The Starbucks Experience by Joseph Michelli

The Starbucks Experience

I read this book and enjoyed it immensely. I appreciated the in depth look into the culture that has made Starbucks unique.

Michelli attempts to communicate the necessity and method of creating an experience for consumers by examining the methods used to create the Starbucks experience. Michelli uses Starbucks as a positive example of what a business can do if they put forth a consistent effort at creating a customer experience. He divides the book into chapters based upon the five guiding principles of Starbucks.

In this work, Michelli argues that every business must encourage employees to own the business. Like a runner with ankle weights during a marathon, so is a business that does not encourage its employees to own the business. Companies have been slowly trending from an authoritarian structure to an approach that respects employees and encourages improvement. Currently Starbucks leads in this change and has demonstrated that this shift will improve a company financially as well as socially. (Another company with an even more aggressive employee focused approach is Panda Express.)

Further a company must recognize that everything is important. One cannot let little things go because each piece builds the complete picture. In isolation, the problem might appear too small to bother with, but each minutia works together to complete a whole picture. Every jigsaw puzzle has many pieces that appear too small to matter much, but without those pieces the puzzle will never display the complete picture to the viewer. Satisfaction will be lessened exponentially with each piece missing or marred in the picture.

Michelli notes that people enjoy receiving a pleasant surprise. Starbucks has attempted to codify this into the lifestyle of their employees. Whenever possible a Starbucks partners take opportunities to improve the life of the customers through simple surprises. These could be simply remembering names and favorite drink orders. This small effort showing that the customer matters delights and unfortunately surprises most people. Forgetting to surprise a customer could easily result in boredom. Boredom dulls the edge of the experience. Boredom defocuses the image in like manner that fog fuzzes the windshield on a cold morning. That lack of focus and clarity confuses the customer’s perception of the company.

Resistance can squelch or inhibit growth, yet it could spark improvements, innovation and growth. The choice belongs to the company. A company that fails to listen and act upon criticism will find their customers distancing themselves and moving onward. A company cannot market effectively if they do not know what the customer thinks and desires. This is cheap marketing research.

Finally companies make an impact on the environment around them. A company could focus on profits alone (for the benefit of the executives), or a company could focus on developing their employees and the environment around them.

One glaring fault leapt from the pages of this book, namely that Michelli present Starbucks as the perfect organization without faults. On the last two pages, he acknowledges their faults, but throughout the book he never addresses how Starbucks learned from failures. There is never an explanation of how Starbucks developed its ideals nor what the inevitable the missteps cost them nor how they recovered. A positive image is good, but if it does not reveals some flaws (humanness), it has limited usefulness

Further, Michelli fails to address how to map a fast food industry with low cost of goods (coffee is relatively inexpensive) to other industries. Most companies cannot afford to give away replacements for broken items (i.e. spilled drinks). While Starbucks intelligently chose to make free replacement drinks a standard practice, how does that translate to companies that do not have a low cost product?

What are your opinion of Starbucks? The other day, I stopped in for a simple coffee. They told me that they were just making a fresh pot and that if I would be willing to wait, they would give me a free cup just for waiting. This is consistent with Michelli’s view of the company and demonstrates their ideals. Unfortunately, Michelli never suggests how a company without a low cost high margin product can do the same.


18 thoughts on “The Starbucks Experience by Joseph Michelli

  1. My opinion of Starbucks? As a business, they do very well, and so as a person who enjoys studying the market structure, I applaud thier clever marketing. They make alot of money using the illusion of sophistication and pro-green policies (and lots and lots of sugar).

    As a customer, I dislike them because the cost of coffee there is so high. I find it sad that so many people are willing to spend $3 or more a day on coffee (and then complain about the cost of a gallon of gas or other “financial straights”). The average customer of starbucks is not the high-class socialite, but the average joe (forgive the pun) who is in debt. Its not Starbuck’s fault for their customer’s misplaced priorities, but I still dislike the practice, and don’t really like buying from them as a result. (We do, as a family, but I still dislike them anyway).

  2. I don’t support everything they do, but I like their approach to business. I don’t support them financially very often because I consider $3 cup of coffee a luxury. And then there are the calories (unless you get a straight black coffee like myself).

    High-class socialite? Or are they targeting a more yuppie atmosphere? Today, there is little yuppie about them. From what I have seen, they have plenty of variety in clientèle: from tweenagers to the elderly. Of course, I know some yuppies to go there because it “is the thing to do.”

    Oh well. Such is life…..

    Still, they make a mean coffee and an excellent Apple Cider.

  3. I think of Starbucks as the ideal business model, I just find their clientele’s approach to life discouraging in general (but then, I live in a state that is very serious about its coffee. So many people around here are practically additcted to Starbucks, and it gets on my nerves when they rant consistantly about how wonderfully irreplaceable Starbucks is). 🙂 And yes, $3 for a cup of coffee is a luxury (albeit, one that the company has done a great job of making into a “daily treat” for many many people, and I respect them greatly for that. How many companies would love a customer base so loyal, and a reputation so grand?).

    What would be interesting is how Starbucks built that following, and what they do to maintain it. I think the atmosphere is meant to inspire lingering, and the smell of coffee is a really strong draw too. What other things do you think keep the company in such high esteem, even by people who, like me, don’t go hardly ever and therefore are not likely to be impressed by the name-recall bit?

  4. I suspect that Starbucks had a “perfect storm” scenario. That isn’t to denigrate the companies success, but it would not be a simple thing to replicate their success today.

    Given the tenor of clients in the north west, Starbucks could recreate a European coffee house and charge premium prices for it. That wouldn’t have survived in the South originally or most of the east coast originally. Yet it worked there and they could charge premium prices.

    The fact that Starbucks carefully designed the atmosphere to create the “third place” in one’s life (after home and work) certainly helped, but the key to their success is the customer service. Did you know that they have a policy to replace any spilled drinks for free? When is the last time McDonalds did that with a dropped hamburger or fries? At other fast food places, that is the exception not the rule.

    Starbucks empowers their employees to find ways to surprise and delight the consumer. Anything to make the customer feel at home and welcome. The company even works with their employees (which they call partners) to teach them how to read people and to respond to the customers emotional state. That training goes a long way to making the environment a better place.

    Wait, I think I am rambling. Or was this a new review….

  5. I didn’t know about the spilled drinks policy… although that makes sense, given the “third place” idea you mention above. After all, at home you can refill your drink and your plate. Most Starbucks workers seem to interact well with the customers; I hadn’t realized that was a policy, but it makes sense.

    Also, I agree with the “perfect storm” bit. Very few things inspire as much passion from the average Joe as their cup of joe. I used to make the coffee for our church in the morning, and every single time, someone would give me a lecture on the importance of proper brewing. Coffee can’t be too strong, make sure there is hot water so we can water it down if you mess up, if the pots’ been sitting too long it has to be thrown out so time it carefully, not too much grounds or it will not have a full taste, etc. Anyone who goes near the coffee machine while the coffee is being made gets some version of that information (usually in more detail).

    So when Starbucks comes along and looks like professional-made coffee (and it is very good joe), they can charge as much as they want and Joe will still pay to ensure that he gets a “real cup of joe”. Unsatisfactory coffee is one of the few things that make people feel like they were conned (don’t ask me why). 🙂 Its become a cultural phenomena (tourists really ought to sit in Starbucks for half an hour and watch), so it warrents a longer discussion, I think.

  6. I see. And are you up for a longer discussion? I have some friends who don’t think that Starbucks coffee is of sufficient quality to drink. One roasts his own beans and the other is considering it. Of course you have to wonder about someone who would read entire book about coffee…. 😛

    Still, Starbucks does an excellent job. Rhetorical question: How do I make enough profit from my company to justify the gratis approach of Starbucks? Or doesn’t that truly matter? Is it just the customer service that matters?

    I suspect it is just the customer service regardless of how it is displayed.

    It just so happens that Starbucks can give away coffee for customer relations boosts without giving away the bottom line. Must be nice….

  7. Anyone dedicated enough to their preffered indulgence to read up on the subject (and then actually DIY) had better settle in for the long haul. They’d better either keep DIY-ing, or figure on paying serious money for the kind of customized quality they expect. I’m a little surprised that someone found Starbucks’ coffee lacking in flavor (I’ve heard complaints about the sugar level in most drinks, but not the quality), but this is America. The land where I can be told to buy organic, non-homogenized, open pasture, no-rsbt hormone milk… and STILL buy the wrong thing. Despite all the specifications above, there are more factors to consider (size of container, paper carton or plastic jug, brand and price, fully or partially or even in some states non – pasturized, flavor, etc.). If we’re so picky about our milk, I guess being picky about coffee is no surprise.

    I think coffee-wise, Starbucks does an excellent job, but you are getting what you pay for. How much does coffee cost to make? My guess is that they have a gross profit margin in the thousandthes percentile (ie, 25 cents in actual cost per cup including the cup), which means that the real costs are in time (employees) and place (rent, upkeep, etc.).

    I would argue that replacing spilled drinks is not necessary, but it does take the level of service for fast food up to the level of service at, say, a clothing store, where if it doesn’t fit or breaks easily, it is replaced. Now, a food store can’t just give customers all their groceries for free if they have to wait in line too long; that makes no business sense. But they can (and albertson’s has) made up a three’s-a-crowd policy, so that if three people are in line at every register, they will open a new one. So, I think, its not so much about customer service per se, but engineering ways to be of more service to people that don’t cause your company to stop serving period. The easier it is for them to use your services, the more likely that they will do so again (and again and again). There isn’t alot of “gratis” involved in the Albertson’s policy; rather, you could argue that it benefits the company, which gets its money faster when more transactions happen at the same time as opposed to over a longer period.

    The key is to find a similar “little detail” that your company can do with publicity and without great expense. It could be rewarding long-term customers with a price break the first year of increased fees for services. Or maybe (and no one that I know of has ever done this, but it would be SO AWESOME) its sending out discounted offers to customers who have not had any complaints in the last year, and/or called in nicely and went away dissatisfied.

  8. Heh. Don’t get me started about companies that reward new customers and stick it to the old ones. Not sure why a company would give discounts to new buyers and require old buyers to pay more. That just generates churn. But I digress.

    I once helped open a restaurant. As I recall, the restaurant coffee (mid to low grade) cost around $1 a large pot. It might have been less, but costs were covered after the first cup of coffee (including water and electricity). Iced tea was the same way. So, yeah, I would expect that Starbucks only needs to sell one or two cups to cover the batch.

    They pay more per employee with higher wages and more training then other places, but they gain efficiencies from that. An employee who “owns” the business and enjoys work will be more likely to work in a manner that increases the bottom line. They are not in an adversarial relationship with management but pulling the company into a better position.

    The revenue that Starbucks generates is necessary to empower the types of generosity they display. Then again their generosity encourages people to pay more. Nice cycle that is….

    Yeah, Albertsons does it right. If you demonstrate to your customers that you care about them, then they will reward you buy coming back. In my opinion, the best way to take care of your customers is to care for your employees. If the employees are willing to work with you and you give them permission to solve the customers needs/wants/desires, it can only improve the bottom line over the long haul. (Yes, there will be some employees who need training on how to solve the needs without giving away the shop, but that is usually the minority.)

    Care for your house first, then they will care for the customers happily.

  9. I’m with you. The point of any business is to provide a valuble service to customers (a value determined in part by the cost to provide it and in part by the cost the customer is willing to pay to receive it). You can’t serve well if your employees aren’t serving well. I’d much rather see a company invest in its employees than handing out free trinkets. A better employee usually makes a better citizen, in addition to a better worker.

    In this political climate, serving the customer’s green conscience is a service people will pay top dollar for. Starbucks has that one down pat, from donations to environmental organizations to the kinds of eco-friendly (and very spendy) items they sell in the shop area, to the green-themed logo on recycled paper cup holders.

    I think my favorite starbucks thing is how their merchendise is so smoothly integrated into the atmosphere. You can’t help but notice the items, yet because of how the racks blend in with the surroundings, it still feels like a simple coffee house. That is the free market for you. And of course, they can afford the nice racks because of how much you’re paying for that coffee (I love the give-and-get cycle, because it shows how alot of things the government currently does could-and are being-done by the business world and much more efficiently at that).

  10. Wow. That’s impressive. You managed to take a fairly leftward leaning company and apply right wing free market conservative principles to it to mock the governmental approach to governance….

    Nicely done.

    Yeah, you have a great point about how they approach advertising. The merchandise fits into the atmosphere. Very well done approach. I can’t figure out how they make that happen, but it is well done.

  11. I’d love to learn how they do it (integrating the marketing into the atmosphere). If you could apply that across the board, stores in general would be more fun to shop at.

    I mean, you go into the average grocery store and the marketing hits you like a physical blow. Its not really fun to shop in, and one must wonder why that is the case. Especially when Starbuck’s products are eye-catching without intruding on the atmosphere.

    I don’t understand why that is either. Maybe we should start at the beginning. Is (the grocery store effect) because there is so much choice, but its all spread out and it looks like less, (and your mind stores all the info on what else there is, so that in your mind there is more)? If so, why does that bother us more than the Starbucks method, and what is different?

  12. The issue there is that Starbucks is the producer of the merchandise as well as the retailer. They can design the merchandise to fit their environment.

    A grocery store can control the environment and layout, but they cannot control the packaging (unless they go by the name Walmart). The producers create packaging that is supposed to jump out and grab your attention. It needs to step out of the environment and be the silent salesman.

    Starbucks isn’t limited that way. So they can do whatever they want and control the entire channel.

  13. Kind of amazing you could review a book about a leftist business and not mention that rather salient fact, and praise a company which screwed over its own employees by grabbing a portion of their tips and giving it to management.

  14. Steve, a couple of thoughts.

    Please remember that this site is dedicated to encouraging people to learn from books despite their objectionable content. We believe that many books retain value even when they contain aspects that we disagree with. Also, here are some early morning fairly quick responses. If you like them, then I was brilliant at 5 AM. If not, I was foggy and confused at 5 AM. 🙂

    Most companies over a certain size lean leftward. Pick any company and I can probably find proof that they supported homosexual advocacy groups, pro-abortion, climate change, environmental extremism etc….

    So, from my perspective, it would be stating the obvious (and boycotting everyone of these companies would drive me to live on a self-sufficient farm). Maybe that’s the wrong choice, but thats how I view it. Yeah, I did consider the fact that Starbucks explicitly promotes and encourages “diversity” when I wrote this. But, it didn’t seem to change the fact that Starbucks has found a creative method to reach customers that we can all learn from regardless of their political leanings.

    As for the part about Starbucks taking tips. I didn’t comment on it because I hadn’t heard of it. That was one of the weaknesses of the book. There was no mention of negatives nor how Starbucks learned and changed to overcome the negatives. From my experience, every company does stuff that the employees consider wrong. How many companies lay off employees while giving the CEO bonuses? How many companies require all tips to be turned in? (Yeah, I worked at that one.) How many companies lay off 10% of the staff and require the rest to pick up the slack? Is that fair? No. Would employees consider that to be “screwing” them? Sure.

    So, I am not certain how this issue matters. When I see that Starbucks forced their coffee growers to demonstrate improved wages and lifestyles for the growers employees, I’m impressed. When I hear that Starbucks pays higher wages to their partners in the store, gives them free coffee to brew at home, trains them, empowers them, and then praises them for their hard work, an issue with tips seems small in comparison. To my understanding, the partners still make more than their peers at other coffee or fast food shops.

  15. We were just discussing Starbucks’ left-leaning policies above, Steve: welcome to the discussion. I’d not heard the tip-taking-bit before, and it seems confusing. Where did you learn that? If the tips are shared equally among all the staff (including management), that would fit into a more socialistic/communist mentality, and make sense given Starbucks’ other company decisions like green-energy and recycling. It also makes some measure of sense for the employees: you are gaurenteed to get some tips, as opposed to just what your table or your customer gives you.

    Anyway, if the company controls the production of everything that goes into their store, that explains the integration. Although, since so many companies are under mega-corporations, I wonder why other companies havn’t instituted uniformity. I also wonder if Starbucks only recently started carrying products for that reason: they didn’t have stuff for sale at first. Barnes and Noble has some measure of control on that front as well, and their stores are some of the least affronting where merchandise is concerned.

    Which leads to another common denominator: theme. Barnes and Noble mostly sells books and related materials, with a few other items in and around the store. Starbucks sells mostly coffee and related services, with a few other items in and around that product. They draw you in for one purpose, and then present “service options” related to that (and don’t tell me that pre-made scones are not a service; I’ve made them, and its fun, but not a task for the kitchen beginner). Hmmm, computer stores do the same thing, in a way; buy the ipod, and now there are a million things you can buy to enhance it.

  16. What other companies have the same sort of integrated channel? Starbucks has the coffee and has been adding products slowly, but only products that fit their environment. I can’t think of other companies that have the same sort of opportunity right now. You?

    And, Starbucks apparently started selling their CDs upwards of ten years ago now, if I recall correctly.

    I agree completely with your opinion of Barnes and Noble (they have a great market on self published very cool looking journals). But, I would differ on the computer store. Computer stores are notoriously obnoxious and visually busy. Excepting Apple of course, which would explain why Apple generates more revenue a square foot of retail space than any other store in the world.

    The computer stores kind of dump you into a complex environment and expect you to shop like a grocery store. At least the big chains do. Yes, they have the add on sales because they want to get all the money on the table, but in my opinion, they do a bad job of it.

    As a side note (yeah, I sold computers once), most of the big ticket items (especially Apple products) have almost zero revenue. A company will go out of business if it only sells the main item: computer, TV, or iPod. There is no money there. The money comes from the accessories where margins could be as high as 100%.

    In my opinion, the best computer stores are boutiques. Like Starbucks and to a lesser degree Barnes and Nobles.

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