Excerpted from BrandWeek, “Why Starbucks Has Ground To A Halt” by Robert Passikoff, Nov 10, 2008
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Maybe you haven’t read Moby-Dick, but you’ve surely read about a character named Starbucks. It’s not a happy tale…most of its brand awareness is based not on the perfect brew, but on ill-considered breakfast sandwiches, falling stock prices, store shutterings and various attempts to boost sagging profits. Of course, Starbucks has by no means disappeared…but the Starbucks brand is facing the danger of obsolescence…
The reason for the troubles is that management ignored all the things that made customers loyal to the brand…How could the brand masters in Seattle have let this happen?…Starbucks stores were popular—and packed. So, out went those cool, comfy couches (how better to make way for lines of loyal customers?).
And of course, the service had to get faster, so why take time to grind all those annoying coffee beans? Hand-pulled shots also held up the clock, so they went bye-bye, too…the grinders stopped grinding, the shops lost that nice coffee smell…Vanished along with it was the reward of the custom experience…
In an internal company memo leaked in 2007…Howard Schultz himself admitted the streamlining that enabled the chain to grow to 13,000 units had “watered down” the brand. “Stores no longer have the soul of the past,” Schultz wrote…
Starbucks … had walked away from a successful brand position and a differentiating recreational experience and toward a door marked “Lifestyle Brand”…
Neither categories nor consumers are constant. Reasons for customers’ loyalty change, as do customers themselves. Starbucks failed to remember than the interaction that takes place between customers and categories is not static, but sophisticated and evolutionary. Not only did Starbucks help to create its category, it was responsible for educating the public about using it. Yet as…customers grew more sophisticated, the category morphed…Competition increased. Soon, a Starbucks-comparable mocha latte could be had most anywhere in the United States.
What had once been a treat is now an expectation. That’s exactly why, now, people won’t think twice about walking in for a really swell morning brew—at McDonald’s.
Edit by SAC
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Customer satisfaction drives customer loyalty and customer loyalty drives profits. Starbucks attempts to increase revenue simultaneously had a negative impact on customer satisfaction. The result? Starbucks profit was down 97% for the most recent quarter vs. 2007 and began closing stores in 2008. The chain has recently introduced rewards programs to promote customer loyalty and combat this decline.
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Full Article:
http://www.brandweek.com/bw/content_display/current-issue/e3i431ca797a370fbb20c4f3afe57081788?imw=Y
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The Homa Files 
January 28, 2009 at 3:29 am |
Customer satisfaction and loyalty should always be a major focus, even more so during economically challenging times.
Studies have shown that loyal customers:
Purchase your products and services again and again over time
Increase the volume of their purchases
Buy beyond traditional purchases, across product lines
Refer your company’s products and services to others
Become immune to the pull of the competition
Give your company the benefit of the doubt when something goes wrong
A few things to keep in mind:
It costs 7-10 times more to recruit a new customer than to keep an existing one
A gain in customer loyalty of only 5% can lift lifetime profits per customer by as much as 95%
An increase in loyalty of just 2% is, in some sectors, equivalent to a 10% cost reduction