What Entrepreneurs Can Learn form Starbucks?

Recently I have been delving into Starbucks Coffee Company transformation in 2008-2014, which they undertook in response to their slowing down performance in years preceding it. Starbucks is American coffeehouse chain set up in 1971 with more than 23 thousand points of sales globally as for 2015, and over 36 million fans on Facebook. Business case of Starbucks transformation is a great example of investing in a range of new products and customer experience. As some of this tactics are inspiring and may have universal character, I decided to share them with you.

To engage customers Starbucks launched in January 2008 “My Starbucks Idea” (inspired by IdeaStorm.com, and developed together with Salesforce.com). “My Starbucks Idea” enabled customers to pitch improvement proposals for Starbucks, and from one-way suggestion box it evolved into opportunity to connect. Within first 24 hours over 7 thousand of ideas were submitted, and in the first week over 100 thousand of customers voted on suggestions such as “free Wi-Fi for all”, “give customers free coffee on their birthdays”, in-store music, menu options, or recycling tips. Starbucks has incorporated 25 the most popular ideas within first year of this initiative. By 2013 over 150 thousand of ideas were generated and 277 were incorporated, including e.g. e-gifting beverages to friends, and famous loyalty cards.

One of my favorite examples of initiative transforming Starbucks sales results within transformation period is one of loyalty reward initiatives launched by the company in summer period. A challenge for Starbucks was to stimulate recurring purchases by the same customers during the same day. As the company analysed the sales data, and customers behavior related to purchases done during customers morning walks to work, they offered each of such customer a customer reward in form of “Treat Receipt” to return the same day, but in the afternoon for Grande cold beverage at reduced price of course. Customers used it to get back to Starbucks during their lunch breaks, or on their way home. The programme appeared to be a great success and helped to mitigate “afternoon slowdowns” of lower traffic in the afternoon in the coffeehouses.

To boost financial performance Starbucks rolled out in 2011 “Starbucks Mobile App” for iPhone and iPod, which additionally stimulated usage of Starbucks Card and Rewards programme, as free application enabled to quickly convert existing Starbucks Cards to mobile-phone based accounts. As per customer research done by Starbucks indicated that they were particularly looking for value in form of loyalty, and customer rewards, electronically boosted Cards and Rewards programme appeared to be one of the biggest contributors to Starbucks transformation.
As preparing great coffee requires proper barista training, in February 2008 over 7 thousand of Starbucks were closed in the US for “Espresso Excellence Training”, despite the financial and reputational costs of having so many locations closed at the same time. Door of each closed store informed “We’re taking time to perfect our espresso. Great espresso requires practice. That’s why we’re dedicating ourselves to honing our craft”. This example shows the role of investing in essential organizational capabilities, even at the cost of trading them off with daily business activity. Wise people say that if you do what you always did, you will get what you always got.

In October 2008, when the New Orleans in US was devastated by Hurricane Katrina, leadership of Starbucks decided to organize its Leadership Conference in this city, and over 10 thousand employees of Starbucks gathered to rebuild New Orelans, and demonstrated Starbucks mission and values. The example of supporting the right cause shows that massive engagement of company employees, can both demonstrate social responsibility, unite employees, and boost energy during business transformation.
Dzida !