Will Starbucks Turn it Around?
By Stephanie Critchfield on Thursday, April 10th, 2008
Bree posted a link to Starbucks’ online coffee promotion - free brew-at-home coffee samples with the completion of a little flavor preference quiz.
While I definitely appreciated the nifty interactive interface for this promotion (Bree called it brilliant - I mean, who doesn’t want free coffee?), it’s actually a symptom of a much larger problem at Starbucks.
A BusinessWeek article published yesterday stated “Starbucks (SBUX) stock dropped 42.8% in 2007 and is down 14.7% since the start of 2008.” That’s cause for concern.
A result, many consumers are beginning to witness a massive re-branding exercise, aimed at improving Starbucks’ bottom line. This exercise began as far back as January when Starbucks re-elected company founder Howard Schulz as CEO. Immediately, Howard whipped up a “Transformation Agenda,” communicated to the public on their website as numbered announcements.
Here’s What’s Up.
Over a period of several years, Starbucks grew to become an Arcadia to coffee lovers. But, over the past couple of years, this paradise has begun to slip away from them.
Even though the company still maintains a loyal following (I know at least one person who goes their 2x per day every day), less loyal people are flocking to cheaper vendors who are now offering “premium” blends, such as McDonalds and Dunkin’ Donuts. A recent article even pointed out that McDonalds plans to launch espressos and mochas nationwide this year.
How Does Starbucks Plan to Regain Their Position?
Watching this Transformation Agenda come to fruition has been fascinating to watch. It’s a truly massive business, sales, and marketing initiative from top to bottom. The Agenda outlines the following courses of action:
- Slow the pace of U.S. store openings and accelerate internationally
- Discontinue warmed breakfast sandwiches at our North American stores (the smell interferes with the aroma of their coffee … Um, k.)
- Going forward, they will not report same store sales comps
- Reinvent partner training
- Reinstating regularly scheduled open forums in the field
- Bring back the Leadership Conference
Through the numbered announcements and other research, I was also able to identify the following.
- Adding Wi-Fi to all US stores (rolling out this service market-by-market to more than 7,000 Starbucks stores)
- In-store training for their more than more than 135,000 store partners in the US. (which included closing stores during this training)
- A reorganization that will eliminate 600 positions (mostly non-retail support folks)
- Introduction of the Park Place blend (the everyday Joe’s blend - smoother than most Starbucks blends that’s receiving very mixed reviews)
Ask the Customer
Throughout nearly every Agenda announcement written by Howard he stresses the importance to have a “laser focus” on the customer. This left me saying “but, are you talking to them yet??” Well, today I just discovered that the company is now soliciting feedback from customers through a CRM portal called “My Starbucks Idea.”
I’m not sure when it launched, but it is a pretty serious endeavor. Interestingly, the portal is powered by Salesforce.com - a sign of their commitment for this venture to be truly built around the customer relationship. Many ideas are very creative. Others are just painfully obvious - like frequent buyer cards. I suppose it never dawned on me, but Starbucks has never offered a buy 9 get one free card before!
Now, of course, what’s most important is what they do with this feedback. If they’re really “laser focused” on the customer, then the most important changes they make will stem from a consensus of pain points and ideas generated from My Starbucks Idea, in addition to the important business and organizational changes.
Going Back to Their Roots.
Another decision was made to - if only temporarily - bring back the store’s original logo, used on the coffee cup and sleeves.
It’s a strange double-finned mermaid thing (I should probably have known what this was, but I’m not up on my maritime mythical lore. Here’s what it is, if you’re curious. Funny, but I guess even the “new” logo is also this double-finned creature, you just see mostly her face). Anyway …. it’s not really the logo that matters. It’s symbolic of their commitment to bring Starbucks back to its roots - before they tried to be all things to all people. CDs, sandwiches, a shop on every corner…
What’s probably most promising is that this is clearly not a slapdash program. Howard and the rest of Starbucks’ leadership are executing on careful planning, and communicating to shareholders, the public, and their partners in a very systematic fashion.
What Do You Think?
So what does everyone out there think? What would you tell Tomer (our Director of Development) who has stock in Starbucks? Hang in there, or cash it in?
Starbucks is dead. At least the Starbucks Howard Schutlz wants to recreate by all these overtures to roll back time. He may want to party like it’s 1999, but the company he helped built is gone forever. RIP Starbucks, long live the new Starbucks I suppose.
Mr. Schultz is quickly proving himself to be the Norma Desmond of CEOs with these latest moves. But if Howard can roll back time — and all the changes done to his company necessitated by rampant growth, hiring less and less skilled staff to fill the exploding number of cafes, to find bigger and bigger suppliers of beans for consistency, etc — his success won’t be in saving Starbucks by making it “go back to its roots”. His success will be in inventing a time machine.
Hang in there, Tomer! I think any company can recreate their image. My personal Starbucks location is busier than ever and everyone I’ve talked to have already commented positively on the recent initiatives (retraining of baristas, starbucks card perks, etc.).
Thanks for the comments guys.
It’s interesting … in casual conversations, I’ve heard people on both sides of the fence. Some think the re-positioning going on now is futile and that Starbucks “had it coming to them.” Others are happy to see the re-elected CEO mixing things up and making employees, shareholders and customers excited about the brand again.
I suppose only time will tell, but I love hearing personal thoughts and experiences as Starbucks navigates its way through the “Transformation Agenda.”
I don’t think so. Until recently I was still interested in Starbucks as my coffee-house of choice, but no longer. This “Pike’s Place” blend they are offering from noon onwards is just awful. I tried to get a taste for it but can’t. I actually left a venti I just paid for sitting at the service station and walked out. Its like I am being offered a big cup of badly-brewed Folger’s–so why bother? There are plenty of Coffeebean & Tealeafs and Peet’s around serving real coffee.
While I’m not a fan of Starbucks, I do think that they get some credit for actually listening to the type of advice we in marketing give our clients. Consumer generated ideas is a terrific tactic, like you said, if they actually DO SOMETHING with the results. Can’t hate ‘em for trying something to try and turn it around. Good for them. (bad for us…if it works….i’m sick of those guys) : )