Starbucks — The Triple Balancing Act and How to Succeed Bringing an Old Product into the New Market

Starbucks, the global caffeine-mammoth coffee company controls 40% of the coffee franchise market share in the US alone, earns $24.7Bn worldwide and conducts over 90 million transactions per week.

In China, a new Starbucks coffee shop is open every 11 hours. But it hasn’t been always like that. In this marketing case study, I’m finding out what are the underlying reasons and why Starbucks is so successful today.

Read the Full Growth Study here

An inclination for Grit and Determination to For Social Justice (Ch #1)

Howard Schultz, the brains, grit, and power behind the Starbucks would have made the company as big if he hadn’t had a reason. A man with a vision and determination which stems from early upbringing was the motor that fueled the expansion of the company. Being raised in the projects and seeing the struggles of his father who battled against the social injustice activated Howard Schultz to be the best in what he does. With a mindset like that, he would be successful in any field. In Starbucks story, this was the first fundamental keystone needed for success.

An Old Product in the New Market (Ch #2)

Introducing coffee in the United States doesn’t sound like an innovative idea. It’s not. Coffee has been there since forever, but Schultz didn’t just bring the coffee, he brought the concept of coffee culture from the “Old Country” and introduce it to the new Market. The proof there was a business model was seen in Italy. Schultz just had to introduce the concept in North America.

Starbucks’ Triple balancing act (Ch #3)

It’s not about the revenue and satisfying shareholders. To have a sustaining business Howard Schultz insisted on taking care of Starbucks employees (Health plan, company shares, and in some cases even subsidized tuition), investors (it’s about the money for sure) and their clients (the most important part). It sounds impossible without sacrificing one of the three spinning plates. But getting this right meant all the next steps will be much easier to take.

Better Coffee Better Coffee and added Experience (Ch #4)

A better product is necessary to gain the advantage and Starbucks delivered better roasts and better drinks once they started out. Learning from the Alfred Peet (The founder of Peet’s Coffee), the roasted bean drinks were consumed with joy.

Even though the quality compared to artisan coffee isn’t comparable (just because it’s hard to maintain price margins and maintaining quality) due to massive logistical and distribution moving parts, Starbucks is succeeding.

Because it’s not about the coffee itself. It’s about the feeling when you walk into the store, the community tables, reliable Wi-Fi and comfortable seats and up to a point, the personalized experience.

“You’re not in the coffee business, you’re in the people business.“

☕Experience More Important That The Product Itself (Ch #5)

(Read the Full Growth Study)

☕It’s not about the coffee — The Brand of Starbucks (Ch #6)

(Read the Full Growth Study)

☕The Mobile Game — Starbucks is crushing it on mobile (Ch #7)

Having deep knowledge of your customers lets you take the right decisions. Mobile technology accelerator is today one of the main retention strategies which contribute to 27% of the total revenue. That is amazing!

The big data, personalization, amazing UX and incredible and addicting rewards program keep customers engaged while at the same time brings the company a huge increase of repeat-buys and average income per order.

☕Following the Framework of Success. How Starbucks leverage the Flywheel to become an unstoppable juggernaut (Ch #8)

Jim Collins, the author of Good to Great and Built to Last, claims the mega-successful companies who can last through decades and had ridiculous growth and revenue year by year, have to accept to do a few things right.

The business has to stem from elite skill, deep passion and ability to earn money. However, that’s easy to say and hard to embody. It requires disciplined action, discipline thought and finding the right fit of demand, competence, and passion.

☕The Expansion Success and Bumps — How to roll out the global success the Starbucks way (Ch #9)

How is it possible that Starbucks is amazingly successful in Asian countries but they managed to break their legs in Australia? The global expansion out of N. America has worked well in countries where the coffee culture wasn’t established yet. In Australia, where most of the population is made from European immigrants, the coffee culture has been thriving for years. The model of bringing the old product to the new market was thus completely broken.

It served Starbucks a cup of bitter, over-burned cup of joe.

Fun fact, Starbucks is entering the Italian Market (with humility)

How Starbucks uses Social Media Channel — (Ch #10) (In the Full Growth Study)

Growth Marketer, Perennial Student and Eggs Benedict Aficionado. I like barbells and growth at dgajsek.com. Twitter: @dgajsek.