02 Apr 2013

Why Starbucks = Community

4 Comments people management

I’m at 38,000 feet above the Atlantic Ocean on my way to Norway, having just finished “Onward” by Howard Schultz. It’s the story of Starbucks’ turnaround from early 2008 to late 2010—the founding CEO coming back to take the reins and revive what the brand is about. You should read it.

FIVEBUCKS

That’s what I used to call it—a symbol of American excess for overpriced burnt coffee. If I saw a bum drinking a Starbucks, I wouldn’t tip him, chiding him instead. I saw ordinary iced tea for $8 in a Starbucks in Singapore. Foolish.

Starbucks_Norway

Starbucks partners—are you reading this?

This $10 billion global infestation made $1.4 billion in net income across its 16,000 stores, blindly seeking growth. Warned not to, Schultz still threw a $50 million extravaganza in New Orleans just after Katrina, while laying off thousands at the same time.

Dunkin’ Donuts and McDonalds got into the overpriced coffee game, while Starbucks started selling their version of Egg McMuffins. After seeing Starbucks kiosks in grocery stores, I expected them to soon sell frozen pizza, ice cream, and instant coffee. I was right on two of these three.

THE THIRD PLACE

But then I saw it was more than morning zombies feeding an addiction. When I left Yahoo!, Starbucks became my office– a place to meet business contacts and friends. If you’re not familiar with the concept of the “third place”, it’s not a silver medal, but where you can hang outside of work and home (the first two “places”). Starbucks wanted to be the hub of the community.

You’d gladly pay $7 for a coffee at a Parisian café because what you’re really getting is the entire experience, the beverage being your admission ticket. It’s “where everybody knows your name”—and you can support ethically sourced Fair Trade coffee, healthcare for all, and even $500 cows for women in Rwanda.  Their LEED certifications for new stores is not a superficial marketing ploy, but core to their brand.

ONWARD

A brand is the sum a user’s interactions with a company. It’s more than a TV tagline. It’s more than a premium you pay over the generic product, just to support overhead and advertising. It had to be authentic.

And that began with taking care of Starbucks “partners”, what all employees are called. The way you’re treated by a barista is fundamentally different than the typical fast food experience. That’s the competitive advantage—and it’s ultimately found in culture. Some investments:

  • Closing all stores one afternoon to provide training on how to properly pull shots– at the cost of millions in lost revenue
  • Replacing machines with ones 4 inches shorter so that baristas can make eye contact with customers.
  • Encouraging partners to take risks—who would have thought Black Sesame Green Tea Frappuccino would be a hit in China? Or that VIA and K-Cups (instant coffee) wouldn’t tarnish the brand?
  • Digital investments in upgraded POS, mystarbucksidea.com, a loyalty program, and a large social media presence—to show they listen and act

REAL VALUES, NOT DILBERT MISSION STATEMENT GENERATORS 

2013-03-13 15_57_09-Howard Shultz_03122013_v1 - Microsoft Word

Going beyond cheesy motivational posters and putting this into action is what Howard Schultz did at the expense of short-term profitability. Selling stuffed animals at Christmas was their lowest point, in opinion—a departure from core coffee excellence to blindly chasing comps. Maybe he would say it was the breakfast sandwiches—the burnt cheese overwhelming the coffee aromas, which he spent pages obsessing about.

Here are some values that will help all of us guide our businesses, in a way only founders and partners can embody:

 

  • Grow with discipline.
  • Balance intuition with rigor.
  • Innovate around the one.
  • Don’t embrace the status quo.
  • Find new ways to see.
  • Never expect a silver bullet.
  • Get your hands dirty.
  • Listen with empathy and overcommunicate with transparency.
  • Tell your story, refusing to let others define you.
  • Use authentic experiences to inspire.
  • Stick to your values, they are your foundation.
  • Hold people accountable, but give them the tools to succeed.
  • Make the tough choices; it’s how you execute that counts.
  • Be decisive in times of crisis.
  • Be nimble.
  • Find truth in trials and lessons in mistakes.
  • Be responsible for what you see, hear, and do.
  • Believe.

 

I’m eager to see what Starbucks does in the next stage of their journey. It’s 2013 and their social brand, while large, has several key opportunities to grow:

  • Activating word of mouth at scale— Starbucks has XXX reviews on Yelp, XXX reviews on Google, and XXX reviews on Yahoo. What if Starbucks ran campaigns that encouraged user participation, which then would drive more of these? Great SEO value, but reinforcing user loyalty is the real prize.
  • True personalization: in the same way you can personalize your Frappucino, can you imagine how amazing it would be if Starbucks could personalize their marketing campaigns? On Facebook, brands can merely bombard users with ads or run ads so relevant they are seen as recommendations from friends.
  • Owning the conversation: Whether it is around the winter red cups, summer fun, green energy initiatives, fair trade, or coffee—many people aren’t aware of Starbucks history. For example, did you know Starbucks has a goal to get to a million hours of annual community service? Or that Starbucks spent 20 years doing R&D on instant coffee, start from Don Valencia’s cell preservation science, which later was named VIA (ValencIA)?

I’d liken Howard Schultz to being the Herb Kelleher of the CPG industry– creating demand for something that never existed before and generating magic in making ordinary people feel extraordinary.

 

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written by
Dennis Yu is the Chief Technology Officer of Portage. He is an internationally recognized lecturer in Facebook marketing, having been featured in The Wall Street Journal, New York Times, LA Times, National Public Radio, TechCrunch, Fox News, and CBS Evening News. He is also an author at InsideFacebook and AllFacebook. Dennis has held leadership positions at Yahoo! and American Airlines. He studied Finance and Economics from Southern Methodist University and London School of Economics. Besides being a Facebook data and ad geek, you can find him eating chicken wings or playing Ultimate Frisbee in a city near you. You can contact him at dennis@portage.co, his blog, or on Facebook.
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