coffee cost.
No doubt the success of Starbucks makes it easier to swallow the cost of the free product, but the lesson is obvious and should be considered by any retailer in a similar situation.
Simple lessons from Starbucks in this case:
Well done Starbucks, as usual.
First, lots of places give away free coffee every day. Every now and then McDonald’s will do it for a whole month. We have heard similar stories in the past from other retailers who did something similar and they were risking a lot more than a few cups of coffee. I’ve heard of grocers telling customers to just take what they have, go home, and come back later and pay when whatever crisis is over. We have also seen this backfire terribly at Walmart when the EBT system went down, and the store got wiped out.
The lesson learned is when your product only cost pennies, its not a big deal to have to give it away, so do it now and then for goodwill. In fact, perhaps Starbucks could do this at random times anyway, just to create some excitement.
The fact that the actual value of the coffee is almost nothing is not important, but rather empowering employees to make a decision. I really wonder who gave the order to give away coffee? I’m sure the scenario has been rehearsed and Starbucks was ready.
Starbucks has faced emergency situations before a lot more serious than this and they have come through such as giving bottled water to public service workers. It’s only water right? The lesson learned is don’t be cheap and just to the right thing. Still, how lucky can Starbucks be? They get to look like a hero and it didn’t cost them much. Poor Walmart, they took a beating when their EBT system went out. Maybe not so much financially, but physically. Both Walmart and the customers got bad press.
Be first in the heart and the mind of the shopper. That’s what Starbucks puts in, so it’s not surprising the local level decisions (even the ones to just take cash) are seen as “right” in the minds of their customers. Kudos earned, not just given, since I’m not a customer.
This is a great lesson in customer service. When things go wrong, do the right thing and take care of the customer beyond their expectations…and win, win, win, win….Go Starbucks for reminding us of this!