The El Cheapo Starbucks Customer Experience

By Dale Wolf

Oh, what have we wrought? Have we learned anything about creating valued, differentiated customer experiences that grow profitable business?

The news is out! We have McDonalds serving upscale coffee (maybe even with baristas) and even more amazing we now have Starbucks testing in Seattle $1 el Cheapo coffee.

Not much innovation going on here.

For the life of me, I cannot figure out why Starbucks would play around with a McDonalds Challenge and start an unneeded turf war.

McD is where you take your kids for lunch; not where you kick back and smell the flavor or great coffee. It's where you go for a burger and fries ... or if you are health conscious, you might get a chicken salad. Starbucks is an entirely different experience -- the European coffee shop.

I cannot see McDonalds siphoning off customers who love the European cafe experience they get at Starbucks. I don't care how good McD's coffee is, the customer experiences and the customer segments are miles apart. I don't want to sit in a McDonalds sipping on a brewed coffee reading my newspaper or a good novel or chatting with friends with Ronald McDonald looking down at me.

So now, Starbucks is offering up this great customer experience at something like 20% of its regular pricing. They might gain some traffic with el cheapo Starbucks (but not the same clientele that helped them build a world-class brand). Will these el Cheapo Starbuckers bring screaming kids for an upscale birthday party? Will Starbucks need to create a clown character to entertain them?

Two great brands stepping outside their zones. It just feels so, so wrong!

Comments

[Joe]

McDonald's is smart for adapting high-end coffee to a slow economy, but still, their McCafe coffees aren't a whole lot less than Starbucks

[steve]

Actually, I go there not for the coffee ... but for the employees. Where else can you dress in purple, wear tongue rings, nose rings, spike your hair and say "May I help you?"

[Devin Meister]

Actually Dale, at least in the midwest, if all you are after is coffee, they are not that different in price. A "tall" at Starbucks is around $1.59 - 1.7-ish, a medium cup at McD's is north of a buck. The $1 target at Starbucks isn't going there to lounge around. I think if you notice at most of the patrons aren't staying long. They get their coffee and go.

[Simon Harrop, CEO BRAND sense Agency]

Dale, I agree with Graham. McDonald's have learned the hard way in recent years that you cannot rely on a tired formuala to guarantee future success. McCafe is a perfect example of a brand 'waking up and smelling the coffee' and understanding the emotional and experiential needs of modern consumers and then doing something about it. They are getting right down to the nuts and bolts of creating a great customer experience which is optimised across all the senses, with great results. Starbucks on the other hand is stuck several years in the past. As you say, a focus on shareholder return has caused them to become complacent with the ever changing expectations that consumers have for a great experience.
I'm interested in your perspective that Starbucks is a 'European coffee shop experience'. To most Europeans, Starbucks is an archetypal 'all-American' brand. As American as McDonald's in fact. Oh how perspectives can differ either side of the pond!

[Dale Wolf]

Graham, you always have excellent comments. Based on your personal experience, I would presume McCafe has better coffee and a better setting. I still think Starbucks is crazy to sell El Cheapo coffee ... they need to improve their experience; not sell their product cheaper. Yesterday's Starbucks experience is not what it used to be ... because others are moving forward. Heck, I like Panera as a place to kick back and walk past a Starbucks to the other end of the strip mall to Panera with my daughter after church each Sunday. We sit next to a fireplace, have a bagel or sweet roll and just talk over our coffee. The coffee is not as good as Starbucks, but the experience is better. But I do notice as we walk past Starbucks that the place is packed with people. But $1 coffee is way off strategy.

[Graham Hill]

Dale

I made the switch some six months ago in Germany - a McCafe test site. The coffee is better (and cheaper). The food is better. The staff are friendlier. It isn't so crowded (except for a few hours on Friday and Saturday). And the furniture is actually more comfortable too.

We have been discussing this over at the CustomerThink website for some months.

Sampson Lee
http://www.customerthink.com/article/are_starbucks_prices_too_high

John Todor
http://www.customerthink.com/blog/how_customer_experience_fuels_desire_and_mark

Graham Hill
Independent CRM Consultant
Interim CRM Manager