I can’t say I’m much of a coffee fan, but I’m the first person to outwardly admire the strategic insights and strategies the Starbucks CEO used to take a heavily commoditized industry… and dominate the market with a premium priced coffee.
But growing this company wasn’t an easy feat. In fact, in 2008 Starbucks lost half its share of market value…OUCH!
Howard Schultz, the founder of Starbucks, stepped down from CEO in 2000, but with the company he started in trouble, he returned in January 2008.
Schultz introduced bold new changes to company. He aimed to reignite the passion and sense of purpose the company once had.
The changes didn’t produce immediate results – but in the longer term, Schultz did exactly what he set out to do, with the stock price experiencing a 150% jump from when he took over as CEO.
In his best selling book, “Onward: How Starbucks Fought for Its Life Without Losing Its Soul,” he documents the changes that rebuilt Starbucks to a global powerhouse.
Here are 7 marketing ideas you can learn from Howard Schultz, and how you can apply them to your business:
#1 – Build Your Brand On Authenticity
“Mass advertising can help build brands, but authenticity is what makes them last. If people believe they share values with a company, they will stay loyal to the brand.”
In the modern marketplace, customer retention can be very challenging.
The way to win the hearts of your customers
is to show that you share the same values.
At Starbucks, Howard Schultz demonstrated this with the “Create Jobs for USA program.”
The program makes loans to small businesses that might otherwise not receive financing. The project was originally funded with a $5 million donation from the Starbucks foundation. Customers were then asked to participate by contributing to the fund.
If a customer donates more than five dollars, they receive a red, white, & blue wristband, which has the word “indivisible” on it. In one year they were able to raise more than $15 million, which helped to create and sustain 5000 jobs!
Indivisible – what better way to describe a relationship of shared values?
#2 – Be True To Your Core
“We will transform the company internally by being true to our coffee core, and by doing what will be best for customers, not what will boost comps.”
In January 2008, Schultz faced a dilemma. In the last three months of the fiscal year, same-store sales had only increased by 1%. This compared to 16 years of 5% or better “comps” (comparable same-store sales).
His decision, which was very controversial among financial analysts, was to stop disclosing comps.
While he agreed that comps were a reliable way to measure a retailer’s health, they were taking Starbucks too far away from its core business. In a desire to keep increasing comps, they were adding products that had little to do with coffee.
Schultz uses the example of cuddly toys being sold next to the counter. The thinking was that this would help incremental sales…
He noticed that this type of thinking had become pervasive throughout the company (and common among many of his competitors).
But “everyone else is doing it” was not a good enough reason for Shultz – so he got back to the core of the business: selling exceptional coffee and creating a great experience.
#3 – Look At The Bigger Picture
“We are as passionate about our commitment to our communities as we are about achieving financial success.”
When Schultz regained his leadership position with the company, he reinvented the Starbucks brand to retain the good things about the tradition of the company – while innovating where appropriate.
To do that, he looked at the bigger picture of what was happening in society. This was in 2009, when the country was swept up in economic uncertainty, political partisanship, and concerns about the environment.
Starbucks connected to the larger changes that were going on in society by providing health insurance for any barista who worked a least 20 hours a week, and that’s just one of the moves they made!
And it was a bold move indeed, especially when you consider that it cost the company $250 million… But Howard Schultz believed it was well worth the cost.
#4 – Sell The Experience, Not Just The Product
“The decline in coffee drinking was due to the fact that most of the coffee people bought was stale and they weren’t enjoying it. Once they tasted ours and experienced what we call “the third place” – a gathering place between home and work where they were treated with respect – they found we were filling a need they didn’t know they had.”
One of Howard Schultz biggest insights was the idea of the third place…
This is a place between home and work where people are able to spend some time.
By making Starbucks this third place, it became more than simply a place to order a cup of coffee…
What Howard Schultz was offering was a different experience, an experience that would allow Starbucks to charge more than four dollars for a cup of coffee.
#5 – Build Trust With Your Customer
“Over the years, Starbucks and I had made deposits into the reservoir in the form of exceptional employee benefits and the respect with which we treated people.”
Schultz faced many challenges – but one of the advantages he recognized was what he called the reservoir of trust.
It was the trust built on treating the customer with respect and providing exceptional customer service.
One of the ways that Starbucks does this is by expecting more of its employees than other companies…
Before an employee becomes a certified barista, they must be able to pour a perfect cappuccino – measured using an electronic scale or a measuring cup.
Starbucks also offers 87,000 different combinations of its beverages. A Starbucks barista needs to be able to make all of them.
When a customer buys anything at Starbucks, it’s because they know they can count on genuine service, a warm atmosphere, and a great cup of coffee every time.
#6 – Find Pride In The Company’s Purpose
“I couldn’t help but think about our baristas. About how knowledge can breed passion. And about how our company had to do a much better job of sharing our coffee knowledge and communicating our mission. Pride in purpose would help give our partners a sense of ownership.”
The company initially had high staff turnover rates and a generation of baristas uninspired by the Starbucks mission…
For these baristas, working at Starbucks was just a job. Schultz decided to bring the pride and passion back into working for Starbucks.
To do this, he chose to retrain all 135,000 of the baristas in espresso preparation.
This meant closing every Starbucks store for one day so that they could all experience an in-store education and training event. This move was unprecedented in retail history.
It also demonstrated how committed Schultz was to restoring Starbucks’ lost sense of purpose.
#7 – Find A Reason To Exist
Starbucks had lost sight of its real reason to exist, so Shultz set out to create a fully realized vision for the business. This would be something clearly understandable to part-time baristas, company presidents, and the customers alike.
He called this the “Transformation Agenda,” and it goes like this:
To become an enduring, great company with one of the most recognized and respected brands in the world, known for inspiring and nurturing the human spirit.
Watch this video to learn more about Howard Schultz’s thoughts on leadership, and how he spearheaded the important changes Starbucks so badly needed…
How can you apply these lessons to your business?
In your corner,
Charlie
