Starbucks has been going through some tough times. The economic downturn naturally hits discretionary spending hardest and, well, a $4.00 latte is nothing if not discretionary spending.
Good companies try new things during tough times. Now, that might sound counterintuitive. You'll often hear people suggest that those are the times to "stick to your knitting," "get back to basics," or, "focus on the fundamentals."
But, everyone else will be "sticking to their knitting" during a downturn, right? Isn't that the time to think about trying crochet?
Here's what I mean.
Business is all about differentiation and focus. Trust me. There are no more important words in business than those two...maybe not just in business. And the harder of the two is the first.
Finding and maintaining a strong point of difference is what has made Starbucks a winner. It's never just been about the coffee. After all, they practically invented the idea of the "third place" in the US. Betting on customer experience as your point of differentiation is especially smart.
Why?
Because most products are just "stuff."
Oh, sure, every once in a while you get one of these, but most of the time, anything you can make, your competition can make, too. If not today, then two months from today.
So, focusing on a product as the key to your differentiation strategy is dicey. You better be very, very good at innovating and at speed.
So, if product differentiation isn't the key to winning, what is?
Well, certainly not price. Again, unless you've got a lot of big yellow smiley stickers you want to smack all over everything you sell.
So, what's left? Well, don't get me wrong. You don't give up on product and price, but if you're looking for a key to differentiation, betting on customer experience at least puts the game in your own hands.
You get to decide what your "store" (or shop, or salon, or website) looks and feels like. You get to decide how you treat your customers. You get to decide how to surprise and delight them with little touches. You get to decide how to involve them in your business. You get to decide...well, you get the picture.
Back to Starbucks.
Given all the problems they're facing, they decided to...surprise...go "back to basics." But, take a look at their basics:
- Begin selling a new everyday brew, Pike Place Roast, named after Starbucks’ first location at Seattle’s famous Pike Place Market.
- Brew smaller batches of coffee to be served in 30 minutes or less.
- Phase in a new espresso machine, the Mastrena.
- Buy Coffee Equipment Co., maker of the industry-favorite Clover
single-cup commercial brewer, and introduce the machines to many U.S.
locations.
- Give Starbucks Card holders more benefits, including a free beverage when they buy a pound of coffee.
- Launch www.mystarbucksidea.com, a social networking site.
Notice that last bullet.
The new Starbucks social networking site is a blog for customers, a place where new ideas can be collected, discussed and voted upon.
Basics? Hmm.
Listen to CEO Howard Schultz:
By embracing our heritage, returning to our core - all things coffee -
and our relentless commitment to innovation, we will reignite the
emotional connection we have with our customers and transform the
Starbucks experience.
So, if your company's "basics" don't include a strong focus on key differentiators, customer experience and innovation for example, maybe it's NOT time to stick to your knitting. Maybe it's time to venture out into some new territory. Maybe it's time to figure out how to use the most valuable resource at your disposal...the intelligence of your entire value-ecosystem...to discover differentiators that will last beyond the next product cycle.
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