Jon Michaeli’s Blog


Starbucks and CRM don’t mix

This isn’t the first time I’ve gone on a rant about Starbucks (nor will it be the last I’m sure). Each time I feel slightly guilty, because it’s not uncommon for me to blog from Starbucks. Then again, they get more than a fair share of my wallet, so I’ll get over it by the time I’m midway through this post.

The subject of this rant is the Starbucks Card. First, some background. The card itself offers customers the convenience of electronic currency, though I’m pretty sure baristas get screwed on tips now that fewer customers are dipping into their pockets and receiving loose change. Registering a Starbucks Card means creating an online account where contact details, credit card info, etc. are stored. This gives you access to free Wi-Fi, lets you avoid $0.40 surcharges for soy milk, and enables you to auto-reload your card. This last feature could backfire for certain folks who are super-vigilant of their credit cards transactions (as I am). In fact, ever since I saw how often Starbucks was charging my card 20 bucks, I’ve cut back, perhaps not on my total caffeine consumption, but certainly in downgrades from espresso drinks to house blends and dark roasts.

No, I’m not complaining that Starbucks has made me more financially responsible. As a marketer, I am in disbelief that the company has not better seized the opportunity that registered card holders present. It’s a database marketer’s dream to have access to such a wealth of customer data, including purchase history, buying habits, personal preferences, etc. We’re talking about brand evangelists here, engaged and loyal clientele who are presumably the most receptive to special promotions and offers. Why not a rewards program? A referral incentive? Or dare I say something even more tailored and creative – “Because you like X, we think you’ll like Y, so here’s a one-time coupon.” I have my “regular” drink, but I’m always open to something new.

This is just another example how Starbucks has vastly underutilized the power of CRM. As far as I can tell, aside from an occasional offer to complete a survey and receive a free drink (which may be completely random anyway), I’m not aware of any targeting that Starbucks does to uniquely position its product to the various customer segments it reaches.starbucks-logo-thumb1

This isn’t the first time I’ve gone on a rant about Starbucks (nor will it be the last I’m sure). Each time I feel slightly guilty, because it’s not uncommon for me to blog from Starbucks. Then again, they get more than a fair share of my wallet, so I’ll get over it by the time I’m midway through this post.

The subject of this rant is the Starbucks Card. First, some background. The card itself offers customers the convenience of electronic currency, though I’m pretty sure baristas get screwed on tips now that fewer customers are dipping into their pockets and receiving loose change. Registering a Starbucks card means creating an online account where contact details, credit card info, etc. are stored. This gives you access to free Wi-Fi, lets you avoid $0.40 surcharges for soy milk, and enables you to auto-reload your card. This last feature could backfire for certain folks who are super-vigilant of their credit cards transactions (as I am). In fact, ever since I saw how often Starbucks was charging my card 20 bucks, I’ve cut back, perhaps not on my total caffeine consumption, but certainly in downgrades from espresso drinks to house blends and dark roasts.

No, I’m not complaining that Starbucks has made me more financially responsible. As a marketer, I am in disbelief that the company has not better seized the opportunity that registered card holders present. Think of the wealth of customer data it has collected, including purchase history, buying habits, personal preferences, etc. It’s a database marketer’s dream to have access to such information for segmentation and targeting purposes. We’re talking about brand evangelists here, the most engaged and loyal clientele, presumably those most receptive special promotions and offers. Just another example how Starbucks has vastly underutilized the power of CRM.

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Why are big brands like Starbucks and Pepsico so darn sloppy?

Snap3So I’ll start off by admitting that I’m in a bit of a funk today. I don’t have much of an explanation, except that it’s Monday. The weather’s actually quite nice for early May in New England.

Right to the point. I have two beefs, and I’m going to cover them together, because neither is worthy of a post on its own.

My first one re-visits Starbucks’ pricing. I’m already bitter that not all Starbucks (e.g. airport locations, Barnes & Noble stores) accept my Starbucks card (yes I understand why), so I pay 40 cents extra for soy milk. Today, I ordered a tall latte with an extra shot (a regular tall has only one, so what’s the point?) and I realized I paid the same price as a grande (which has 2 shots), except a grande has quite a bit more steamed milk. I looked more closely at the latte pricing and noticed that adding a shot to a grande makes it more expensive than a venti (which has 3 shots and also a lot more milk). Yes, I’m familiar with the concept of volume pricing, but in principle the regular price you charge for a larger size should at the very least be higher than the price for the smaller size. Why? Forget business sense. Because if you don’t follow this common sense principle, consumers are bound to be bitter once they figure it out.

The other one strikes a chord, because it relates to a personal pet peeve I’ve already blogged about twice in my Turner Broadcasting and BMW posts. Pepsico already has egg on its face over the Tropicana fiasco. And now, a chief marketing pitch for the new Gatorade drink G2 has an obvious grammatical error (see Google search results image at top). The page and tons of other ads are plastered with the phrase “Less Calories” (instead of “Fewer Calories”). This should never have made it past even the most junior copy editor. Truly embarrassing!

At long last, Starbucks launches pairings menu

Posted in Uncategorized by Jon Michaeli on March 10, 2009
Tags: , , ,

I’m not sure what took so long, but for the first time I can remember Starbucks has started to bundle coffee with its pastries into one package price. At least in my neighborhood, the options are very limited (I’m assuming this is a soft launch and the company is testing the market and will have more variety and price points if proven successful), but I still find the “tall latte and choice of oatmeal or coffee cake for 3.95 (all day)” too limiting and a bit arbitrary.

I’m guessing scones and muffins are the most popular pastries, and so the rationale is likely “We don’t have a problem getting full price for our ‘bread and butter’ products, so let’s continue to sell those as standalone items and instead start with those that are struggling and need some awareness and trial.” A slow, cautious approach makes sense – move too quickly, and the company could very easily cannibalize sales if higher volume associated with bundling doesn’t more than offset the lower margins of doing so.

I’ll assume Starbucks has mined the data and crunched the numbers, as the register receipts have all the information necessary to formulate a smart strategy. That said, I cannot help but feel the current pairings menu is too narrow to draw actionable conclusions for a more widespread rollout in the near future.