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How Starbucks can win back its customers

Starbucks yesterday started a much-heralded, big dollar advertising campaign taking square aim at McDonalds and McCafe. If you haven’t heard the news, yet, McDonalds has become Starbucks number one competitor for the coffee-fix market and their newly launched McCafe’s are meant to go head-to-head with the whole Starbucks concept.

In advertising as in politics, it is never a good idea to mention your competitors and going on the defensive always means your playing a losing hand. But Starbucks obviously feels this is the only way to win back customers, by stressing “value.” Their basic message is that “value” does not mean “cheap” (folks are switching to McDonalds because the price point is significantly lower and the coffee is just as good). “Value” means high quality, fair trade, and generous wages and benefits for their employees. Now, since most people are switching to McDonalds (and Dunkin Donuts) because the coffee is just as good and significantly cheaper, that means the only “value” we get from Starbucks is fair trade, ecologically sound practices, and generous benefits for employees.

I’m sorry, Starbucks. You’re going to have to do better than that.

So, in the spirit of Shoestring Venture as a place for entrepreneurs, here are five things Starbucks must do to recapture their customers. They must, in other words, think like an entrepreneur — even a shoestring venture.

Value starts and ends with customer service
Am I — or any other customer — supposed to feel good that the people who give me lousy, unfriendly, and slow service at Starbucks are making higher wages and better benefits than the people who give me lousy, unfriendly, and slow service at McDonalds?

Every startup retailer and restaurant knows that the only growth asset they have is customer service. It is built into the blood and bones and DNA of startups. Starbucks had it once (I actually was a customer at their very first store in Seattle), but customer service and customer experience is no longer in the Starbucks DNA.

By that, I mean that Starbucks no longer even meets the fundamentals of customer service. I have finished one book on customer service (Customer Service is Marketing: The Ten Commandments of Customers — watch for it!) and I’m busy at work on a second (You Had Me At Hello: Five Words Every Business Should Know). And Starbucks breaks every one of the ten commandments of service. Let’s just go over some of the fundamentals:

  • Greet the customer. This is such a no-brainer that even folks who didn’t graduate from elementary school know this. Why does this never happen at Starbucks?
  • Never forget the value of gratitude. When was the last time you were ever thanked at Starbucks?
  • Customer-focus, not task-focus. From top to bottom, Starbucks has become totally task-focussed. It is, however, from top to bottom a customer service operation. Why is cleaning a floor more important than helping a customer? Why is stocking the pantry more important than the customer at the register?
  • Engage the customer. The task of every foodservice business (with some exceptions) is to turn people into faithful, regular customers. That requires engaging yourself in the customer, the customer’s experience, and the customer preferences. Why does Amazon know what I like and the folks I see regularly at Starbucks don’t?
  • Is there a party behind the counter that I should know about? The Starbucks work environment has a structural capacity to degenerate into something close to a work party — in full view of the customers. As we stand in line or sip our lattes, do we really need to know about your boyfriends and how much you hate your manager?
  • Stop making mistakes. I often sit in a Starbucks on Via Princessa here in northern L.A. and watch customer after customer blow their lid because their order was wrong (I once calculated the average error rate for this Starbucks at 15%). This includes people walking in from the drive-in line. Almost all the time, it was because the order taker wasn’t listening or the order maker wasn’t caring, one or the other. If I order a mocha choca whatsit latte and you hand me a carmel schmarmel whosit frappucino, how do you figure that this experience is more valuable to me than what McDonalds offers?
  • Excuses only satisfy the person who makes them. The fundamental physical law of customer service is that you will frak up (although 15% is unduly high). It’s not whether you frak up, it’s how you handle it. I once had a manager hand me a drink that was wrongly made. When I pushed it back and said what was wrong, she said, “It’s not my fault. I just made what was written on the glass.” You know what? I don’t care. I don’t care why you frakked up, I just care that you frakked up and my drink is all wrong. When a customer comes to you with a problem, apologize and then fix it. It’s not rocket science.

    Starbucks has forgotten the main source of value they offer: customer experience. Employees who are grumpy, stressed, and unfriendly do not produce a valuable customer experience.

    Every startup retailer or restaurant has to learn the fundamentals of customer service. Starbucks has to treat itself as if it were a startup and relearn — from the lowest cashier to the chief executive — the fundamentals of customer service and producing a good customer experience. That means the CEO and every other executive needs to don an apron several times a year and work shifts behind the counter. If Starbucks produces value as a customer service organization, then everyone working there should understand what it means to be in the trenches.

    Starbucks has to learn to manage queues
    Normally, queue management would be solidly in the customer service category. And it still is. It’s just that queue management is not just about friendliness and promptness, it’s a math-heavy, operational management concern. And Starbucks — along with Panda — has perhaps the absolute, dead last, worst queue management system of all major food service companies. I say that, of course, as a loyal customer of both companies.

    In non-MBA speak, Starbucks has got to learn to move its lines faster.

    Why, may I ask, are high-volume Starbucks stores laid out exactly the same way as low-volume stores? If a store is doing ten times the volume as another, shouldn’t it have more registers, coffee machines, blenders, and storage space? Isn’t that, well, elementary? Two registers in every store?

    Poor queue management means that stores reach operational capacity at fairly low numbers. It means that customers don’t get a “valuable” customer experience waiting in line or waiting for their drinks. It means that employees are harried, stressed, and prone to mistakes. And how can you get good customer service out of an employee who is stressed?

    It also means that customers will turn to substitutes or competitors (like McDonalds or Dunkin Donuts). It means they do a small bit of calculus in their head as they head off in the morning: “I’ll stop at Starbucks. No, the line will be too long and I have to get to work. I’ll stop at McDonalds.”

    But Starbucks doesn’t just have problems with customer wait time. It has serious problems with perceived wait time (a subject I discuss at length in Customer Service Is Marketing). Without going into all the research and statistics, suffice it to say that every time you put a customer in line and make them wait, there is a chronological wait time, which you can measure with a clock, and a perceived wait time, which you can measure by asking the person how long they waited. The two aren’t always equal. In fact, perceived wait time is usually longer and many factors conspire to make the perceived wait time much longer than the chronological wait time. All you need to know is this: as far as customers are concerned, perceived wait time is the wait time.

    How does Starbucks fail on perceived wait time? By not helping customers. They talk, they goof around, they chatter, they do other tasks, they walk away from the register, they gossip at the register with friends, they allow customers to dither while at the register, and so forth. All of these, while they may not substantially affect the chronological wait time, significantly increase the customer’s perceived wait time.

    So, simply put again, Starbucks needs to move the lines faster, make drinks faster, and make the wait experience less torturous for customers.

    Starbucks needs to unleash the entrepreneurial creativity of its employees
    Starbucks enduring problem is its gross underuse of its employees. As a rule, employees have their fingers on the customers’ pulse more closely and so are always important sources of creativity and innovation. But Starbucks has a unique asset in its employees: because it pays such generous benefits, it is able to hire more creative, more engaged, and more invested employees than other companies. So why, in the area of creativity and innovation, does it treat employees just like every other company treats minimum wage workers?

    Starbucks has, behind every counter, an invaluable source of entrepreneurial energy in developing new products and new services. Why do new drinks come wafting down from only from Seattle? If I’m a manager in Pullman and I have a great idea for a drink and my customers back me, why not try it? If I’m working a store in Minneapolis and I have an innovation that might speed up the lines, why not try it? Then go from there? Where’s the in-store experimentation?

    If Starbucks truly wanted to beat out McDonalds, we should see this entrepreneurial energy every time we walk into a store. There should always be something new, different, or better about each and every store because the employees are actively improving the base formula.

    But Starbucks, bless its heart, is a rigorously and ruthlessly top-down organization. Everything is formulated and fungulated and fantabulated at the corporate level and everyone below marches in step.

    How many thousands of great business, product, and customer service ideas are dying every day behind the counters and steamers of Starbucks every day?

    Starbucks needs to unleash the creativity of its customers
    Now, I’m a dyed-in-the-wool skeptic of crowdsourcing as a universal panacea for every industry, but Starbucks truly needs to start listening to its customers. They’re talking. Starbucks ain’t listening.

    Think of it this way. If we were to take the customer crowd-sourcing logic to its conclusion, then customers would be a corporate asset just like any other corporate asset. Take the logic even further and customers, as an asset, can then be a source of strategic advantage, just like any other asset. If you have smarter customers than your competitors, then you are getting more value from your crowd-sourcing than your competitors, right? If your customers are more creative than those of your competitors, then you’re going to reap more rewards from your crowdsourcing, no?

    Starbucks customers, as a strategic asset, tend to be discriminating, loyal, well-educated, business savvy, and highly creative. Starbucks not only has high-quality employees, they have high-quality customers. But because their only point of contact is with counter employees — and because the organization is ruthlessly top-down — that means that every significant piece of crowdsourcing dies at the counter.

    Let me put this picture in more focus. Starbucks has a strategic asset in its customers — more so than McDonalds or Dunkin Donuts. They have a perfect crowdsourcing apparatus in place — that is, stores manned by employees who directly engage with the customer. They don’t need fancy Web sites or social networking strategies. Every time a customer says to employee, “You know, I think it would be a good idea if . . .,” you have the most valuable and actionable crowdsourcing possible happening.

    But just like employee innovation and ideas die every day behind the counter, valuable — as in “profits” valuable — customer ideas die every day behind the counter, too.

    Starbucks needs to think locally
    Part of unleashing the creativity of employees and customers is to stop thinking of Starbucks as existing in this kind of geography warp. Every time you walk through a Starbucks door, you leave wherever you are and you enter Starbucks, located somewhere in Pike Place.

    Starbucks stores need to partly transition out of that geography warp and become part of the place where they are. That means adding local personality to the stores as well — god forbid — adding local food. Imagine you walk into a Starbucks and there’s the usual frozen coffee cake crap, but right next to it are four or five goodies from a local, highly acclaimed bakery?

    We’ve all done the Starbucks brand and, well, frankly, we’ve all moved on. Isn’t it time the Starbucks brand come back to us?

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    1. [...] of value (and lower than AIG!), pretty much making Starbucks a vanity purchase for egotists. Well, you already know my opinion about Starbucks. Sorry, I think the stupid, dumbo, retarded ads about accent marks for McDonalds is going to beat [...]


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