Learning from Leaders: CX lessons from Starbucks - Omoto
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Learning from Leaders: CX lessons from Starbucks

Culture outperforms strategy every time. And culture with strategy is a lethal combination – it is unbeatable. Unfortunately, most organizations don’t get this and consider culture and strategy as two different dimensions. The top managers realize that a positive culture is important for growing the business and a negative culture hurts all. But, they often don’t know what to do about it and fail to connect company culture with its strategy.

However, there are some companies that have built their strategy on culture and are role-models for others to follow. Let’s take the classic example of Starbucks. Undeniably, Starbucks has been different from the rest ever since it began its journey. Its major focus was not the product; rather, it was the experience and the desire for creating a “third place” for conviviality beyond home and the workplace. This is what its official website says:

Howard Schultz, the former Chief of Starbucks and currently serving as Chairman Emeritus, has always been known for his unconventional ways in handling his business. While everyone else was talking about products, he talked about the people, the culture, and the employees. On culture and people, he said, “We built the Starbucks brand first with our people, not with consumers. Because we believed the best way to meet and exceed the expectations of our customers was to hire and train great people, we invested in employees.”

The cafe chain claims that is not a coffee provider, but an ‘experience’ provider. Walk into any outlet of Starbucks all over the world and the experience would be warm and welcoming. It’s not because the staff perform certain tasks robotically and coherently. Also, the experience doesn’t lie in just the layout and the décor. Rather, the experience is made special because of the employees such as the staff that take your order so wonderfully. They behave in a manner similar to their counterparts at any other outlet in the world. This consistency is because the employees understand that their work fits into a common purpose. Therefore, they know how to offer a memorable experience that offers a bigger picture, without following a script.

When it comes to customer experience, Starbucks has indeed proved to be the golden child. Let’s have a look at the key points that have helped the organization offer a delightful experience over the years.

Relationship-driven approach

The aim of the chief executive, Howard Schultz has always been to position Starbucks as an extension of peoples’ home and work. The sense of community and the human connection appears to be relevant irrespective of locations. He focused on building a relationship-driven, employee-first approach that encourages employees to share a close bond with the brand. They’re called ‘partners’ and not employees and every part-time staff (in the U.S.) receives stock options and health insurance. In fact, during the global crisis of 2008, when every other company was cutting down on the workforce, Starbucks decided to invest in staff training. Most companies, while trying to improve their culture, assume that there is something wrong with their existing culture. They assume that culture needs a fix. This negative approach often doesn’t work.

Early in the 1990s, Starbucks was a growth darling recognized for creating a positive work culture. Schultz defined benefits-eligible employees as those working 20 hours per week—not the traditional 40—and employees could get 401(k) matching funds, bonuses, and health coverage. In 2015, he introduced four years of tuition coverage for a spouse or child of benefits-eligible employees who were U.S. veterans. Schultz explained his rationale in this investment in his book, Onward, “[Employees] are the true ambassadors of our brand…Give them reasons to believe in their work and that they’re part of a larger mission…they’ll in turn personally elevate the experience for each customer—something you can hardly accomplish with a billboard or a 30-second spot.”

The company aims at creating a culture of belonging, inclusion, and diversity. It considers these aspects as the heart of the business and seeks to inspire and nurture the human spirit, understanding that each person brings a distinct life experience to the table. Starbucks partners are diverse not only in gender, race, ethnicity, sexual orientation, disability, religion, and age but also in cultural backgrounds, life experiences, thoughts, and ideas. The organization believes that embracing diversity not only enhances work culture but also drives business success. It is the inclusion of these diverse experiences and perspectives that create a culture of empowerment, one that fosters innovation, economic growth, and new ideas.

Innovation-driven approach

Schultz’s vision was different from most of his contemporaries. He believed that one needs to look for opportunities that others haven’t seen yet. He believed that the private sector has to take a larger role than it has in the past. His business model, therefore, focused on delivering a sustainable economic model by Starbucks being a leader in sourcing beans ethically and minimizing the environmental impact.

Customers also benefited from Schultz’s commitment to innovation. For instance, Starbucks offered wi-fi in stores beginning in 2002. Further, it partnered with Apple in 2007 to provide free access to iTunes music. Sales followed, so the company continued to expand its technology focus to include more content, loyalty rewards, and, eventually, payments.

Starbucks was a $20 billion company with more than 23,000 locations by November 2015. A 2015 introduction that helped propel this growth was what Starbucks called “Mobile Order & Pay.” Customers who had the loyalty app could receive a constant stream of incentives and marketing communications, and could also order and conduct their transactions through the app. They could place an order and pay for it without speaking to a Starbucks employee. And customers were placing up to 7 million orders per week within three months!

According to the CFO Scott Maw, the company not only identified revenue drivers, but invested in them quickly, and reinvested in initiatives with a high return-on-investment. This enabled an organization of such a size to remain nimble.

Loyalty programs

The Star Loyalty program was designed to encourage customers to use the app, which offered a range of features such as a store locator and payment management. Each component of the program was crafted to maximize the user experience. Users set up Mobile Order & Pay by linking their app to a credit card or a PayPal account and loaded money onto the tool so that it worked like a debit card. There was an optional feature to automatically re-charge the tool if the balance dipped too low. Users could tip via the app, facilitating ease of use.

Further, a message center allowed Starbucks to push user communications ranging from usability tips to new menu offerings. And the Gift tab enabled users to select from various artwork—featuring themes from Happy Birthday to Thank You—and then send a digital Starbucks card to any e-mail address with just a few taps on a mobile device.

The Rewards screen tracked how many “Stars” users had earned and how many more they needed to achieve the next rewards level. This further incentivized users to make more purchases and use the app more frequently. The rewards themselves were most commonly drinks and food from a Starbucks outlet. But, Starbucks ingeniously took advantage of this audience base by sending custom offers to e-mail subscribers along with giving app users glimpses of new products before other customers that did not use Starbucks could. The brand provided users a true omnichannel experience and interacted with them at specific digital touchpoints.

Mobile App

A brand needs to have an omnichannel presence in today’s scenario. The first edition of the Starbucks mobile app in 2011 was essentially a digital version of the Starbucks Card. The adoption rate was so encouraging that the company continued to invest in the app.

In 2012, Starbucks made a big bet on Square by investing $25 million in the payments start-up. This investment streamlined the store experience and eventually enabled the Mobile Order & Pay feature of the app. Starbucks earned the title of 2012 Mobile Marketer of the Year. It won the award earlier in 2010 too for its innovation in creating two-way communications with customers via SMS and for its strategic use of QR codes.

The company drove opt-ins with special offers and encouraged users to text specific codes to receive discounts. To tune things up a notch, Starbucks served mobile ads using Mobile Rich Media Ad Interface Definitions (MRAID), and the geolocation tracking incentivized users to visit the nearest shop.

The brand not only engaged with its customers but it did so in every way possible. The company was truly benefiting from these efforts because by the end of 2015, more than 9 million of the 45 million total customers were paying via their mobile devices each week. Howard Schultz disclosed that the transactions on Mobile Order & Pay were growing “by the hour.”

Branding

From its origin, Starbucks ensured that the cornerstone of brand-building was customer experience. Further, given the external factors and the rising coffee prices, it could never have competed on price. Instead, Starbucks chose to focus on things it could control: consistency across stores, service, and a seamless experience.

Social media became a huge source of power for the brand. With more than 35 million Facebook fans and 11 million Twitter followers, Starbucks capitalized upon experiential marketing by tapping into the passion of its customers. Customers loved the fact that they could get exactly the same drink in the Charlotte, North Carolina airport and on King’s Road in London, in the same cup, with the same delightful name, and be rewarded for doing so.

Starbucks’s Loyalty Reigns

Starbucks used the brand along with its mobile and digital assets as “the foundation of a much broader external mobile digital and loyalty platform,” and planned to extend this to purchases and experiences outside of the four walls of the Starbucks store.

Thus, the company built its competitive advantage primarily around customer experience at a time when most others were focusing only on the 4 Ps of marketing. Further, it also pivoted very effectively according to market needs. No wonder, Starbuck remains one of the most loved brands in the world and is also the poster child of amazing customer experience until today.

The article has been inspired from this HBR case study.

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