On Starbucks, CRM, Coffee Shops and Customer Service, Part I

David Sims : First Coffee
David Sims
| CRM, ERP, Contact Center, Turkish Coffee and Astroichthiology:

On Starbucks, CRM, Coffee Shops and Customer Service, Part I

By David Sims

A second cup of coffee for today, and the music is my wife practicing what she'll play in church Sunday morning:

The news in the Wall Street Journal this morning: Starbucks Corp. said "unexpectedly heavy demand for new juice and banana frappuccinos during the morning rush hurt its sales growth in July."

"We are losing some espresso business due to longer-than-normal wait times" at stores, Chief Executive James Donald said, noting that frappuccinos are more complicated to prepare than some of Starbucks's other beverages.

Too long wait lines is a problem lots of businesses would like to have. The problem at Starbucks isn't that customer service is poor, but that it's too good. For one thing it's the new standard in coffee shops, and for another it's highly impersonal. Let me explain.

I greatly favor coffee shops as mini-laboratories for CRM. Probably the most widely reprinted piece of writing I've ever done in CRM was an article about Ashland Coffee & Tea I did for Bob Thompson a few years ago. In it I rhapsodized -- correctly -- about the wonders of such personalized service where everybody knew your name, and they're always glad you came… hum along, please.

It's all true. I mean, places where they'll put Tom Waits on the shop CD player if you ask them to are walking the walk when it comes to customer service.

Granted, the whole principle behind CRM is the company offering the service the customer wants. This includes remembering the customer when he contacts the company, knowing his preferences, ideally saying "Hi Marvin" when you interact with him -- assuming his name's Marvin. Get that wrong and hoo boy.

That's the kind of service you get at neighborhood coffee shops. Hi Dave, got your Sumatran blend, little milk no sugar right here, I'll put it on the tab, packed an extra cranberry scone for Marcia, tell her I said hi. Next please. CRM at its finest.

Yet First Coffee submits that it's because of huge, standardized Starbucks that you get such good service at neighborhood joints. And that for many people, the impersonal "What would you like, ma'am?" Starbucks model of customer service is preferable to the know-thy-preferences gospel preached in CRM.

First let's dispel the canard that Starbucks is driving the personalized neighborhood Mom 'n' Pop Leftover Hippie personalized places out of business. First Coffee has zero patience for the intellectual equivalent of roadkill who protest how Starbucks is choking off individuality, unfairly squashing the CraZbeanz, Java Jive and Mel & Rikki's Corner Cafés of America.

In 2002, when the anti-Starbucks peabrains were at their screechiest, The Wall Street Journal talked to proprietors of a Kansas City coffeehouse called Broadway Café. When Starbucks announced in 1998 they were opening an outlet next door, the Broadway's customers and owners "collected a thousand signatures on a petition asking city leaders to thwart the plan."

Starbucks opened anyway, and four years later when the Journal paid them a visit the Broadway Café was not only still open, but "sales at the 10-year-old coffeehouse have grown stronger since Starbucks arrived. With reluctance, Jon Cates, a co-owner of the Broadway, concedes that that might not be a coincidence. 'Starbucks helped our business, but I don't want to give them any credit,' he says."

"In fact," the Journal found, "most independents are doing fine -- and not just in spite of Starbucks, but perhaps because of it. Here in Kansas City [in 2002], nearly all of the coffeehouses operating before Starbucks arrived in 1998 remain in business. Since then, other independents have opened, pushing their numbers well beyond the 25 stores Starbucks has on the market. Like Broadway Café, many of the independents operate within a store's throw of a Starbuck's outlet."

The fact is there was no appreciable coffee shop culture in America before Starbucks. Guys met at diners or bars, not coffee shops. Starbucks changed all that. The Journal: "Nationwide, independents accounted for more than half of the industry's growth between 1996 and 2001, when the number of U.S. coffeehouses doubled to 13,300, including Starbucks… [and] the large majority of independent coffeehouses started within the past decade have survived."

Whyzzat? Because Starbucks established the base in customer service. It's rarely the best customer service you'll get in a coffee shop. But it's never the worst.

And maybe this should really be the goal of CRM: Establishing expectations for certain standards. Benchmarking, whatever you call it. When you go into a coffee shop now you expect it to be at least as good as Starbucks. Ashland Tea & Coffee is as good or better than Starbucks, so it stays in business. Gloria Jean's is worse, it's going down the toilet as I write. Thanks to Starbucks, Americans expect a lot more out of coffee shops, B.S. (Before Starbucks) we were happy with a clean mug and a fresh pot.

"For one thing, sheer terror goads many independent owners to improve their shops when Starbucks enters the neighborhood," the Journal found. "Kansas City's Broadway Café banned smoking and began roasting its own beans when Starbucks opened next door. Similarly, the arrival of additional Starbucks in Long Beach, Calif., prompted the five-store It's a Grind chain to spend thousands on cosmetic improvements as well as staff training, customer service and quality control. Sales have been rising by 8 percent to 15 percent since Starbucks moved close to the It's a Grind stores in 2000."

Note that: "Staff training." The great secret of Starbucks is that the company puts a lot more time and effort into its customer service than it gets credit for. Industry journal Tea & Coffee reported a couple years ago that Starbucks likes to keep their employees happy, The Inviolable First Rule For Happy Customers, putting employees through hours and hours of tasting training and offering "stock options, health benefits for part-time employees and an annual review which could result in a raise."

Not the regimen for the high school kid slinging cappuccinos at Dollie's after school, whose training is "Wear a clean shirt, nametag and smile, dammit."

Because what's happened is customer service-wise, Starbucks is the dividing line, the cutoff. If you're better than that -- and it's not hard, their coffee's really not that great -- you don't have anything to worry about. If you can't bring yourself to offer Starbucks-level coffee or service, you probably should find a different line of work anyway.

Take New Zealand. Nobody goes to Starbucks in New Zealand. Russell Brown points out that there are 162 Starbucks stores within a five-mile radius of the top of London's Regent Street; about the same at many points in Manhattan. And First Coffee knows you can't swing a cat in Washington, D.C. without hitting a Starbucks. In Auckland? "A few, largely in shopping malls" attracting expats, not Kiwis.

Why? New Zealand already had high general standards before Starbucks. There was no need for Starbucks' standards. America had hit or -- usually -- miss standards. Starbucks taught Americans what levels of customer service and coffee quality should be generally expected. Most coffee shops rose to the challenge and raised their own product and service standards, those who didn't probably aren't missed too much.

Here in Istanbul you can see it happening slowly. There's a Starbucks along Istiklal Caddesi, the main pedestrian walking avenue. It's always packed -- largely with local businessmen and Turkish teens, not only tourists thirsty for a taste of home. I've noticed that the service and quality in the other coffee shops along Istiklal who want that clientele have improved. Thank you, Starbucks.

There are two Gloria Jean's along Istiklal, one near Taksim Square close to Starbucks, and one at the other end near Tunel. I bet there's never a time when the two of them combined have as many customers as Starbucks. Neither the coffee nor customer service are anywhere near as good as Starbucks, I'll be surprised if they're around next summer.

Starbucks is the de facto CRM baseline standard for coffee shops now, in quality and customer service. Do better than them, which isn't as hard as you think, and you have nothing to worry about from Starbucks. But you have to do at least that well. And tomorrow I'll talk about why their impersonalized service is just what many people want.

If read off-site hit http://blog.tmcnet.com/telecom-crm/ for the fully-linked version. First CoffeeSM accepts no sponsored content, from Starbucks or anyone else.

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