Starbucks CEO: "We've cracked the customer experience code"

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Stuart Lauchlan
co-founder
diginomica
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Starbucks' CEO Howard Schultz is relishing the company's reversal of fortune - and attributes the success to the firm's focus on customer experience.

Following the announcement that group profits have more than tripled, Starbucks' CEO Howard Schultz is relishing the company's reversal of fortune - and attributes the success to the firm's focus on customer experience.

The world's largest coffee chain reported a net profit of $241.5m in the three months to the end of December, compared with $64.3m a year earlier. And following an exceptionally busy Christmas period in the UK, Starbucks will be opening a further 30 stores on British shores by September.

As with the other 661 UK chains, customer experience will remain a priority for the latest additions.

"The global economic crisis has profoundly shaken consumer confidence and retailers who want to stay relevant in the future will have no choice but to recognise and respond to this new reality," said Schultz. "At Starbucks, we know that to continue and to accelerate our recent momentum we will have to continue to improve, continue to innovate, and continue to focus on strengthening our connection to our customers. We know that our success in the past is no assurance of our success in the future. Simply stated, we know that we have to earn our business every day and we are committed to doing just that."

Schultz cites the firm's recent Christmas holiday season as a prime example of how the firm's customer engagement strategy was delivering returns. "Our holiday performance was among the best in our history thanks to improved merchandising, a highly-effective, well-designed in store customer experience, compelling value offers, disciplined inventory control and above all else, energised, passionate Starbucks partners who exceeded the expectations of our customers," he said.

"Our customers responded enthusiastically to all of our holiday innovations and initiatives this year. Our holiday beverage platform which this year included caramel brulee latte was a big hit, delivering 30% up lift in holiday beverage sales compared to last holiday season. We offered a relevant and more focused merchandise selection, including a selection of gifts for under $10. A Starbucks card beat sales targets with over $500 million loaded in the first fiscal quarter and our legendary Christmas sled holding coffee, a seasonal favorite, celebrating its 25th Anniversary this year not only handily beat sales targets but also sold over 300, 000 of this extraordinary blend in one single day."

Social media

Social media also played its part in boosting customer loyalty late last year. "We also advanced our partnership with Product Red by leveraging our strong Facebook presence to connect with consumers in 156 countries for a global, virtual sing-a-long to raise money for the global fund," commented Schultz. "This effort was the largest global campaign ever on the Facebook platform and further strengthens Starbucks unique connection with our customers. I am particularly pleased to report that to date our partnership with Product Red has helped to provide over $7 million days of life saving medicine in Africa.

"[Starbucks] continues to be the most popular brand on Facebook, with sites now launched in 14 countries and we are the biggest brand within our category on Twitter, adding more than 1,000 new followers each day. The importance of our social media expertise continues to grow, and we evolve the conversation with our core customers. Starbucks continues to be recognized for the way we’re engaging and we’re seeing it pay off in ways we have not anticipated."

There are other new technology innovations aimed at customer engagement as well. "Our iPhone applications, which we launched near the end of September have been helping customers find our stores, determine nutritional information and reload their Starbucks cards," explained Schultz. "In the few months since we launched the apps we have had over 1.2 million downloads, we were featured in Apple’s holiday campaign, and we were featured on iTunes as a top 10 productivity essential. Earlier this month, we were named the most popular US chain for a location based mobile application. More signs of the growing relevance of the Starbucks brand and experience."

The company has also extended it My Starbucks Rewards loyalty scheme. "The programme has been simplified and offers more benefits to customers based on transaction frequency. We have doubled the number of cards registered for the new programme over last year and thousands of our customers are already earning their way towards highest level of rewards," said Schultz.

All of this is resulting in higher levels of customer satisfaction, he added. "We tracked speed of service, friendliness of our people, specifically the barristers, accuracy of beverage, taste of beverage, and overall satisfaction," he said "All continue to show improvement from a year ago. Our customers continue to respond very positively to the healthier products and choices we are making available to them through our revamped food programme."

In the UK, Schultz points  to two innovations that he argued could be a powerful localisation tool to engage with customers. "We launched a new locally relevant beverage within the UK called Flat Light, bringing innovation needed to establish cultural relevance and connection with consumers in unique ways depending on market and customer trends," he said.  "We also opened a new neighbourhood-focused store on Conduit Street in London to a very strong reception. Conduit Street is one of the latest of a series of new stores in which we are pushing the envelope in coffee innovation, design, sustainability and the overall customer experience by relying on local artisans and innovative concepts and we create further differentiation with these stores."

Keeping the customer at the heart of the wider business strategy is core to Starbucks continued success, concludes Schultz. "In 50 countries outside of the US the Starbucks experience, the sense of community, the third place and the relationship with our partners demonstrates the high degree of relevancy of the Starbucks experience," he said. "In the UK, we’re serving over two million customers a week. We’ve cracked the code on the ability of the Starbucks brand and Starbucks store experience to be accepted. Now, we have to elevate the customer experience and do the kind of work behind the scenes and the cost structure, the expense control and the kind of marketing that makes us highly relevant on a local level."

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28th Jan 2010 17:26

 I am really encouraged by this story because the distinction between the customer experience that is designed and delivered and measurement of how that experience is "consumed" by customers (satisfaction) is clear. Too often satisfaction is used as a catch all for customer experience when in fact it is simply a measure of expactation vs delivery.

The effort and creativity required to deliver a truly differentiated customer experience should not be underestimated and is frequently the missing link from organisation. Making sure service people are smily and friendly is not the solution and it looks like Starbucks has taken a holistic approach which is positive.

I am not convinced the execution from Starbucks is as good in the area of store culture as that of say Pret, but if the intent is there and the understanding that it is a long game as it would seem they do then the outcome should be positive.

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04th Feb 2010 15:26

Thanks for your post Paul.

With regards to the debate about measuring customer satisfaction vs customer experience, you may be very interested to read this great article by Peter Simpson - Analytics and customer experience: Are you measuring the right thing?

Thanks again Paul.

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14th Oct 2010 16:17

They claim to have 'cracked the customer code' and yet they are dismembering their assembly line to make wait time increase?  I don't think so.

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By ShaneC
23rd Aug 2011 05:44

The CEO of Starbucks coffee business thinks political figures should do better. In an open letter, he outlined his concerns. Rather than just voicing aggravation, though, Schultz has decided to do something about this. He has promised to quit donating to political campaigns until things are more to his liking. Schultz is trying to encourage other companies to do the same thing. Resource for this article: Howard Schultz drops political figures off at the wallet

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