Wednesday, October 15, 2008

Beating Around the BLENZ

Starbucks poobah Howard Schultz might wind up choking on his Pumpkin Spice Latte if and when he reads this.

It is Friday, September 29th, 2008.

The time is 2:38 p.m.

Location: Vancouver, British Columbia.

Wandering into the Starbucks oasis just down the street from the Sheraton, an out-of-province visitor asks Gen-Y guy behind the counter if there is a wireless connection. The helpful barista responds by saying "Yeah we do, but you would have to pay for it. There is a BLENZ location about a block away where you can get it for free".

The potential customer says thanks, turns and heads down the street to drop in on Howard's direct competitor - now with 84 locations to serve coffee fans throughout British Columbia, parts of the U.S., Japan, the United Arab Emirates, Kuwait and China.

Depending on your perspective, this story will impact you in different ways.

But, Howard and the hundreds of business owners I know might be wondering how does it happen that a guy we're paying to employ, would be so willing to send a potential customer away to one of our direct competitors - especially one that has copied our concept in such a blatant fashion?


Howard may be the 354th richest person in the U.S. but he didn't get that way without recognizing simple, yet powerful truths. Sending business down the street - especially to someone who is eating into your margins daily - doesn't keep you in business and keep that barista working. Interesting to note that in his book, "Pour Your Heart into It" Schultz admits to being afraid "Starbucks may become another soulless big chain."

It would appear Howard's paranoia is well-placed considering the emergence of the many copycat competitors like BLENZ. In 2008, for the first time in its history, Starbucks sales have been slipping. That's a tough cappuccino to swallow for a brand that has made such a determined effort to entrench itself as the "third place" between work and home. Schultz has had lofty aspirations for the Starbucks brand and more than most, has succeeded in taking its game to a level worthy of public recognition. For years, real estate agents have been frothing when Starbucks decides to open a new location in a neighbourhood in which they have traction since it is usually a sign of bidding wars to come.

Despite their current challenges, including some drab locations and some disenchantment from environmentalists (, Starbucks has succeeded in tapping into the pulse of people who enjoy being able to espresso themselves in their daily routine.

But, will Starbucks be able to keep the mojo it has battled so hard to earn?

In January 2008, Howard Schultz resumed his roles as President and Chief Executive Officer after an eight year hiatus, saying his principal challenge is to restore the "distinctive Starbucks experience" in the face of rapid expansion. By late March 2008, Starbucks had more than 16,226 stores worldwide, including 11,434 stores located in the United States. On July 1, 2008, the company announced it was closing 600 under-performing company-owned stores and cutting U.S. expansion plans amid growing economic uncertainty. On July 29, 2008, Starbucks also cut almost 1,000 non-retail jobs as part of its bid to re-energize the brand and boost its profit.

What do you think an otherwise harmless Vancouver incident has to say about what Howard has to do in keeping Starbucks ahead of its competitors? Or is this just a tempest in a green teapot? If you were to calculate the true cost of what it takes to attract a customer through your door in the first place, only then can you begin to appreciate the damaging effects of brand disconnect at the front-line.

What sort of impact does the front-line have on the overall brand experience at any company?

How would you ensure a "seamless" delivery of what Starbucks aspires to be at the store level?

Can't wait to see your comments pour in on this one.

"We believed very early on that people's interaction with the Starbucks experience was going to determine the success of the brand. The culture and values of how we related to our customers, which is reflected in how the company relates to our employees, would determine our success" HOWARD SCHULTZ


Ian said...

While driving westward across North America this summer I stopped into a Starbucks in Ontario, hoping to check my e-mail. I was surprised to find out that I had to pay to become connected. I've never been back to a Starbucks since, not once. I stopped in other coffee shops across Canada and the U.S., bought their products and enjoyed free internet.

Starbucks lost a valuable customer, all for the cost of free wireless internet. The privately owned coffee shops can deliver free internet...Howard, are you listening?

Marc said...

Same here in all of the booming parts of Alberta. I hit three in a row when I needed a solid fix and none of them had their Wi-Fi running. Some had been open for three months already. These guys are going to get life lesson on meeting customer expectations....what's a $39.95/month Internet connection when your customers pay $4.35 for a coffee?

Mike Shanks said...

"Great Customer Service" is more than remembering what I want a "Venti Tazo Chai, light on the water with non-fat". The experience is more than just one store, it is a brand. Knowing that Starbucks are around the world I should be able to get the same quality experience no matter which one I go to, but I don't. O'Hare International is a prime example, awful service at the Starbucks there.

When I go to a coffee shop I have one of two purposes. Getting my tea, or having a meeting. If I am having a tea I generally get it and go and not much "peripheral" stuff is involved. I look for a courteous server, hopefully with a smile, a clean transaction, and a correct order. When I go for a meeting all that needs to be there too, but now I need the "Experience". Now I am looking for atmosphere, services like internet, clean environment, well laid out restaurant, ample seating etc.

Starbucks does not deliver well for meetings.

Guess I will continue at my local William's Coffee Pub!!

Ken LeBlanc said...

Who is that great looking guy in the store ordering tea at 5:45 am?

dmartell said...

@Ken - I see you! Too funny.

FREE WIFI! Everyone needs to do this .. it's the best ROI, as a restaurant, you can get.

I can't wait to check out BLENZ next week while I'm in Vancouver.

Rick Nicholson said...

What's ironic here is that I think the front line employee supports the brand promise of giving the customer what they want.

I've seen customers comp-ed a free latte because they didn't like the taste of the one they were trying for the first time. I've heard of customers getting a free coffee when they dropped their first one on the ground.

Unfortunately the strings around this employee's neck won't allow him to give free WIFI.

Interesting that the promise was carried out by the employee, but the brand failed the customer. WIFI in a coffee shop is like having toast with eggs. How can you not give away the toast when the customer is already paying for the eggs.

Shame on you Starbucks...