Introduction
Starbucks, established in 1971, is a multinational chain that has evolved into the world's largest coffee retailer, boasting over 35,000 stores across 80 countries. The transformative period for the company occurred in the 1980s when Howard Schultz, the current chairman emeritus, became involved and redefined its business approach. Schultz envisioned Starbucks as a "third place," serving as a communal hub between home and work, where individuals could savor premium coffee. Under his guidance, Starbucks underwent rapid global expansion, not only within the United States but also internationally. The company has diligently crafted a reputation as a provider of high-quality coffee, offering a captivating and welcoming environment. Starbucks is recognized for its expertise in coffee, commitment to ethically sourced beans, and dedication to social and environmental responsibility.
The Crisis
In July 2008, amid the challenges of the Great Recession, the company experienced a significant economic downturn as customers increasingly chose more affordable coffee options from alternative cafes. The fourth quarter saw a substantial net loss of $6.7 million, with profits declining by 28% compared to the previous year, prompting the closure of 600 shops. In 2009, over 300 additional stores were shuttered, resulting in unemployment for approximately 7,000 employees. Howard Schultz, the former CEO, returned to lead the company during this crisis.
While the previous leadership attributed the downturn to the Great Recession, the economic climate, and high dairy prices, Schultz contended that the company's struggles were not solely due to the recession but rather stemmed from extensive expansion and bureaucratic policies. Instead of enhancing existing stores, Starbucks had overly focused on expansion. To address these challenges, Starbucks needed to strengthen its customer relationships to demonstrate a genuine concern for its patrons and a commitment to quality. Additionally, the company faced competition from McDonald's, which had begun establishing coffee bars selling espresso.
Schultz shot off a letter to the employees on the day he took office once again as CEO. He said, "The company must shift its focus away from bureaucracy and back to customers." He made his objective very clear: "Reigniting the emotional attachment with customers."
The 'My Starbucks Idea'
In March 2008, the launch of "My Starbucks Idea" facilitated direct customer engagement and communication with the company. This platform enabled customers to express their viewpoints on various aspects, encompassing products, services, layout, advertising, corporate social responsibility, in-store music, and more. The exchange of over 93,000 ideas among around 1.3 million users on social media led to a monthly surge in page views to 5.5 million.
"My Starbucks Idea" established a direct link between customers and the company's headquarters, underscoring Starbucks's dedication to attentive listening to its customer base. The widespread global presence of Starbucks proved advantageous as customers worldwide connected, forming communities like the 'free Wi-Fi group,' 'soy group,' 'comfy chair group,' and 'frappuccino lovers.'
Implementation of over 100 ideas suggested through "My Starbucks Idea" played a key role in fostering a robust and engaged fan base. By providing customers with a platform to articulate their ideas and perspectives on the brand and actively responding to them, Starbucks effectively restored brand trust.
Social Media Strategy
Starbucks quickly recognized the importance of showcasing its 'cool' factor through marketing on social media. The company understood the necessity of avoiding an appearance of desperation or excessive eagerness to boost sales. Consequently, Starbucks refrained from overwhelming its followers with numerous products, causes, or promotions, emphasizing instead the importance of community building and engagement.
The strategic use of social media by Starbucks highlights its ability to strike a delicate balance between spontaneous and carefully planned posts. Additionally, these platforms served as effective tools for the company to promptly address and control any information that could potentially harm its global identity.
How did Starbucks flip the page?
In summary, Starbucks successfully navigated the aftermath of the 2008 financial crisis by adapting its operations to meet customer expectations via social media. By providing customers with a platform to express their ideas and opinions, and actively responding, Starbucks not only cultivated a strong fan base but also rejuvenated brand trust. The company's adept use of social media reflects a careful equilibrium between impromptu and strategically planned posts. Starbucks saw a rapid recovery once they began focusing on customers again.
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