Innovate & Disrupt

Starbucks is one of the esteem brands and its customers have the highest regard for the company, its brand and its products. Many case studies have been written about Starbucks, about their co-creation philosophy (MyStarbucksIdea.com as an example). Starbucks is regarded in the league of Nike, Apple and the like. 

New Policy?

Like many others, I do use Starbucks for - place of work, for meetings, get my timely dose of caffeine, and so on and on. So, as usual I visited Union Square Starbucks and found a table to sit and opened my laptop. As soon as I did, security guard came by and asked if I was going to “buy” something. I told him I would as soon as my meeting partner showed up. In the next couple of hours, I noticed our friendly security guard approached every new patron who is sitting at a table or chair without a latte in their hand.  

As a passionate Starbucks user, I found this very unusual. So, I introduced myself to the security guard and befriended him. He told me that they started doing this recently to make sure people are not just sitting but in fact giving some business back to Starbucks. I told him we do give him a lot of business - even those who are just sitting there and don’t have a Latte next to them but he didn’t get what I was saying. He also told me that other Starbucks shop in Union Square is also doing this. Instead of taking his word for it, I went to the other shop to confirm this new “policy”. 

This afternoon, I ended up in my usual Starbucks in Jersey - and I didn’t see this new “policy” - obviously as its not as popular as the ones in Union square. 

Starbucks was compelled to start this new policy - only in the most visited/popular Starbucks locations: a classic demand and supply problem - and I don’t blame them for that. When there is more demand, you have to figure out ways to “gate” the demand or “benefit” from the demand - some times use both ways. At this point, Starbucks is trying to “benefit” from the demand than “gate” the demand. 

Well, they have already “gated” the demand - by - blocking all the power outlets long time back. Due to this, most people with laptops had to leave the shop after their batteries drain. Despite that, the demand was so high that they had to focus towards “benefiting” from the demand. 

Now, lets step back and think this through - 

• The reason people flock to Starbucks is not because of their coffee but the ambiance.
• Ambiance is not just chairs and decor - but the people who flock there to meet, work and hang out. 
• Starbucks doesn’t have to make money on every customer’s every visit. Starbucks should “measure” the tangible and intangible benefits they get from every customer; life time value of a customer is NOT how much they spend per visit, but lot more than that. 
• There are many reasons people drive miles to find the nearest Starbucks - even though there is a Dunkin Donuts or McD right in front of them - and that’s not just because of Starbucks Coffee! 

Here is the bottom line - 

• If you have too much demand and make sure all the Starbucks user are getting access to your resources and services, then, come up with some other methods instead of  ”gating”. 
• Starbucks should realize that the demand is not just for their coffee but the welcome it’s patrons get when they walk in. If the welcome becomes gated, patrons get jaded! 
• Today the security guard is asking if I am going to buy something. Tomorrow, he may have to ask me “how” much I am going to spend and compare that to how much time I will spend at the store to calculate the COGS (cost of goods sold - per customer, per visit)

Over all, I love Starbucks as a brand and I truly wish this “new policy” is just a misinformed store manager’s way to deal with the demand and hope he/they fix it - before the next door McDonald’s benefits from Starbucks mistake!

@Vsistla

Most of the startups do a good job in figuring out the business they are in buy fail to align their “go to market” strategy with the business you are in.

Go to market strategy should be thought through with respect to target customers as well as competition/incumbent.

In layman terms -

1. If you are competing with current incumbents, make sure that you don’t vie for their current customers right off the bat. You will fail!

2. If your Customers and you have same go to market strategy for your business/revenue model, you are doomed to fail! For example - if you are making a branded consumer app that gives your end user something from your Customer but your Customer also has a branded consumer app, you will fail! You are better off offering your value as part of your Customer’s branded app. (note user is different from customer in this regard)

3. You cannot compete effectively against your incumbent with the same go to market strategy - ESP with limited resources, lack of brand recognition, pedigree, etc. Just the way you focus on underserved customer to disrupt, you should also focus on underserved market approaches.

@Vsistla