February 01, 2008

Solving Starbucks Problems

Sales are soft at Starbucks. Customer visits have declined. Its stock price has tumbled. The customer experience isn’t as remarkable as it once was. Those issues, and many more, are facing Howard Schultz as he returns to leading the company on a day-to-day basis.

In a conference call with Wall Street analysts on Jan. 30, 2008, Howard committed to bringing forth transformational change by “reignit[ing] the emotional attachment with our people and our customers” and “sharpen[ing] our competitive advantages [of] … passion, curiosity, community, commitment, and authenticity.”

In March 2007, Paul Williams and I dissected many of these issues Starbucks faces in a series of back-n-forth blog posts. Together, Paul and I have a combined 19-years of marketing experience with Starbucks and we tapped into that experience to talk strategies and tactics Starbucks could follow to reclaim the qualities it has lost.

At the time, we were responding to Howard Schultz’s leaked internal memo where he admitted that Starbucks has “… had to make a series of decisions that, in retrospect, have lead to the watering down of the Starbucks experience, and, some might call the commoditization of our [Starbucks] brand.

Our series of posts have been given new relevance since Starbucks has taken initial steps in its transformational agenda. Re-read, or read for the first time, the laundry list of strategies and tactics Paul and I believe Starbucks could implement to become the company it once was.


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We began by addressing the LOSS OF COFFEE THEATRE issue:
Paul analyzed the switchover from the La Marzocco espresso machine to the Verisimo automatic machine and offered up tactical ideas Starbucks can use to course-correct itself back to espresso authenticity. I riffed off Paul’s post and added the idea Starbucks needs to give permission to store partners to showcase their flair and personality while on the bar in order bring some of the coffee theatre back.
Next on our list was the LOSS OF COFFEE AROMA issue:
I explain in detail how “operational efficiencies” (not Flavorlock packaging) have led to Starbucks stores no longer smelling of coffee. I offer the quick-fix solution of finding ways to grind coffee in-store again. Paul disagrees with my exoneration of Flavorlock packaging and he smartly offers up the idea of implementing an “Aroma First” rule. This “Aroma First” rule would have Starbucks making in-store decisions based upon how any proposed activity would impact the aroma of coffee inside a Starbucks.
We also addressed the LOSS OF STORE SOUL issue:
Paul breaks down what it means to be a Mom & Pop shop and gives specific ideas on how Starbucks store design should stop being all things to all people at all its stores. I offer up thoughts on how Starbucks should give more control to its stores to run store-specific marketing programs and post store-specific marketing signage.
We touched upon the LOSS OF MERCHANDISE focus:
I explain how Bearista Bears and Finger Puppets sell very well, but at a great cost to the brand. As a solution, I propose Starbucks ask itself two questions to ensure its merchandise focus: (#1) Does the product link directly to coffee? If yes, sell it. If no, don’t. (#2) Does the quality of this product match the high-quality of Starbucks coffee. If yes, sell it. If no, don’t. Paul adds-on and modifies my two questions by asking if the merchandise links directly to either the preparation, consumption, and/or enjoyment of coffee. He closes his thoughts by expressing just because Starbucks can sell music, DVDs, and plush toys doesn’t mean they should.
We close by addressing the LOSS OF IDENTITY issue:
Paul likens Starbucks returning to its core to restoring antique furniture to its core, original finish. He also brilliantly points out Starbucks needs LESS INNOVATION and MORE EXPLORATION. Starbucks didn’t invent coffee, it explored the world of coffee and brought interesting flavors to its customers. Paul says Starbucks should concern itself with digging deeper into the world of coffee and uncover exotic coffee concoctions and share them. I take the IDENTITY conversation in a different direction and explain how Starbucks needs to standup to the bullies working on Wall Street by pruning all of its unhealthy growth in order to rejuvenate its soul and refertilize its reason for existing.

For even more ideas on how Starbucks can solve its business problems, read what myself and a cadre of other marketing-minded folks have to say in the WHAT MUST STARBUCKS DO? manifesto published online by ChangeThis in April of 2007.