BrainTrust Query: Lessons From the Starbucks Turnaround
By Mark Price, Managing
Partner of M Squared Group
Through a special arrangement, presented here for
discussion is a summary of a current article from the Cultivating
Your Customers blog.
Who would have wanted to be in Starbucks’ shoes
a year ago? McDonald’s had launched low priced alternatives that had huge
trial, the economy had stalled and consumers were balking at spending $4
per drink, even at a familiar place. Howard Schultz announced that the company
had "lost its way," becoming too standard and corporate and less entrepreneurial
— less like a local coffee shop. The chain then closed stores on a broad scale
for the first time.
Fast forward a year later. Starbucks blows its Q4 numbers
out of the water. Get this — sales were up four percent to $2.7 billion. Comparable
store sales were up four percent, which was driven by both increases in store
traffic and average ticket price. If that wasn’t enough, the company’s margins
were up by 8.5 percent to 13 percent. As a result, the company earned 32 cents
in the quarter, up from nine cents in the year-ago quarter. Starbucks now expects
to launch 100 new locations in the U.S., and another 200 worldwide.
the clues to Starbucks’ success lies in a phrase buried in their press release,
"Starbucks’ consumer research shows higher satisfaction in every major indicator,
such as value perception and experience, compared with a year ago." So the
results were not driven by price increases alone (even though prices did go
up), but by improvements in customer experience as well.
have noticed a series of improvements at the store from prior years, including
reintroduction of the Pikes Peak blend and Via instant coffee, more healthy
snacks, improved staff engagement and a new, frequency-based loyalty card.
I think there is something more. Starbucks two years ago launched My Starbucks
Idea, a portal that permits customers to suggest improvements to the store,
products, pricing, etc., and for other customers to vote and identify the most
popular ideas. Here is the kicker — real-life Starbucks employees actually
respond to the ideas, suggest improvements, identify logistical issues and,
when an idea is selected for development and launch (which they actually are!),
provide timetables and commentary. Imagine that — a company
that asks customers for ideas, permits them to prioritize the ideas and actually
assigns relatively senior people to engage in conversation with their customer
The site profiles Starbucks employees that are engaging with customers
this week, highlights ideas with the most votes as well as the most recent
ideas, and includes a small poll to gain some quick customer insight. The question
on Jan. 31 was: "What flavor of bran muffin sounds the most appealing to you?"
My Starbucks Idea is not the sole reason for Starbucks’ success. Clean execution,
new products and a motivated salesforce all contribute in a big way. The idea
of soliciting ideas from customers is not new either. But the execution is
so clean, the relationship so transparent and results so clear for mystarbuckidea.com
that I believe it helps to motivate Best Customers to return, refer and do
all those other things that make Best Customers so important.
Questions: What do you think of My Starbucks Idea? Do other retailers have
as much of an opportunity to explore ideas and gain feedback from customers?
What role might it have played in Starbuck’s turnaround?