Tuesday, August 5, 2008
The Starbucks Success Story
The original Starbucks opened in Seattle in 1971 as a store that sold coffee beans & equipment. In 1983 Howard Schultz joined the company and after a trip to Milan, advised the founders that the company should start selling coffee as well as coffee beans.
His idea was rejected by the three founders as they thought that getting into the beverage business would distract them from their primary business which was to sell coffee beans. However, Schultz believed that there was enormous opportunity to sell coffee to ‘pressed-for-time-on-the-go-Americans’ and he started his own chain of coffee shops called ‘Il Giomale’. Subsequently, the founders of Starbucks sold their chain to Schultz, who re-branded the consolidated business as Starbucks.
Starbucks then experimented with food but realized that it had to contend with high materials cost and stiff competition from low-price fast food chains such as McDonalds, Burger King, Dunkin’ Donuts etc. that also sold coffee. So they decided to shift their focus back to coffee and started the process of re-branding.
Rather than communicating a set of images that Starbucks wished to stand for, they adopted the ‘Experiential Branding’ route where they tried to create an atmosphere inside their stores that would not only draw people to the store but also make them linger and return. They decided to spend very little on advertising & instead create a brand image through their stores. They made the following changes to their stores:
1. They discontinued the use of pre-ground coffee as grinding of whole coffee beans within the store would add aroma to the store
2. Smoking was prohibited inside stores & employees were asked to refrain from wearing strong perfumes as the smell of smoke & strong perfumes was believed to adulterate the aroma of coffee
3. They introduced the concept of “Coffee of the Day” as well as seasonal beverages such as ‘Pumpkin Spice Latte’ (served around Halloween) & ‘Eggnog Latte’ & ‘Christmas/Holiday’ blend of coffee that is sold during the Christmas season
4. They introduced Starbucks ice-cream for coffee lovers who also loved ice-creams & Frappucinos (sealed bottles of cold coffee)
5. They introduced the concept of the “Third Space” – the space besides home & work. This essentially meant that people could spend time at Starbucks outlets studying, working on their laptops, writing, reading, meeting friends, holding formal meetings etc. They were not kicked out of the stores or the bill thrust in their faces as soon as they finished their cup of coffee (unlike in Indian coffee shops)
6. The store format varied depending on the location of the store…downtown buildings, college campuses, shopping centers, bookstores such as Barnes & Noble, Borders etc. The stores had fireplaces, leather chairs & couches for those who wanted to lounge & tables with hard-backed chairs for those who wanted a more structured environment to study/work etc.
7. Starbucks began selling special Jazz & Blues CDs, which in some cases were special compilations that had been put together for the company to use as background music inside its stores. The idea for selling the CDs originated with a Starbucks store manager who had worked in the music industry and selected the new "tape of the month" Starbucks played as background in its stores. Customers liked what they heard & started expressing a desire to purchase those CDs. The Starbucks CDs thus became a significant addition to the company's product line.
8. Employees would know the names of the regular customers along with their order, INCLUSIVE of the “decaf venti 0% no-whip no-foam extra-hot extra-cocoa mocha” bit
For a person that loves Coffee, Starbucks indeed is a God-sent. Once exposed to Starbucks & the likes, the coffee shops in India seem to be a sham!!
Think I'll leave you with these. "Drink" for thought? :p