I have been following the fall of Starbucks with interest, and a recent comment by John Quelch on the Harvard Business Publishing blog (link) entitled “How Starbucks’ Growth Destroyed Brand Value” caught my eye yesterday.The reason for the renewed interest in Starbucks is the recent announcement that Starbucks is to close 600 stores in the US and an earlier internal memo that admitted that “Stores no longer have the soul of the past…”Quelch gives his analysis of the situation concluding that:
I’m not sure that he has really hit on the main cause of the problem, and in my opinion, focuses upon some of the symptoms rather than identifying the cause. I think that the core reason that Starbucks lost its mojo was that it watered down the customer experience. Two things combined to cause a dramatic loss of Starbucks’ experiential capital with its customers. Firstly, Starbucks didn’t understand the customer experience that drew people into the stores. In their enthusiasm to expand quickly, they made some choices that significantly eroded the customer experience. This led to a gap between customer expectations (the soul of the past) and the in-store experience. Secondly, customers became more knowledgeable about coffee, changing their expectations. The combination of these two effects created a double negative. Reducing on experience delivery combined with an increasing set of expectations gives an an almost exponential loss of trust and emotional alignment. This is very dangerous and difficult to stem. Once customers begin to feel cheated (or snubbed) by someone they had a special relationship to, things get emotional and out of proportion, leading to emotional retaliation. This has become easy for Starbucks customers to do, because there are plenty of alternatives on offer. There are more exclusive experiential offerings, which still have soul, and there are plenty of fast-food alternatives that have good, quick and cheap coffee. The article also raises an important question. Is it possible for a strongly experiential offering to grow and still retain its soul? I think so, but I think it requires a constant focus upon the customer experience throughout. Not a static focus either, one that develops over time together with the customer. It is possible to do. Look at the Apple stores. They have soul, are focussed upon the Apple experience and are managing a strong growth rate. Starbucks took its eye off the ball and have paid dearly. Thats an important lesson for all to learn.