Insights into the turnaround that shouldn’t have worked—but did.
When the economy began to circle the drain in 2007, people immediately assumed Starbucks—the home of $4 coffee indulgences—would feel the crackdown on unnecessary spending. And feel it Starbucks did, closing more than 600 stores in 2008, and for many observers, signaling an end to the days of carefree spending.
So how, in a time where discounts continue to be the name of the game, are sales for the coffee giant setting records quarter after quarter? Oh, and did I say $4 coffee indulgence? Today, it’s up to $5. Charging more when times are tough should be a recipe for disaster, not success, yet it’s provided Starbucks with nearly $12 billion in 2011 revenue and better sales than ever.
What can building product marketers learn from this amazing turnaround? In a word: RISK.
1. Get LEAN to Grow Big
A lot of us know firsthand how LEAN programs can become an ongoing heads-down approach, cutting back and going dormant. Starbucks instead used its cost-cutting measures—closing under-performing stores and slashing spending—as a way to fund more product developments, create community involvement programs, and to initiate entire brand refreshes…investments in growth that are now paying off big.
2. Partnership at Every Level
Sometimes what you call your employees (staff, associates, etc.) provides hints to how you value your people. At Starbucks, corporate employees are “partners”, everyone contributing to a larger effort, sharing in the success and failure. Starbucks believes “partners” are participants and take pride in what they do. (Oh, and partners are also customers; if someone asks if “you want a Starbucks” while working at the headquarters, they mean the store on the 8th floor where everyone pays full-price, just like the 17000+ stores across the globe.)
3. Embrace Opportunity
For decades Starbucks built itself as a destination for premium brewed coffees and beverages crafted by trained baristas—and it still is. Yet it’s been packaged goods and merchandise that’s fueled the bulk of Starbucks turnaround. And again defying reason, the packaged sales have actually increased store traffic rather than cannibalizing it. Why? The wider product line has only strengthened the brand by broadening its exposure and availability.
4. Strong Roots, But Long Branches
Starbucks core customers like the unique, bold flavors. Unfortunately, its own research uncovered that 40% of U.S. coffee drinkers don’t. So after four decades, and a search for the right blend, Starbucks has launched a line of milder “blonde” roasts. It hasn’t forgotten or abandoned its roots, hasn’t “sold out” to reinvent itself, but instead found value in reaching beyond its base. The result is a whole new line for a whole different audience.
- Starbucks Outperforms Expectations – NY Times
- Most Innovative Companies – Fast Company
- World’s Most Admired Companies – CNN