Starbucks has a culture of service principles and a team of committed people, making it one of the top customer experience companies around.
However, by 2008, Starbucks' customer service had deteriorated to the point that its most devoted consumers were abandoning the company. With a falling stock price, retail closures, and major layoffs, the company was on the edge of bankruptcy.
Starbucks had become too big. So much so that decision making and customer experience were no longer in control as it kept branching out into the recording and film industries. This Starbucks case study demonstrates how the company's bankruptcy served as a wake-up call for them to refocus on coffee and rebuild their customer experience to what it is now.
Starbucks coffee is ranked in the middle of the pack in blind tasting testing. However, there's something about the Starbucks experience that attracts customers who are willing to pay twice as much for a cup of coffee.
The company considers itself to be a "moment" company. They place a high value on the company's culture among its employees, with each one of them adorning a green apron. Starbucks prides itself on providing exceptional customer service.
During the 1980s and 1990s, Starbucks had a lot of success expanding its brand. Starbucks has become one of the most well-known and popular brands in the industry by the year 2000. They'd established a comfortable position, so they started exploring fresh ways to expand beyond coffee.
Starbucks' attention was diverted
away from the task at hand
Starbucks is known for providing its customers with the ideal break from their daily routines. With delicacies consisting of a unique blend of Italian coffee names, European pastries, calm and helpful personnel, luxurious leather seats, and indie music to create happy times. Overall, they create a welcoming environment that contributes to a memorable encounter.
But this was not always the case. Their brand ego had begun to take over in 2003. Starbucks founded its own record label, won eight Grammy Awards, then released a film and partnered with William Morris to scout for music, books, and films. In Los Angeles, Starbucks even established an "entertainment" branch.
The company had lost sight of who it was after only five years. These additional enterprises had become a major distraction, and their primary coffee brand had suffered greatly as a result. Sales collapsed without the visionary leadership on coffee, and the stock price dropped from $37 to $7.83. The corporation had to lay off 18,000 employees and close 977 locations. Starbucks' reputation had plummeted to new lows.
There was one question that everyone, from the customers to the stakeholders to leaders of other big corporations had on their minds.
Will it be just another hot brand that fades into obscurity?
Starbucks was in serious need of a refocus
After seeing the disaster that was created, the decision-makers started coming to their senses and pulling up their socks. The corporation got out of the entertainment sector and refocused on the coffee habit. It shut down every shop location for a full day to retrain every barista—a sign of what matters most to the brand's consumer experience.
Starbucks designed sandwiches, snacks, and pastries around the coffee ritual in order to capture a larger percentage of the market share and extend the coffee ritual into lunch and supper. All of these attempts were made to reignite consumer interest.
Starbucks was able to finish its turnaround strategy due to strategic thinking
There are several lessons to be learned from this case study, but one of the most essential is to constantly concentrate on improving what you're known for rather than branching out so much that you lose sight of what you stand for.
When Starbucks began to lose sight of why it was founded in the first place and began extending out into regions where it couldn't build a distinct and unique character, the effects began to backfire.
Here are some of the takeaways from the case study, as well as how Starbucks was able to get back on its feet and become one of the most desirable businesses in its field.
1. Create a vision of your desired outcome
Starbucks aspired to be a much-loved daily ritual. The coffee maker's challenge was to figure out how to build strategies around the customer experience in order to boost same-store sales significantly.
2. Put money into a long-term strategy
They wanted to re-establish a strong link with customers, focusing on the customer experience, and develop the brand via its culture-led essence, all while working with an incredible team of people. Starbucks sought to put its culture front and centre in the customer's mind.
3. Concentrate your efforts on a single opportunity that has been discovered
Starbucks shifted their strategy in 2008 to expand the coffee experience beyond the morning. It aspired to create a space where people may congregate throughout the day. Desserts, snacks, and sandwiches have been added to the company's coffee-centric repertoire.
They spotted an opportunity in the company's under-utilized retail sites, which remained mostly empty after 11 a.m. The firm hoped that by diversifying its portfolio, it would be able to increase lunch and supper sales, as well as get a larger portion of the consumer's wallet and same-store sales.
4. Take advantage of a market-changing opportunity
Starbucks shut down all of its locations for a day to focus on customer service before expanding its coffee assortment. Starbucks was able to re-engage the majority of its long-time customers. It was able to transform the morning coffee ritual into an all-day living habit, allowing them to focus on being a consumer experience brand and a meeting spot for friends and coworkers to relish moments.
5. A remuneration-paying performance outcome
They witnessed double-digit growth for five years in a row, no longer considered merely a place to go for morning coffee, but a place to escape at any time of day. During that time, the stock price grew tenfold.