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My Starbucks Idea – The Howard Schultz Story

In today’s buzz, we will see how Starbucks overcame the Economic slowdown crisis in 2008.

Starbucks was founded in 1971 in Seattle, and since then it now has around 32700 stores in 76 countries around the globe. The quality of coffee at Starbucks is never questionable but its price has always been higher than any other domestic coffee retailer in any country.

Hence in 2008, when there was an economic slowdown in the world, people wanted to save any amount of money they could, and hence they started shifting to other coffee retailers as they could save some amount through it. Because of this, the sales and revenue started dropping, and the profit of the company had fallen by 28%. They were also forced to close around 900 stores globally and lay of 6700 employees in 2009.

Management Change –

Like every company, Starbucks also wanted to improve their business and thus their profit. So, Starbucks brought back their old CEO, Mr. Howard D. Schultz. He had served as CEO of the company from the time when they only had 4 outlets.

He found that, in the process of expanding business, the company shifted their focus from making the existing stores into an inviting place for the customers. He also found that the company did not focus on inventing new drinks and products, and this digged them into less business as McDonalds started coffee bars with various new coffee  products during the same period.

To shift its focus towards customers and their expectations, Schultz urged every employee to shift their focus from bureaucracy and work on the demands and expectations of the customers. He had a very clear objective of reigniting the emotional attachment with the customers. He had a completely different approach than the old management members towards the scenario. He told all the employees that in this process, their customers have started showing them back.

To change their approach, Starbucks shifted their focus towards technology oriented strategies. They created an environment where all the employees could think freely and come up with some strategies that would benefit into the growth of the company.

My Starbucks Idea –

Starbucks rolled out My Starbucks Idea in 2008. In this, the customers were able to give their opinions on anything about Starbucks ranging from their products to their marketing strategies. After the 2007/08 crisis, Starbucks had to rebuild customer relation and make them believe that it cared for the quality and consistency.

Through “My Starbucks Idea” customers had a direct link with the headquarters and Starbucks was also listening to their requests. Starbucks also formed communities for like minded people across the world in which they had an opportunity to connect between them. The communities were like free Wi-fi group, Frappuccino lovers or comfy chair group and so on.

Starbucks listened to over 100 ideas from the responses received from customers and this helped them in creating a good fanbase again. Starbucks focused more on building and engaging communities our social media. People started tweeting “Keep calm and make coffee” on various social media platforms. This kept Starbucks trending.

My Starbucks Signature –

This was also one of the trending initiative of Starbucks. This initiative allowed customers develop their own signature drinks, name their drink and share it with the other community. By this Starbucks informed the customer that they had a wide range of product offering across the world. Customers could only modify the quantity of ingredients to any signature drink.

Marketing –

In 2008, the marketing team started promoting to increase customers visit during breakfast hours. They offered a free pastry with a coffee bought before 10:30 AM. This initiative attracted over a million people to queue up at Starbucks store. They shifted their focus to social media marketing from traditional advertisements channel as it had more awareness and responses.

Starbucks had a separate community for their employees and baristas on which they used to generate and debate on new ideas. It was an idea of a 28 year old Barista to have an official handle on Twitter for the brand. Today, the twitter page of Starbucks has 11 million followers.

Some interesting facts –

  • Starbucks has its own record label of music created in 2007 which they usually play in stores.
  • Starbucks share price rose from $7.70 in 2008 to $ 119 today, an almost whomping 900% return.
  • Starbucks have a 10 minute rule, the employees have to open the store 10 minutes before the posted opening time and should close it 10 minutes later than the posted closing time.
  • Starbucks spend more on health care for employees than on coffee beans every year.

Customer satisfaction is more important than business expansion to be a successful business.