Starbucks' Misstep - Why It Matters

Also posted on WisePhilanthropy.com

Starbucks created a category: the universal coffee shop… with all sorts of things going for it: the offerings were predictable anywhere in the world and on the higher end of a quality continuum; they really mean it when they say that will re-do your drink if it isn’t right; they have enlightened personnel practices; it endorses and practices environmentally responsible sourcing – certainly better than any other large chain; they had an engaging and easy loyalty program; and they offer free bathrooms. In the world of impersonal and off-putting fast food places, Starbucks was several cuts above. Probably more.

 In fact, while there were those who hate its imperialistic aspirations and decry its occasionally over roasted beans, let’s face it: in the world of solo entrepreneurs, Starbucks has become the de facto default office for a huge number of people all over the world. It is quite common to see folks with their computers sit at the same seat for hours on end every day. It is even common to overhear job interviews at the very next table [I don’t quite get that, but it happens enough that I guess it shows how spurious claims of confidentiality must be by employers!]

Long term twitter and facebook followers know that I post my Starbucks COL index wherever I travel. Since [unlike MacD’s which used to be the index of record] Starbucks has an international standardization, the only difference in my doppio macchiato from place to place is price.   Whether in Beijing or Taiwan, or London or Paris, or San Francisco or Salt Lake City, I make it a point to compare prices as an indicator of whether these places are as expensive as my hometown of New York City. Quick answer: none in the USA, but many more expensive elsewhere.

As a creature of habit, I go to the same Starbucks every morning after the gym. In fact, when I walk in the door, I don’t even need to order since my standard order is known by virtually all baristas.   They start the expresso even before I get to the register.   Some say that New York is impersonal.   No, it is just a series of micro-neighborhoods.

 Back to our point:

 Starbucks announced a change in its loyalty plan which has gotten no end of press. Before weighing in, I wanted to let my own feelings settle. In the end, I believe that Starbucks has made a major misstep that calls its culture into question.

 Any company has a right to rethink its loyalty program to reflect its own needs and the interests of customers. But when a loyalty program makes it much more difficult to be loyal, why bother? [Some companies learned this the hard way.]

 There are many business experts in marketing and branding whose insights on loyalty programs are far better informed than mine. It does seem to me that Starbucks could easily have grandfathered [sorry about the gender…] its gold members even after the change. They could have made the new price point for a reward more incremental and less draconian - much closer to the existing one, even using a new metric. They could have been less specious in their justification – that a majority of loyalty users were requesting the change.   More to the point, they could have spent much more time considering what loyalty really means to their coffee drinking public.

 Which, in turn, brings me to a larger issue of interest to our readers. In the philanthropy and non-profit world, the erosion of loyalty to organizations is cataclysmic. Among the many reasons is the sense that organizations care more about financial support than individuals. Or the perception that organizations convey an assumption of your obligation to them rather than a commitment to your meaningful engagement.

 The non-profit world itself too is a victim. The workplace itself has changed – at-will employment with 24-7 expectations.   Reward for reduction in labor force rather than expansion.   Reducing fringes as if they are simply perks to be disbursed as a favor.   And even our government, sad to say, has become hardhearted and heavy handed. Dismissing entitlements as if they are simply unearned handouts [as some advocate] is disingenuous and would be grounds for breach of contract if it were the private sector. People have paid into social security and Medicare for years and should trust that they have earned their benefits. Yet these benefits are derided as too expensive. Why trust that anyone cares?

 So… when one of the few private companies that has celebrated its values, its customer service, and its genuine commitment to its employees – and deserves respect for them - suddenly changes its plan in a way that the majority of loyalty users find dissatisfying, it is particularly disappointing and infuriating.   As a private business, Starbucks doesn’t owe us anything. But, it would be a nice breath of fresh air if Starbucks were as true to its culture of customer responsiveness as it claims. That would truly be worthy of loyalty.