Customer intimacy empowers innovation, says Starbucks CEO

22nd Jul 2010

Starbucks CEO Howard Schultz has long argued that customer experience is critical to the success of the global coffee chain – and key to innovation and consistent performance despite the economic downturn. 

“Credit for our overall performance belongs to our partners around the world who continue to deliver and improve experience to our customers,” he says. “Every single customer metric showed improvement. The continuing improvement in traffic and transaction metrics increasingly improved customer’s satisfaction feedback in operating efficiency. 
“The transformative muscle we’ve build in front and back of store operations over the past 2 ½ years gives us confidence that we can accelerate our investments in innovation and new and existing business and generate disciplined-profitable growth around the world while at the time increasing our dividend and building long-term value for our shareholders.”
Essentially Starbucks places enormous emphasis on getting close to the customers with initiatives like the MyStarbucks rewards programme which in turn drives incremental business. “The deep connection we’ve established with our customers continues to be reflected in the growing success of My Starbucks Rewards, a loyalty program that recognises and rewards customers paying for their purchases with a registered Starbucks card,” says Schultz. “The programme launched just over six months ago was created in response to our customer’s desire for value and recognition that built on their relationship with their store and their barista. In fact, [the programme] was cited in a recent customer survey as a top reason for increased visitation versus six months earlier.”
The metrics to back up Schultz's enthusiasm are undeniably impressive. “Our customers are again on track to load over $1 billion dollars on Starbucks cards this year. Sales of cards are up 17% over last year, and the reload on existing cards was up over 59% compared to last year,” he explains. “Almost 20% of all in-store transactions are now being paid for by using a Starbucks card. And in Q3, we surpassed $1 million gold-level members. The Starbucks Card and Reward Programmes are powerful catalysts for customer loyalty and retention and will continue to enable us to leverage our scale, distinguish us with customers and further differentiate us from competitors going forward.”
Such customer intimacy enables Starbucks to launch innovations despite the economic downturn. “Consider however you want it, our Customizable Frappuccino Campaign, for example,” says Schultz. “The campaign was an important contributor to our competitive performance by driving retail traffic in the afternoon and evening day parts. And expanding the customer base by offering ingredient options such as soy milk and decaf coffee for customers wishing those options. 
“Beyond that, the campaign’s halo effect on the brand helped drive increased sales of Bottled Frappuccino across CPG channels for the first time in over two years. And beyond even that, it ignited significant consumer and retailer interest and excitement that continues to build around our $2 billion Frappunccino Brand platform overall; just as we had planned.
“The success of our Customizable Frappuccino Campaign illustrates the power of Starbucks new business model, a unique model that will continue to enable us to innovate, cross promote, and leverage our global retail footprint on investment and prominence in social media and our growing global CPG business going forward.”
The firm has also begun experimenting with a new mobile payment application, allowing customers at Starbucks stores in more than 1,000 target stores, and a small number of company-operated stores in Seattle and Silicon Valley to pay for their purchases with their Smartphones. “We know believe that offering mobile payment and mobile gifting capabilities will result in a more efficient in-store experience, and provide us with significant competitive advantages, and further differentiate Starbucks from competitors,” says Schultz. “Based on early success and positive customer feedback, we are committed to expanding this program in the months ahead. So please stay tuned.”

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