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Starbucks caffeinates sales with a shot of CRM

Saturday, April 19th, 2008

After two quarters of declining sales and executive-level scrutiny on brand health following reports that the company is straying too far from their brand roots, Starbucks is introducing five new initiatives to realign the company with their true identity. Interestingly, the most attention is being placed on CRM (customer relationship management) approaches to reward their most loyal customers and better understand their needs and desires. One of these initiatives is a standard customer loyalty-rewards program at retail, and another is a new style of website for customers and employees to share thoughts with the people who run the company.

It appears Starbucks is practicing these concentrated CRM tactics to reclaim their position of being the customer’s “Third Place” with home and work being number one and two. Third places are social environments generally revolving around beverages. Starbucks is fulfilling on this mission as having become a nationally accepted “Third Place” where consumers spend lots of money, time and collaboration. With their now declining sales, Starbucks recognizes that they must take consumer interaction and entertainment to a more subtle but effective level without being too obvious. Who wants a “Third Place” that feels uncomfortable, forced or inauthentic? But that doesn’t mean you have to be home-grown and primitive in your communication or approach.

Consumers will soon be seeing something new in Starbucks retail environment with a loyalty-rewards program starting in mid-April. These “on the house” perks are for anyone who buys a Starbucks card and registers the card online, because Starbucks knows they can convert them to loyal users once they get to know them better. Participants will get free refills on coffee, a free cup of coffee when they buy a bag of whole bean coffee, hours of free Wi-Fi a day and “on the house” upgrades including syrups, soy milk, and extra whipped cream on all lattes. The in-person experience will also integrate online through monitoring and MyStarbucksIdea.com.

MyStarbucksIdea.com will initially include about a dozen categories. People can post, discuss and vote for ideas in categories such as coffee, atmosphere, food, music and social responsibility. Forty-eight Starbucks employees will respond to the posts then channel suggestions back to management. “Their job is to show up every day and engage with customers about their ideas,” says CTO Chris Bruzzo.

We see two important aspects of CRM at work.

Better understanding core customers. Starbucks is embracing a highly streamlined approach in communicating to and understanding their customer with this online initiative maximizing on a CRM tool which is a smart way to “get to know” your customer, communicate directly with the customer, increase their purchases and monitor and enhance their overall brand experience (Starbucks is using Salesforce which is a top CRM/Sales tool with over 800 applications like these.)

Creating a customer-feedback protocol. Starbucks is getting great ideas directly from their customers creating a sense of involvement in the experience and overall ownership and participation by the customer. They actually show when the consumer’s suggestions are “under review” or “coming soon”. Each suggestion is acted on; people can view results by participating in this forum. While the suggestions are a form of user-generated content that others enjoy to read, vote on and celebrate successes when Starbucks adopts the new ideas, these comments are also indicative of Starbuck’s general business model. The comments imply that Starbucks moves fast and get things done.

Other companies like Dell have joined Starbucks in implementing these innovative tools. Visit www.dellideastorm.com to see the Dell CRPM application taking hold.

We suggest more brands step outside of the comfort zone and taste-test CRM and digital technologies to understand how simple and straightforward they can be. Cost-effective technology is at your fingertips where consumers literally “tell you” what they want, and the tools allow easy customization of direct communication to niche audiences. These techniques could make a venti difference in your sales.

– Contributed by Tracy Kollker

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