Starbucks success grounded in customer experience

By Phoebe Sweet / Staff Writer

Customers place orders at Starbuck's inside the New York-New York. Starbucks focuses on customer experience, one big reason the company's outlets can charge a premium for its beverages and other offerings. Photo by Richard Brian

There's a disconnect between the way consumers think they buy and the way they actually do.

Eight out of 10 consumers say they want to make buying decisions based on fact and reason, but seven of 10 say they actually make those decisions based on emotion.

And that's why one expert business consultant says smart businesses should focus on customer experience as much as the product they sell.

"For the longest time in our history what we sold were commodities," said Dr. Joseph Michelli, author of "The Starbucks Experience: 5 Principles for Turning the Ordinary Into the Extraordinary." "We no longer extract, deliver or make anything. We provide experiences. Service is now a commodity."

Michelli spoke at the recent Embarq XTREME Business Breakfast at South Point.

He said customer experience - the theater that gives buyers that feeling of intimacy with their salesperson - is as important as the product they're buying.

That's what makes a cup of coffee that's worth a nickle as a commodity and 50 cents at a convenience store is worth $4 at Starbucks.

About 95 percent of business leaders realize customer experience is key to success, and 80 percent say they know the difference makers in their business are no longer product-based.

Still, half of consumers say the majority of their buying experiences are bland or boring.

And while 92 percent of business owners say they have great customer service, most surveyed customers disagree.

That's because too many businesses are inward looking, Michelli said, focused on streamlining operations, being efficient and having protocol and regulations. They never consider the drag on productivity and sales that forgetting the customer and his needs can have.

"Inward-looking companies are very efficient, but they run employees into the ground," Michelli said. "And when you go to a business that makes you do things their way, you feel stupid. Businesses that focus on their own process alienate the customer."

Instead, listen to the customer, stand on the other side of the counter now and again and give your customers an emotional experience.

And much of experience is about perception and fantasy, Michelli said.

Best Buy's Geek Squad, for example, isn't really a platoon of pocket protector-wearing nerds. But depicting them in commercials as geeks makes them seem more knowledgeable and gives consumers trust.

Geek Squad's commercials say, "We've spent more time with Windows Vista than is socially acceptable," Michelli said. "That's a fantasy."

But as long as the service performs, we're happy to believe in it.

Michelli said there are five steps to taking your business from product to experience, from ordinary to extraordinary.

Make it your own: The most important part of any business is its people, and businesses that give their people ownership - both emotional and literal - in the company are much more likely to succeed.

Starbucks, for example, offers health insurance to any employee who works 20 hours a week, gives immediate stock options to all employees and empowers workers to make the customer's experience stellar every time.

When Starbucks had stores in only three markets - Seattle, Chicago and Los Angeles - it was a front-of-the-house employee who turned around Los Angeles' stagnant first store by inventing the vanilla frappuccino. Starbucks now sells more ice blended drinks like the frappuccino than it does hot coffee.

"People near the customer know what the customer wants," said Michelli.

Everything matters: Details really matter, especially when it comes to the customer experience. While your product or service must always be consistent, everything from the decor to the toilet paper must be in keeping with your theme, in Starbucks' case "affordable luxury."

Surprise and delight: Starbucks worked very hard to making sure that a Starbucks coffee would taste the same in Denver and Dublin and Dubai. The product and the experience should always be the same.

But by creating in-store surprises, the company captures customers' imaginations.

Starbucks spends more on in-store samples than on advertising, Michelli said, in order to create the unexpected.

Embrace resistance: "Starbucks is not loved by everybody," Michelli said. In fact, many hate the coffee giant.

But Michelli said Starbucks takes criticism seriously, and learns from it.

He used the example of a Starbucks ad for fruity iced drinks that came out after 9/11. The add featured two tall drinks with a firefly buzzing around then and the tag line, "Collapse into cool." Although it takes several logical leaps to get from fruity drinks to collapsing trade towers, many survivors and victim family members made those leaps and were offended by the ad. Rather than defending the ad, which was clearly not meant to depict the World Trade Center, Starbucks simply pulled the ads.

Michelli said companies should embrace criticism and accept responsibility, use the dialogue as a way to improve relationships and use criticism to improve function.

Leave your mark: Although many companies initially get involved in corporate giving or community involvement as a PR measure, "once you really start loving the community it becomes addictive," Michelli said.

Starbucks has a unique corporate giving philosophy. The company only donates money to organizations in which its employees are involved, a different way of vetting worthy charities. And Starbucks matches an employees volunteer hours with a donation equal to their salary for those hours up to $1,000 when employees give time out of their own lives.

Responsible businesses should find ways to leave their mark on the world through volunteerism, fundraising, community grants or through a revision of their own business practices, he said. Doing the right thing has a way of coming back around to help business, as well.

Phoebe Sweet covers banking and marketing for In Business Las Vegas and its sister publication, the Las Vegas Sun. She can be reached at (702)259-8832 or by e-mail at phoebe.sweet@lasvegassun.com.

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