WAKE UP AND SMELL THE SUCCESS!

You already know the Starbucks story. Since 1992, its stock has risen a staggering 5,000 percent! The genius of Starbucks success lies in its ability to create personalized customer experiences, stimulate business growth, generate profits, energize employees, and secure customer loyalty-all at the same time.

The Starbucks Experience contains a robust blend of home-brewed ingenuity and people-driven philosophies that have made Starbucks one of the world’s “most admired” companies, according to Fortune magazine. With unique access to Starbucks personnel and resources, Joseph Michelli discovered that the success of Starbucks is driven by the people who work there-the “partners”-and the special experience they create for each customer. Michelli reveals how you can follow the Starbucks way to

• • Reach out to entire communities
  • Listen to individual workers and consumers
  • Seize growth opportunities in every market
  • Custom-design a truly satisfying experience that benefits everyone

involved

Filled with real-life insider stories, eye-opening anecdotes, and solid step-by-step strategies, this fascinating book takes you deep inside one of the most talked-about companies in the world today.

For anyone who wants to learn from the best-and be the best-The Starbucks Experience is a rich, heady brew of unforgettable user-friendly ideas.

Starbucks executives claim that the company’s customer-friendly, socially responsible policies amount to a new business model, and author Joseph A. Michelli generally agrees. Certainly the company has been innovative and wildly successful. Unfortunately, Michelli’s decaffeinated, artificially sweetened account of Starbuck’s retailing prowess often reads as though the writer is giving a boost to the company’s PR department – and the book cover design doesn’t help, with its Starbucks signature colors, logo (dutifully trademarked, as is every mention of every cup of Frappucino) and inset of the brown, corrugated paper the company uses for cupholders. Some of Michelli’s examples of Starbucks’ caring policies are banal – opening early or providing a free cup of tea are not major innovations, nor are they transferable examples. Yet the book usefully illustrates how far good service and community relations can go. Each chapter provides a readers’ guide and sidebars about how to apply Starbucks principles to your business.

• Founder Howard Schultz opened the first Starbucks in Seattle in 1971, offering strong coffee, attractive store and product design, and a welcoming atmosphere.
• Each week about 35 million customers go to Starbucks.
• A $10,000 investment in Starbucks stock in 1992 would be worth $650,000 today.
• Starbucks’ first principle is “make it your own”: Employees take pride in their work.
• The second principle is “everything matters.” Quality control is key.
• The third principle is “surprise and delight.” Provide unexpected bonuses and perks.
• The fourth principle is “embrace resistance.” Critics are not enemies, they’re friends.
• The fifth principle is “leave your mark.” Starbucks aims to make the world better through socially and environmentally responsible policies.
• Employee morale is higher at companies that are involved in their communities.
• Starbucks uses a triple bottom line, measuring its social and environmental impact as well as its profits.

More than Free Refills

In 1971, Starbucks Coffee, Tea and Spice opened in Seattle, where it attracted customers by giving them more than the usual free refill on a 50-cent cup of burnt coffee. Unlike other chains, it offered high-quality beans, careful preparation, attractive store and product design and “the charm and romance of a European coffeehouse.” Since then, the company has opened 11,000 stores in 37 countries. Some 35 million customers visit Starbucks weekly and some of its best customers come in as often as 18 times per month. Today, Starbucks buys about 4% of all the coffee sold worldwide.

“Starbucks is one of the truly exceptional American success stories, a company that so dominates its market that there isn’t even a close second.”

Starbucks went public on the NASDAQ in 1992. The company has grown so much that if you had invested $10,000 then, it would be worth $650,000 today – and Starbucks continues to expand. It opens a new store somewhere in the world every day of the year. Starbucks has 500 stores in Japan, including the busiest Starbucks in the world, in Tokyo. In some places, it has opened stores across the street from one another.

“Starbucks executives continue to respectfully and willingly share profits with their people.”

Every store is company-owned; none are franchised. Starbucks’ successful growth formula includes focusing on its employees, its products, the experience of its customers and its relationship with local communities.

The Starbucks Experience

Starbucks has become a top global brand by adhering to the following five key principles:

1. “Make it your own” – Customize the experience.
2. “Everything matters” – Focus on every aspect of the job. Never, ever lose your focus on your customer’s experience and point of view.
3. “Surprise and delight” – Do the unexpected to make buying a cup of coffee enjoyable.
4. “Embrace resistance” – Learn from your mistakes.
5. “Leave your mark” – Do your job so that your customers remember you.

The Partner Ethos

Two aspects of Starbucks’ corporate culture are central to its success:

1. Employees are partners – Starbucks calls its employees “partners” and encourages them to become involved in the company, and to contribute ideas about building the business and improving the product.
2. Leaders transmit the culture – Managers are responsible for relaying Starbucks’ culture directly to employees.

“Customers aren’t looking for best friends; they just want a positive connection.”

From the beginning, Starbucks executives have believed in profit sharing. Because employees receive company stock, they feel a direct link between the chain’s profits and their own. In an unusual move, the company also offers medical insurance to part-timers who work more than 20 hours a week. Many fast food companies hire people part time, but few give them benefits. In another move that is rare in the food service industry, Starbucks gives unexpected $250 bonuses to hourly employees who met certain criteria.

“True leaders show staff that their individual uniqueness gives them a special way to connect with others.”

Partners receive extensive training in the company’s products and service standards, including how to greet customers and shape their stores’ atmosphere. Starbucks spends more on worker training than on advertising – and the expense pays off in terms of employee retention and customer satisfaction. Although the fast-food industry in general suffers from a high employee turnover rate, Starbucks’ rate for its 100,000 employees is 120% less than the industry average. According to one industry publication, Starbucks workers have an 82% job satisfaction rate, compared to a 50% satisfaction rate for other fast-food workers.

“The more an employee knows about a product – its origins, its properties – the greater the difference that employee can make in a customer’s life.”

A company Mission Review Committee handles employee concerns quickly and efficiently. For example, an employee group asked the committee about extending paid parental leave for those who adopt children. Within two weeks, Starbucks enacted a two-week leave for new adoptive parents.

Principle One: “Make It Your Own”

Starbucks founder Howard Schultz is often quoted as saying that he is not in a coffee business, but in a people business that serves coffee. Connecting with customers and their communities is his main focus. Starbucks teaches this approach to its workers in a company pamphlet called the Green Apron Book, which emphasizes these five principles:

1. “Be welcoming” – One barista said she keeps note cards on her customers including information about the drinks they like, their families and even the names of their pets.
2. “Be genuine” – Partners must be active listeners and good observers. Noticing that a new customer looked as though she was about to cry, a barista offered her a toffee nut latte, “Because who doesn’t like that?” The next day she received a thank you note and flowers from the customer, who said the barista’s kindness was literally a lifesaver.
3. “Be considerate” – On the corporate level, this means instituting environmentally friendly policies such as using wind energy, reducing carbon dioxide emissions and contributing to clean water projects globally. Partners join community projects, such as tree planting.
4. “Be knowledgeable” – Partners learn about coffee through tastings, internal publications and classes. The store gives each one a pound of coffee every week to ensure that they use the product they sell. Some partners become “Coffee Masters” by completing a three-month program of special training and testing.
5. “Be involved” – When the staff at one store realized that they had many deaf customers, they decided to take lessons in American Sign Language. At other stores, employees have suggested redesigns that improve the work flow.

Principle Two: “Everything Matters”

Retail businesses rise or fall on the details. Therefore, Starbucks focuses on every aspect of its business, including image, employee concerns, product quality, customer experiences and the company’s reputation.

“Starbucks management makes a point of listening and responding to ideas and suggestions from partners.”

In 1991, Starbucks created an in-house architecture group to design its stores. This unit oversees lighting, furniture, fixtures, artwork, music, aromas, colors, the menu boards and the shapes of the counters. The company has different designs to suit different locations, depending on traffic patterns and other requirements: Some are sleek and modern, while others match the local architecture. Starbucks uses store design to build its brand. One enthusiastic customer claims, “Starbucks could very well operate without even selling coffee. They could charge an entrance fee and offer nothing else but a room and mellow Bob Marley music softly playing in the background, and people would still come.”

“From the perspective of Starbucks’ management, few things affect the reputation of a business more than a resounding ‘Everything Matters’ approach to quality.”

Cleanliness is a large part of the customer experience, and all Starbucks stores post cleanliness checklists and follow certain cleaning routines. At least one worker must come out from behind the counter every 10 minutes to check the environment, a requirement that one barista said she particularly liked: “It gives us a chance…to make sure everything is clean and orderly, and we become more involved with our customers.”

“While great leaders spend most of their time looking at big-picture, strategic opportunities, they cannot overlook the systems and training necessary to ensure the quality of every aspect of the company’s products, services and processes.”

Clean restrooms are particularly important to Starbucks; said one customer from New York City, where public restrooms are rare: “Trust me, no matter what the music, the flavor of the day or the wireless availability, Starbucks’ success is all thanks to the free and clean toilets.”

Starbucks pays attention to packaging. When the company noticed that customers often asked for double cups so they could carry their coffee without burning their fingers, it spent two years developing an environmentally friendly cup sleeve out of recycled paper. The company also introduced a takeout cup that uses recycled materials.

“In essence, the Starbucks management approach teaches that quality business relationships are essential to long-term growth and survival.”

Furthermore, Starbucks discovered a way to package coffee so it still tastes fresh for up to six weeks. This both reduced waste and enabled the company to ship its coffee around the world.

Principle Three: “Surprise and Delight”

People love surprises. When the Rueckheim brothers introduced Cracker Jack candy-covered popcorn at the World’s Columbian Exposition in Chicago in the late 1800s, the snack was reasonably popular. But sales skyrocketed when they advertised that every box held a secret prize. Psychologists note that predictability provides security and safety, but the unexpected reduces boredom. People in today’s culture have developed an appetite for the exceptional and the spectacular. Many companies try to avoid surprising their customers, but Starbucks uses surprises to build customer and employee loyalty.

“Whereas many corporate executives dread dealing with complaints, Starbucks’ management actually invites dissenters in for problem-solving discussions.”

For example, the company shipped its ice cream to 6,000 locations by Federal Express to celebrate National Ice Cream Month. Since Starbucks ice cream is sold only in supermarkets, being able to get it for free at Starbucks stores was a novel treat. Starbucks has given away books by poets who live in coffee-producing areas. In some places, Starbucks stores post signs noting which products are kosher, while in others it displays the work of local artists – depending on what the community responds to and needs.

Principle Four: “Embrace Resistance”

You can’t please everyone. Starbucks copes with criticism and problems by addressing mistakes and working to prevent them from happening again. It takes responsibility for lapses in quality control and makes changes when necessary. The company worked closely with some of its critics to develop coffee-buying guidelines that call for good working conditions for farmers and that minimize pollution. Because it buys so much coffee, Starbucks has become a global force and must concern itself with conditions in the developing countries that produce coffee.

“We all seem to be waiting for the new wrinkle, the twist, the unexpected magical prize at the bottom of the sticky box.”

Because they are on the front lines, Starbucks store managers are the first to hear most criticism. For example, the first Starbucks store in Beijing, China, was the target of significant public opposition. Within a few months, government officials wanted to revoke its lease. After a series of meetings, the manager altered the store configuration to allow more people to sit down to drink their coffee, rather than ordering drinks to go. (In the U.S. 80% of Starbucks customers order drinks for take-out.) To emphasize its community involvement, the company donated $5 million to a Chinese educational fund.

Principle Five: “Leave Your Mark”

To carry out its stated principles of social responsibility and community involvement, Starbucks requires managers to have transparent dealings with vendors, open communication with partners and high standards for product providers. Corporate policies mandate environmentalism, volunteerism and philanthropy. The company’s mission statement says it will be an innovative change agent and that it will develop flexible solutions to problems. It acknowledges the importance of meeting its fiscal responsibilities and treating its employees well.

“The trick for management is to get employees to see the bigger picture and understand that small components of their day-to-day tasks can actually have a transformational impact on customers.”

As a socially responsible company, Starbucks uses a triple bottom line: Its annual report measures social and environmental impact as well as financial results. The senior vice president of corporate social responsibility works with the board and the company’s foundation to find ways to contribute to the communities where its stores are located.

Meanwhile, Starbucks’ philanthropic activities contribute to its low turnover rate. Studies have found that employee morale is three times higher in companies that have a high level of community involvement. Employees who work together on charitable projects build team spirit, and deepen their connections to their communities, to each other and to Starbucks.

Joseph A. Michelli is the founder of a training, consulting and keynote presentation company. He hosts a daily radio show in Colorado.