Browsing Tag

starbucks

Is Profit the Most Important Thing?

What would you say if you learned that everything you learned in business school is wrong? Not just wrong, in fact, but fundamentally and fatally flawed, rotten to the proverbial core? How would that knowledge change how you function as a business leader?

These fascinating questions were featured during The Aspen Institute Presents, a new PBS series featuring leading entrepreneurs, politician, and thought leaders discussing philosophical questions and practical challenges. The segment that really captured our attention centered on the premise that increasing shareholder value is the most important thing to any corporation, and the accuracy of that premise.

As proponents of a more humanistic approach to business, this is the type of conversation we want to see happening in every business class, everywhere. As expert after expert reported (and you can watch the entire segment here), organizations that focus too relentlessly on shareholder value as the only meaningful metric consistently fail. They’re less profitable and enjoy a shorter organizational lifespan than organizations that consider shareholder value only one of a number of relevant factors that go into determining overall profitability.

The Proven Value of A Humanistic Approach

This is consistent with what we’ve learned through our own research into Cult Brands. Dominant organizations are those organizations that clearly and concrete demonstrate their devotion to the greater good. Shifting the company’s viewpoint from a narrow focus on the immediate bottom line to a longer range, more global perspective that takes social and environmental concerns into account yields significant results in terms of customer loyalty and ongoing organizational profitability.

Don’t get us wrong. Making money is important. But it’s not the only important thing. Even in commodities industries, today’s consumer is expecting more and more from the brands they do business with. Organizational transparency and community involvement are more important than they’ve ever been. It’s especially important that a brand’s internal values be in alignment with customer expectations.

Starbucks CEO Howard Schultz has been a vocal proponent of this concept, and he shares some of the reasoning behind his philosophy here. The message that the mighty chain rose up in response to a need for community and a place to connect is one we’ve heard before, but it’s one we need to hear again and again. It is by understanding on a deep and fundamental level the needs and psychological hungers of the marketplace that we can best create products, services, and especially brands that succeed.

Starbucks maintains an enviable place in the market because Schultz views all of his decisions through a humanistic lens, asking himself if his employees would be proud of and happy to implement the decision he makes, and if he’s acting in terms of the greater good. We’ve seen the chain make some great moves along this line, such as sourcing all of the chain’s mugs from a domestic producer rather than a cheaper Chinese source. Sacrificing some measure of immediate profitability to do the right thing has proven to be a profitable model for Starbucks. It’s a replicable model that begins by understanding who your customers are and what they want the most from your brand.

December 18, 2012 by

Does Robin Hood Go To Starbucks? A Little Matter of Coffee Mugs

In Customers First, we talk about Starbucks and some of the ways that the brand appeared to be heading off track.  It’s only right and fair that we should raise our coffee mugs and salute Starbucks when they get it right.

Check out this NY Times article about Starbucks’ decision to source their coffee mugs domestically.  It’s the tale of how Starbucks, a company with 200,000 employees, started doing business with American Mug. Here’s the Cliff Notes version:

American Mug was a company that was headed toward closure.

American Mug was a company that was headed toward closure in a town full of businesses that were similarly in trouble—or already closed.

American Mug is a ceramics company. The ceramics industry has floundering badly domestically due to competition with China.

Starbucks chose American Mug as their supplier rather than go with a Chinese source even though the American-made mugs are more expensive.

Do you see what they did there?

Right in front of your very eyes, Starbucks has tapped into the power of a contemporary cultural story and leveraged it to strengthen their brand dominance and customer loyalty.

Let’s talk about that contemporary cultural story bit first. As people, we all experience problems—all kinds of problems, all of the time. We have big problems and little problems. We have problems that affect us very, very personally, and some that don’t seem to bother us at all. We identify with the problems of others—of our friends and neighbors, colleagues and countrymen.

All of these problems create a level of tension within us. Tension is no fun. It makes us uncomfortable. It makes us unhappy. We’re strongly motivated to relieve these tensions and we’re keenly aware of and generally resentful about situations where we feel ourselves powerless to effect any type of change that would relieve the tension we’re experiencing. It’s the drive to relieve tension that causes us to seek solutions to our problems.

Cultural stories are the narratives we’ve built up collectively to record and relay relevant information about the best way problems can be solved. Cultural stories contain the solutions to problems, acting as a guide that we can use when making decisions.

Robin Hood and Starbucks

In a time of great hardship and gross economic disparity, people embraced the tale of Robin Hood. He took from the rich, especially those deemed to have wealth unjustly, and gave to the deserving and virtuous poor. Cultural stories are extremely powerful forces in a society. It’s important to understand how these tales influence the listener. Does exposure to Robin Hood result in generations of children who grew up to be bandits? Or do we get, instead, generations of children committed to the idea that inequality must be challenged?

If we look at British society today, and we look at British society at the time when Robin Hood tales were first told, we see that while the situation is by no means perfect, things are a whole lot more equal than they used to be. The arrow may not have hit a utopian bullseye, but it’s on the target.

When we talk about contemporary cultural stories, we’re talking about the tensions and pressures our customers are experiencing right now.

Starbucks’ best customers are feeling a sense of economic oppression right now. Even if they aren’t in a tough situation themselves, they know and easily identify with people who are. This creates an internal tension: anxiety and worry about one’s economic security is very unpleasant. We are strongly motivated to resolve our internal tensions, but who do you blame for an omnipresent sense of economic peril?

There are a lot of answers to that question, but “Unfair Competition From China” is a very, very popular one. Unfortunately, there’s not much one person, as an individual consumer, can do to impact the balance of global trade. This adds a sense of hopelessness and frustration to the internal tension.

And here comes Starbucks to save the day. Like Robin Hood, they snatch up the gem—the lucrative mug contract—from the Chinese, perceived to be unjustly rich in terms of manufacturing contracts, and award it to the struggling American industry. They’re the hero in this coffee talk.

For the typical Starbucks customer, the mug sourcing change will not affect their lives in any concrete way whatsoever. But by frequenting Starbucks, and allying themselves with the brand, these customers now have their chance to stand up and join with Robin Hood. They’re supporting the company that’s fighting back against China—and they can do it without making any change in a routine they already enjoy. They become heroic by association.

It’s a smart strategy.  To be a hero is a noble thing, an appealing prospect. When we act heroically, we feel better about ourselves. We like who we are. Starbucks has created a way for their customers to tap into that powerful emotional experience vicariously. We think it’s a good move, in the right direction.  What do you think?

June 13, 2012 by

The French Frontier: The Power of Predictability For Global Brands

PhotobucketStarbucks, it turns out, is not synonymous with seamless, stress-free success. Embracing a global strategy is an integral part of the coffee retailer’s much-talked about turnaround strategy, but after ten years of effort, things still aren’t great in Europe.  Particularly not in France, according to this New York Times story.

Starbucks has embarked on a multimillion dollar campaign to win over the European marketplace. Their efforts are pretty straightforward, and from our perspective, logical: everything from the the coffee recipe to the physical plant is being examined and altered to bring it more in alignment with the tastes and preferences of the local customer.

The changes may help—the strategy, after all, bears a close resemblance to what works for other American chain eateries that have gone global. But it raises one unavoidable question: How would things look different for Starbucks if they had done the groundwork to enter the European marketplace more effectively ahead of time? We’re not privy, of course, to the inner workings of their leadership team, but it seems a fair guess that not having to spend millions of dollars is always better for your financial position than being forced to spend millions in order to remain even vaguely competitive.

In other words, there’s power in predictability.  One of the key concepts of Brand Modeling is that developing a deep, comprehensive, humanistic understanding of your company’s best customers allows you to predict, with a high degree of certainty, how those customers will respond to your offerings. This allows you to be selective and efficient in your organizational decision making process.

For example, had Starbucks spent the time and energy to fully understand their best customers in France, they likely would have discovered their expectation—framed by the cultural mythos that permeates French life—that one does not walk down the sidewalk with a paper coffee cup in hand. Coffee is meant to be enjoyed in the cafe, at a leisurely pace. Armed with that knowledge, it would have been easier to see that the French Starbucks should include adequate seating space and avoid investing resources in takeaway coffee.

In Britain, incidentally, the situation is reversed. There, takeaway coffee enjoys popularity favorably comparable to the American experience. You can see where this is valuable information to have prior to breaking ground and building shops.

Starbucks isn’t alone in this situation.  Going global has stymied some brands. Burger King was a flop in Europe, whereas McDonald’s, who came very early to the wisdom of listening to local markets comprehensively and in detail, thrives.

It all comes down to customer knowledge. We are all competing in the environment full of empowered consumers. They know they have choices. The French consumer is not suffering from a lack of cafes to visit if Starbucks fails to please them. Dominant organizations are, and continue to be, those brands that are truly willing to step up and put their customers first.

April 10, 2012 by

Flushing Your Brand Goodbye: Starbucks and the Public Bathroom Question

Talk about a tidal wave of change!

Starbucks recently made headlines with its decision to close the public restrooms in many of their New York locations.  Too many people are using the Starbucks’ bathrooms, not all of whom are paying customers, and this makes it difficult for Starbucks’ employees to take bathroom breaks in a timely fashion. Add in the not-insignificant expense of keeping public restrooms clean and operational in New York City, factor in the fact that the chain is not by law required to provide restrooms in shops that seat less than 20 people, and it seems that switching to employees-only facilities is a sensible, straightforward business decision.

That is, of course, until you stop and think about what Starbucks sells.

Starbucks sells coffee.  Coffee contains caffeine, and caffeine is a diuretic, especially when consumed in large amounts.  Diuretics cause the body to produce increased amounts of urine.  In other words, if you drink caffeinated coffee, sooner or later, you’re going to need a bathroom.

Coffee isn’t all Starbucks sells. In fact, coffee isn’t even Starbucks’ primary offering.  What Starbucks sells is the experience.  People choose Starbucks because of the coffee shop’s atmosphere, community, and unique culture. Starbucks is the hipster’s home away from home; a place to relax, read the paper, cruise the internet, and connect with like-minded friends. Enjoying the coffee is secondary entirely to the experience, but it still an essential element of the customer-brand interaction.

This cycle only works one way.  When we drink coffee, we develop a need to use the bathroom. There’s only one way to resolve the tension we’re feeling. By removing the public restrooms from their facilities, Starbucks has introduced a biological limitation on their customer’s experience.  People are free, of course, to continue to come in, order coffee, hang out, and enjoy the atmosphere and community—as long as their bladders hold out.

Once that threshold has been reached, and the need to visit the bathroom is one that can no longer be ignored, it doesn’t matter how compelling the community and ambiance may be. When you’ve gotta go, you’ve gotta go! If there are no bathrooms in  Starbucks, you have to leave the coffee shop and go somewhere else.

Brand Modeling: Predicting the Impact of Organizational Change

How quickly will you return? Brand Modeling tells us that success lies in understanding the wants and needs of your best customers, and fulfilling those needs better than anyone else does.  Starbucks won valuable market share by being the coffee shop that provided a certain self-aware, self-congratulatory atmosphere for its patrons. They clearly understand the psychological and emotional needs of their clientele. But what about their physical needs?

It will only take one distressing experience for a Starbucks’ consumer to decide that they’ll get their next coffee at a shop that delivers less in the way of ambiance and community and more in the way of bathroom facilities.  In the interest of saving a few dollars and some employee time, Starbucks is introducing an unnecessary tension into their operation that can damage the customer relationship.  There are already rumbles about Starbucks failing to be a good corporate citizen; customers sense the disconnect when an organization has a millionaire CEO and can’t afford to fund basic bathroom maintenance.

Small resentments can create large problems, even for the world’s best brands. We’re really not sure that closing the bathrooms is a great move on Starbucks’ part.  What do you think?

November 29, 2011 by