An interesting accident happened a few days ago that prompted me to write this article. As I picked up a to-go latte from a Starbucks and went about drinking and driving (coffee, mind you!), I realised that my coffee had a serious problem. I was just given boiled milk. There was no trace of coffee. Almost half-way to my destination, I could not turn back to dump the white beverage on the barista’s head (though that was what I craved to do). Cursing the American coffee giant, I took to venting out my frustration on twitter instead. Surprise of all surprises, I got a reply from their ORM team, pronto. Not only I got a sincere apology from the Starbucks manager but also three free coffee credits in my Starbucks mobile app. To cut a long story short, it reiterated the fact that Starbucks takes the customers seriously and knows how to leverage digital.
Well, coffee is big business, and for Starbucks it was about 15 billion in sales in 2103. The globally recognized brand has written it’s success story by creating a unique Starbuck experience in it’s stores and online. Today 94% of Facebook users are either a Starbucks fan or are a friend with one. The company has over 10 million users on its mobile payment system. In total, Starbucks’ digital presence through mobile, social and web drives over 35 million unique brand interaction every month. Starbucks is an example that the best brands don’t just do great digital advertising. They drive business through digital and social.
Let’s see how Starbucks wrote ‘T’he Big Brand Theory’
In July 2008, Starbucks’ quarterly earnings tanked, global operating income sunk 26%, and the company’s in-store sales figures were negative for the first time in the brand’s history. Starbucks lost money for the first time reporting a net loss of $6.7 million for the third quarter. In the fourth quarter, profits further dipped by 97% and earnings for the year tumbled to 53%. As the financial crisis engulfed the North America, Europe and Asia, Starbucks saw its sales figures in the red by 8%. Starbucks closed 900 stores and laid-off hundreds of people.
During this time Starbucks launched My Starbucks Ideas website. This online community worked as a hub for all Starbucks coffee drinkers to share their ideas, suggestions and even grievances. Starbucks started implementing changes and came up with new innovations basis customers’ feedback. And it hit gold. Starbucks achieved huge success after publishing this site and their customer engagement increased dramatically.
Here are a few killer ‘My Starbucks Idea’ from the consumers that have enhanced the Starbucks experience:
(Interested in knowing the ideas which were executed by Starbucks under My Starbucks Ideas campaign, read this)
Starbucks not only addresses the need of change from customers but also the need of uniqueness. In order to answer these needs, Starbucks launched another brilliant digital consumer engagement initiative, Frappuccino.com. Firstly, customers are able to create their own drink and name it. This drink might become an actual sales product in the store which represents the customer involvement. Secondly, customers can upload and share their picture of sipping the Starbucks Frappuccino, which helps spreading the word around. Moreover, customers can customise the current selling product to become their unique drinks.
Starbucks’ digital network:
Every other store out there has a Wi-Fi; therefore Starbucks took it to next level. In October 2010, the company made a move to expand its online offerings to customers with the Starbucks Digital Network. The digital network is a partnership of Starbucks and Yahoo, and delivers premium content on news, entertainment and lifestyle from sites like USA Today, Wall Street Journal, ESPN, and Nick Jr. When you connect to Starbucks’ free Wi-Fi, you’re greeted with the landing page of the digital network that allows you to check in with Foursquare, log in to your Starbucks card and more.
Result; in June 2010, Starbucks was named the world’s most popular social media consumer brand basis its Facebook fans, Twitter followers and YouTube subscribers, by Famecount, a UK-based independent media measurement service.
Tweet a coffee campaign:
A Starbucks program that lets consumers buy coffee for friends on Twitter, has prompted about $180,000 in purchases to date since it launched in late October, according to a researcher. (Date: Dec-06, 2013). Research firm Keyhole tracked all the instances in which someone used “@tweetacoffee” in conjunction with a friend’s Twitter handle and found that more than 27,000 fans used the program. Some 34% of users bought multiple gift cards and 32% of the purchases occurred on the first day.
In 2009 Starbucks achieved another digital milestone by launching mobile platform myStarbucks app that allowed users to locate stores, learn about coffees and build their own drinks. Early 2011 Starbucks took a step further by taking its loyalty program digital with its Card Mobile App allowing customers pay for in-store purchase with their mobile phones. Today over 20% loyalties card transection are executed through mobile.
Continuing the mobile innovation in 2012, Starbucks announced integration with Square; an app based mobile payment system and Apple’s passbook feature, which combines with the loyalty card information on iPhone.
Result; at the end of September 2013, the company had $621 million sitting on its mobile platforms. And the company’s interest income suggests that what started, as a little side business is now getting lucrative for the coffee chain. In the past year, Starbucks has made $146 million on interest alone, or 8 % of total profit. The company also reports significant financial gains through reduced transaction costs that it would otherwise pay to credit card companies.
How Starbucks used Digital space apart from customer engagement and promotion?
Starbucks made sure that their goodwill soar using digital channels. A fresh partnership with (RED) and Foursquare saw Starbucks donating $250,000 ($1 for every check-in) to fight AIDS. Then there’s the partnership with Google, which saw the companies raising money to create jobs. Starbucks ran a sold-out Google Offer of $5 for $10 worth of store credit at Starbucks. Google donated $3 for every activated offer to Starbucks’ Create Jobs for USAinitiative. The promotion was Starbucks’ first daily deal and was launched as more of a means to give back to small business than a way to rake in dollars. The campaign, in combination with a Banana Republic fundraising initiative, contributed more than $2 million to the jobs fund.
The Starbucks’ Comeback story:
The bottom line is Starbucks was back and in a big way. The coffee giant that started from being a hole in the wall coffee shop in Seattle, has now 23K plus stores in 65 countries. But as you saw the success for Starbucks didn’t come in a straight line. Starbucks’ strategy can be a learning mine for other organizations aspiring to be digital leaders. The major lessons are:
Stay true to your inspiration:
Love the business and keep in mind what inspired you to start the business in the first place. In February 2007, Schultz wrote a much-discussed memo that described how “Starbucks, in its pursuit of growth, started practicing all kinds of efficiencies; each of which made sense at the time, but led to a watering down of the Starbucks experience and created what some might call the commoditisation of our brand.” Efficiency should not be mistaken for originality and authenticity.
Nothing comes before the customers, not even ideas:
As Starbucks concentrated on opening one store after another and hiring thousands of employees, it lost view of the most important factor, the customers. Starbucks who oriented and trained employees to make eye contact with customers, remembering regular customers’ drink orders and anticipating customer needs couldn’t commit to training the employees as efficiently as before. According to Howard Schultz, Starbucks had ‘forgotten what we stand for’. When he returned as CEO, he made sure that he drilled company’s mission and values into all of Starbucks’ employees by launching My Starbucks Idea campaign.
Hold the roots and aim for the sky:
In the race to become bigger, a brand might lose touch with its existential factor, its raison d’etre and its customers. And history has proved time and again that that spells doom for the brand. And Starbucks was no different. For a short time it had lost its focus and missed its footing. And we witnessed what followed thereafter. But Starbucks quickly rectified its mistakes and emerged as a bigger and more powerful brand.
Though Shultz helped rediscover the company’s roots and showed how authenticity can be the game changer, he never for once let Starbucks cut back on the innovation front. Starbucks leveraged the web, embraced social media and the emerging mobile opportunities. When you do something keeping customers in mind, customers pay you back. And that’s what happened, Starbucks popularity soared like no other company or brand. Starbucks not only managed to get bigger but also smarter which is a rare feat.
Build and organize digital capabilities:
Starbucks has made digital innovations as integral to the company’s strategy as to its customer experience. In 2008 the company created ‘Starbucks Digital Ventures’ an incubator for digital initiatives. The group is currently working on over 100 individual projects, most of which are customer and partner facing. Starbucks’ leadership believes that digital will play the most significant role in maintaining companies leading position as a brand. At the end, the digital and always connected paradigm gives us the opportunity to build an authentic relationship with our customers in new, interactive and scalable ways; adopt now.
In today’s age of consumer centrality, the brand need to think about patterns of desired outcome and behavior that needs to be achieved; rather than moving the consumer through a pre-designed flow of experience. It’s like setting a stage for other people to perform but you can never tell them what to do. We need to understand the ecosystem where the consumer is at the center, and how the network around him works together, rather than the brand at the center.
So here’s what our learning take-away are from the Starbucks’ story: always keep your customers at the center of your ecosystem, shift strategies to accommodate them. We live in an era where the customer landscape is not only dynamic, it’s incredibly segmented. What used to work from a traditional branding sense … now opens up a series of new touch points that we have to explore.
Bonus: 7 Things You Didn’t Know About Starbucks via Mashable
Want to discuss more about Starbucks’ digital transformation? Let’s keep the conversation going through comments. You can also tweet to me. And of course we can always meet at Starbucks. After all the coffee chain’s new ad campaign advocates more real-life communication in your life…and cups of coffee.