Sep 2, 2009
Starbucks’ 15th Ave has a shot by orchestrating a new experience for new customer
Over at the Harvard Business Publishing (HBP) Experience Matters blog, Peter Merholz has stirred up quite a firestorm regarding Starbucks’ new 15th Ave coffee shop in Seattle. For those of you who aren’t familiar with this new concept coffee shop, 15th Ave is an experiment in offering customers the ambiance of a neighborhood coffee shop stocked with Starbucks coffee.
Many of the commenters – and Peter himself – believe Starbucks is being disingenuous with this new coffee shop. They think customers will see through this inaunthenticity and that for this reason it will fail. They argue that what Starbucks really needs to do is fix their original customer experience.
I agree on the later point (and whether you’re a fan or not you’ve likely seen the company’s many admissions that the core Starbucks experience is in rehab). On the point of the 15th Ave store failing because it is disingenuous, I beg to differ.
One of the questions I am asked most often is, “How many customer experiences can a company have?” And I often reply, as many as it needs.
It’s a myth that a company should only have one customer experience and stick to it. Every customer experience starts with a need, problem, or desire someone will pay to have fulfilled. So it only makes logical sense that a new experience should be defined when a company decides to solve a new need for a new target customer. Said differently, if a company discovers a different need that people will pay to have fulfilled, they should have a different experience for that customer.
For the last 20 years or so, Starbucks has been out to solve a need for commuters. CEO Howard Schultz wanted his coffee shops to be a third place between work and home — a space that would be as familiar as work or home, an integral part of our lives. And Howard didn’t call me last night but I don’t think that’s not the need he’s trying to solve with 15th Ave.
Conceptually, 15th Ave is supposed to be about personalized, local service. A friendly barista who knows your name, locally-baked goods, and freshly-roasted coffee made in small batches. More hang-out than stop-in.
In a follow-up post, Peter argues that 15th Ave is not a “luxury-brand” like Lexus is for Toyota or Infinity is for Nissan. Interesting comparison – since we’ve all come to see those luxury brands as solving different needs for different target customers than their familial peers. Lexus and Infinity absolutely took advantage of their predecessor’s operating capabilities, too. And when each of those alternatives launched, there was talk of inauthenticity. Makes you think, doesn’t it?
Some argue that a huge company like Starbucks can’t possibly fulfill a local, personal experience. That their authentic muscle has atrophied and – unlike coffee roasting – being personal is something the company can no longer deliver. Possibly true. As someone who has led “rogue” start ups inside Fortune 500 companies, I know from experience that this is hard. (Over on 15th Ave store manager Jenna’s blog, her local-vibe is certainly turned on).
None of us are really sure why Starbucks decided to create 15th Ave. To be honest, I haven’t been to 15th Ave yet and I’m reacting to the ruckus in Peter’s comment section, a bit of research, and my friends in the area. Still, the notion that every customer experience a company creates has to be the same is just not true.
My take: I see Starbucks targeting a new customer and orchestrating a different experience to solve a different need, re-tasking the operating capabilities they can. If I’m right, I think they’ve got a shot (pun intended).
Love this perspective, as I’ve personally migrated from Starbucks to privately owned coffee shops over the last couple of years. If they bring their concept to my neighborhood, I hope they’ll pull the shots manually, genuinely be part of the community, and have something yummy to eat (and smell!) for a change. Indeed, I agree that a company can have as many customer experiences as they need.
Interesting perspective on Starbucks – one of those companies we love to hate…but I agree that even if Starbucks isn’t seen as locally friendly – we’ve seen companies re-invent themselves to meet another customer need before. The question for me remains how will successful will they be in a market that caused them to close 600 of stores last year and in competing against thousands of other local coffee shops trying to meet the same customer need?
Paula I think you named the biggest risk for this new concept – operationalizing “local” and “personal.” Thanks for stopping by.
Anne: I’m not sure Starbucks is trying to “re-invent’ themselves – more a second, up-segment experience. And I suspect the tough market that contributed to the closing of stores was also a trigger to find an additional niche.
Sounds like both you and Paula would agree this is a new customer experience designed to solve a different need for a different target customer. AND…I appreciate your healthy skepticism about their success. Stay tuned, yes?!
This is a great example of proactive disruptive innovation: http://bit.ly/zjPGs
I have to agree with you that the 15th ave. store is a phenomenal proactive move by Starbucks to create a separate business unit to move up market. This allows them to protect their current market against disruptive innovation while moving into the next tier.
In the business of coffee Starbucks was the disruptive innovator when it entered the market. It innovated on the business model in such a way that it turned non-consumers into consumers by providing convenient, great tasting coffee with great customer service.
Since it’s inception it has become the incumbent. The things that it used to create the disruptive innovation (convenience, great tasting coffee, and great customer service) have become abundant to the point of being a commodity. One of my favorite rules of economics is that abundances create scarcity in other areas.
Scarcity (which in this case was largely created by Starbucks success) is the ambiance and social capital that comes with purchasing coffee from a neighborhood coffee shop. What is going to distinguish a Toyota coffee from a Lexus coffee is not the coffee, (both cars go from point A to B, are easy to find and purchase, etc.) it is the experience.
15th ave.’s main goal is to provide that experience and it is an excellent example of proactive disruptive innovation by the incumbent.
[...] Starbucks 15th Avenue. The rise and fall and change of Starbucks could fill several business books. The brand continues to make curious steps as it strives to rebuild in a tumultuous economy. This post examines their latest brand adventures. Hit or miss? I’d love to hear your take. [...]
I don’t know if this idea will work, however, the various Starbuck’s in my area, most within walking distance, already serve the need to hangout, as well as the drop in and leave crowd. I think it might dilute the brand, actually….
I’ve been to the 15th Avenue Coffee and Tea many times. It’s somewhat reminiscent of the Starbucks of the 90s given the manual espresso machine, heavy emphasis on coffee education, and small batch unique coffee offerings.
That store needs the local community around it to love it. I think it is steadily growing in its following, and it does satisfy a kind of customer who demands a little more from their Starbucks – of course without it being a Starbucks.
I still sometimes have my doubts about it’s location. It’s within walking distance of numerous other little coffeehouses so it’s placed itself in heavy competition for the coffee dollar. I almost think that the First & Pike store location would have been a great site for a 15th Avenue Coffee and Tea. Of course, no one asked me!
I hope for the best for 15th Avenue Coffee and Tea.