Ysidora Yeo
Client Program Director and Author
Unpopular Opinion: Starbucks is in the Business of Serving an Experience to their Customers
How Starbucks found success in employing customer-centric strategies centered around the social concept of a Third Place.
A few coffee aficionados I know spend their downtimes exploring these hole-in-the-wall cafes run by award-winning baristas. They can comment on acidity and exclaim at bean origins, and there’s a whole other world of notes and fruity flavors that I can never taste in these coffees. (At risk of receiving a personal message from my coffee head friend later – coffee pod coffees taste equally good to me …)
“Please let me show you better coffees!” – the same friend once said to me, comically shaking me when she saw my Starbucks takeaway.
Unpopular opinion alert, but she’s right – there’s “better coffees” I’ve had out there, despite my inability to differentiate the good from the greats.
But unpopular opinion number two – Starbucks, despite their marketing, isn’t about their coffee, but is in the business of serving an experience to their customers.
The concept of the third realm
When I was cramming for my studies for the last seven years of my education, I’ve spent a good $10-20 each time at Starbucks. The convenience factor was a huge plus – with branches probably only a single-digit behind McDonald’s, it was easy to find and settle at the siren’s store. Gentle coffeehouse jazz music (peak at Christmas), cosy brown interiors, and your name misspelled on your coffee cup – almost the feeling of home.
In 1989, urban sociologist Ray Oldenburg published his book, The Great Good Place. In it, he discussed the concept of a “Third Place,” – a place outside of home where the community could gather, hang out, and just relax. These, to him, were coffee stores, salons, and bars, among others. Oldenburg suggests that for a healthy living, humans needed to find a balance in their three main realms: the Home, the Workplace, and an inclusive, sociable place – the Third Place.
Starbucks has now build their strategies around that third realm, with their Third Place concept.
It’s such an integral idea for Starbucks, that they have their Third Place Policy – summarily (and comically) touted by news sites as “No Purchase? No Problem.” In essence, you won’t be pressed to buy if you sit in a Starbucks – everyone is a customer, whether they buy or not.
(This article doesn’t discuss some of the unfortunate situations that have resulted in a in-my-opinion, extreme customer-centric take like this, but I do recommend a side read).
The move to a business around customer experience
However, Starbucks wasn’t always like this. Ask most in the field and they’d probably tell you that Starbucks was a very product-centric company. Their menus boasted a range of drinks, their display cases stocked full of pastries, and promotions revolved around new drinks and merchandise. Nothing wrong with it – they just wouldn’t have used the business as a great case study for customer-centricity.
They tried, however. Staff ask for your name, remember your regular orders. The challenge with this was, if you went to another Starbucks chain, the stranger barista no longer knows your usual, much less your name.
So how did they transition to proponents of the Third Place through customer-centricity?
The Starbucks app became the game changer for them that allowed their baristas to overcome the location barrier. Data from the app helped the company understand their high-value customers, purchase decisions, purchase frequencies.
Swipe your Starbucks membership card and the staff will now most likely call you by your name. They now even know your birthday – treats for you every year on your special day. The more you buy, the more you gain with Starbucks Rewards. Collect Stars and accumulate them for a free drink. Customers can also use their app to place orders without the physical queue. You’d also be able to easily see their entire menu – and cute tumblers! – in a single screen in your hand. It’s obvious but not accosting that their customer loyalty program incorporated techniques of both cross-selling and up-selling.
Now, javaphile or not, isn’t this a place you’d like to be?