April 5th, 2009
Readers share some advice for Starbucks
After I wrote about Starbucks’ internal announcement that it is launching a Digital Ventures business, I received a good deal of mail from readers about the company. Amazingly, even though Starbucks is a high-profile company, only a couple business publications picked up on the story of a new division being created.
People feel strongly about what Starbucks can do for them and their communities. The notes and some things I’ve been thinking about make for a basic master plan for the first year of the new group’s efforts:
1.) Make Wi-Fi free and easy. Reader Miles writes: “I can’t tell you how many 1000’s of times I have met people at Panera vs Starbucks for the pure reason that we all needed online access without the hassle and cost of going of TMobile connections.”
Actually, Wi-Fi is “free” with a purchase these days, but the steps for getting online are ornate and confusing, involving both logging on to Starbucks’ site and AT&T’s network. T-Mobile got the bump last year, but AT&T wrangled a deal that makes getting online at Starbucks a pain. There can be no pain. Customers need to be able to log in as easily as they turn on their laptop. And iPhone users shouldn’t need to wait for a code sent via SMS to get online with AT&T. I get the SMS for Wi-Fi access on my phone about the time I get home from Starbucks.
2.) Fix the Starbucks cards. Another reader asked why the Starbucks Gold Card, a $25 card stored value card that gives the user a 10 percent discount, always has to be swiped through the point-of-sale system twice, once for the discount and a second time to pay for the purchase. The system must do all this in one swipe in order for the company to start to learn about customers politely.
The Gold Card has won more than 750,000 members, but that should spur the company to reduce transaction times in response to that success. There is no reason for an affinity card to add to the number of steps in a transaction. Make the POS system cache the card number to do the payment, so that baristas don’t have to ask “Is there money on this card?” before swiping a second time.
Once the cards can be aware of your identity—strictly between the customer and Starbucks—there’s the foundation for a wide range of digitally enabled services, particularly the one people wrote about most:
3.) Let people order ahead and pick up their drinks with less hassle. Having spent some significant years in food service as a kid, I have my doubts about this idea, but it is one I heard from a number of readers. They want to be able to call or send SMS ahead to order their drink, which will be ready when they arrive.
The problem is that people don’t always arrive on time or, if they get distracted, at all. What then, does Starbucks do with the spoiled drink? Coffee, especially espresso, degrades within a minute or two. Whipped cream breaks down in minutes, making a drink ugly when it waits for the customer to arrive. Even though this service would be pleasing when it worked, it could raise costs dramatically without making the customer happier in many transactions.
Starbucks would do better, in my opinion, to focus on the time in the store as an opportunity to improve the relationship with customers.
4.) Let the baristas and engaged customers blog through the local screens and a store-specific Web site. The AT&T service welcomes customers to the specific store where they login. It is therefore possible to target writing and pictures within the store and to a site that people can visit even when they are not at the store to make themselves part of the local community.
This would solve a big problem cited at the town hall meeting with CEO Howard Schultz that I attended: People feel the baristas are semi-anonymous, so much so that they’d like to see name tags on people. That’s tacky. A site displayed on the local screen that let baristas share their interests (”Bob raised money for the March Of Dimes this weekend” with pictures or “Cheryl loves playing with her kids” and a short video) would be an engaging way to introduce staff to customers.
Moreover, some customers would like the same experience for themselves. Even if only 10 customers participated at a local store, Starbucks would instantly have a large national community of more than 140,000 active local publishers. They’d likely be educators, activists and business leaders who saw the value in participating and fund-raising locally, and it would also lay the foundation for the company to engage the community with local news.
5.) Think of the store as a news stand. Newspapers are dying a kind of death of the body—their distribution systems don’t make sense now—but the hundreds of people who visit a Starbucks each day generally consume news while visiting the store, whether through conversation or by reading. Making the store a local outlet for news creates business opportunities, both with local media (say, for example, compiling personal Kindle or e-editions of news for delivery to laptop, mobile or Kindle—not to mention the hardware partnering opportunities), and with facilitators of local entrepreneurial media makers who could use Starbucks as a “home base” for building their audiences and deep relationships.
The same backbone services that would support local blogging displayed in store at a store-specific site would be the beginning of new news networks. This is the idea that intrigues me most, though all the company needs to do in its first year is streamline getting online and setting the stage for this local engagement. There are ample opportunities for Starbucks to co-invest to make this happen, as well as forge partnerships that support new services in this hypothetical environment.
Within three years, if Starbucks starts from this perspective, its digital division could be driving between $200 million and $300 million in direct revenue from online/in-store digital engagement. Increased store visits and spending per visit would add much more to Starbucks’ top line revenues.
Mitch Ratcliffe is a veteran journalist, media executive and entrepreneur. See his full profile and disclosure of his industry affiliations.
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