Starbucks Revamp Plan: Thumbs Down

By Josh Barsch

Last week, Starbucks’s again-CEO Howard Schultz announced quite a little rejuvenation plan for the ailing coffee franchise. I am a huge Starbucks fan myself, so I was frankly pretty disappointed in how toothless the proposal really was. I was expecting some major customer-friendly stuff, but here’s the five-point initiative we got instead (this is straight from a Starbucks press release):

— A proprietary and revolutionary in-store Clover(R) brewing
system that delivers the best cup of brewed coffee available
anywhere;

This is actually the smartest of all the intiatives they put forth, because it actually focuses on the reason that I and most of their millions of customers patronize the place: the coffee. What the press release didn’t say is that the new super-premium coffee will cost $2.50, which is $1 more than their already-spendy coffee costs. Still, though, folks who are rolling through Starbucks every day are spending a lot of discretionary income as it is. Will an extra dollar a day make or break these customers? Probably not. However, the economy is getting rough, and you’ve got to think that there are a lot of SBUX customers for whom money is getting tight. I imagine these folks holding onto their Starbucks coffee as one of only a handful of remaining luxuries, and the prospect of even-more-expensive brewed coffee won’t fly. I’m a brewed coffee drinker myself — no fancy accoutrements at all, thank you — and if the coffee is as good as it’s advertised to be, I’ll buy it. Admittedly, though, I am not as financially pinched as the average man on the street. We’ll see what happens.

— The introduction of a new state-of-the-art espresso system
that provides the perfect shot every time and helps facilitate
the critical connection between barista and customer;

Well, again — I’m a brewed coffee guy, not an espresso guy. But I’m guessing that most SBUX espresso fans already think that SBUX espresso is pretty damned close to perfect. I don’t know anyone who says, “This shot of espresso is great, but if they could just make it a little more *perfectly*, then I’d stop in and buy more espressos every week.” Do the millions of middle-class folks that keep the SBUX engine running really have a palate to tell the difference between the current espresso shot, and the upcoming new-and-improved one, such that the new one will give a significant boost to sales? I’m thinking not.

And I didn’t know whether to cackle or vomit when I read the part about the “critical connection between barista and customer.” Sorry…that’s fantasy, Mr. Schultz. SBUX baristas are the friendliest in the biz, but a robot could make my coffee and I’d be just as happy. In fact, a robot wouldn’t hustle me for a tip before the drink is even made the way SBUX baristas do. Be friendly, and give me the correct change — those are the two things critical about the connection between customer and barista. I point this out because, in a separate article I read, Schultz talked about how important it is for the customer to be able to see the barista making the drink. Ugh. Again…my apologies, but that’s ridiculous. If that were true, every drive-through would be empty, rather than backed up 10 minutes and wrapped around the parking lot.

— A complete reinvention of brewed coffee in-store, that will be
brought to life by baristas across the U.S., who will scoop
and grind a new unique coffee blend, connecting customers to
the early days of Starbucks;

Starbucks dropped the introduction of hot breakfast items because, apparently, the smell of the food overpowered the smell of the coffee. I don’t have much to say on that, since the breakfast items never made it to my local Starbucks and I wouldn’t know. I did see that the new coffee will be called “Pike Place Blend,” named after the location of the first Starbucks. Which is novel, but “connecting customers to the early days of Starbucks” is a textbook example of corporate narcicissm and the opposite of customer focus. I’ve been to Pike Place Market, and I’ve been to the first Starbucks. And it’s nice and all. But if you randomly sample the U.S. population, though, maybe 5 percent will have heard of Pike Place and know where it is. Sample the SBUX-sipping population, and you might get 10-15 percent recognition. Simply put: neither current customers nor the non-coffehoused masses are looking to connect to the early days of Starbucks. We couldn’t care less.

— The first phase of a Starbucks Card Rewards program, rewarding
registered cardholders and providing unique new benefits when
using their cards in Starbucks stores;

This is a great idea, in theory. Everyone and his brother does this already (which is, I assume, why SBUX has avoided it thus far). In fact, the franchise operated inside the Safeway near my home in Arizona was already doing it years ago — you bought X number of coffees, and you got one free. The program was ended (I don’t know why), but that was an ideal program. It was simple, it was easy, and it gave me free coffee. That was pretty ideal for me.

But alas — this is not part of the new loyalty program. Instead we get “Complimentary customization on select syrups.” Are you kidding me? Even the press release had to spell this one out:

— Complimentary customization on select syrups (including
flavors such as vanilla, hazelnut and cinnamon) and milk
alternatives (such as soy or half and half). For instance, a
Tall Vanilla Soy Latte would be the same price as a regular
Tall Cafe Latte because the soy and the vanilla are free.

Wow. That is a mouthful. And inexplicably overengineered. Take this to the bank, people — on your future visits to Starbucks, expect to see those friendly baristas forging intricate new personal relationships with customers by explaining to every third Suburban-driving soccer mom how in the godforsaken hell the complimentary customization process works.

The card also gives you a free drink when you buy whole-bean coffee. Makes sense, because that coffee is higher-margin stuff. Don’t know if it’ll work, though — I buy SBUX bean coffee, but I buy it at the grocery store because it’s cheaper. Might I switch habits if it means a free drink? Possibly, but I doubt it. That’s just me, though — I’m a very, very convenience-oriented dude, and I avoid extra stops at all costs.

Also, the card gives you free refills on brewed coffee during the same visit. This, I must admit, is excellent news to the brewed-coffee drinkers of the world. This one gets nothing but high praise from me. A couple other loyalty-card items:

— Two hours daily of free, in-store Wi-Fi, starting this spring
in company-operated stores in the U.S. (per registered
cardholder).

This is a cool idea, but it seems a little late, to me. You can get free wifi almost anywhere these days, and in fact, since SBUX has been such a holdout in this area with all the T-Mobile hotspot nonsense and now this, their wifi policies have actually been a good reason *not* to hunker down in a SBUX with your laptop. Wouldn’t it go a great deal further with customers to simply hit the switch and provide free wi-fi like every other freaking coffee shop in the country?

— The opportunity to join Starbucks in supporting charitable
causes.

Seriously, now — the charitable causes in question won’t take my money anyway without a SBUX loyalty card?

Lastly, we have the social networking initiative:

— The launch of MyStarbucksIdea.com, Starbucks first online
community, that takes the Starbucks Experience outside the
store and enables customers to play a role in shaping the
company’s future;

Initially, I didn’t like the sound of this as a major initiative, but the more I see of it, the more I like it. Like many folks, when I think of “social networking,” my knee-jerk reaction is to think of a bunch of slackers playing grabass with each other on Myspace and Facebook. But I humbly apologize for that after seeing the Mystarbucksidea site — it seems to be doing the right thing by opening things up to customers and letting them help SBUX set the direction of the company.

OK, so it isn’t all bad, but I don’t think the new initiatives are enough. Here are two they missed:

1) Free wifi everywhere. I touched on this before, and it doesn’t need much more explanation. For a usually forward-looking company, it’s odd that they’re still clinging to the idea of selling something that the rest of the world is giving away for free.

2) Faster drive-thrus. The single biggest deterrent for me and my family stopping at Starbucks every single day, perhaps even multiple times each day (yes, I’m that big a fan) is the fact that an attempt at the drive-thru may very well eat 10 minutes of time that I’m not willing to spend. Drive-thru wait time is what SBUX should fear — it is, above all, a reason not to go to Starbucks. Add two more baristas behind the counter making drinks, and that wait time is cut significantly. The additional labor will be more than offset by the increased loyalty that I and others like me will award to a store that will guarantee me a very short wait for their delicious products and allow me to go about my day.

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24 March 2008 | Business | Comments