Is Starbucks still the "third place"?

Starbucks uses the catch phrase “third place” to promote the ambiance of their stores, indicating that “there is home, there is work, and there is Starbucks”. There are two Starbucks coffeeshops near my place in Cambridge. Recently a friend of mine suggested to drink coffee together at a new local coffeehouse around the corner, the “Boston Common”, which is supposed to be much cozier than anything around. What happened to Starbucks? Aren’t they supposed to be the “third place”, everybody’s favorite hang-out? Well, at least in this area the answer would be a clear “no”. Many Starbucks stores have become fast-paced, to-go places, not any different from the Dunkin Donuts from across the street, with doors opening every other second and baristas becoming stressed out in rush hours.

Did Starbucks lose its focus? I believe yes. The major challenge for a powerhouse brand like Starbucks is how to deal with growth. It needs to grow while staying somewhat small; become a global corporation while staying locally relevant.
Let’s have a look back. In 2001, Starbucks sought to become more appealing to the mass market. Research proved that for new customers Starbucks was somewhat “slow”. Young urban professionals want to grab a cup of coffee and rush out again as quickly as possible. Starbucks therefore decided to invest $ 40,000,000 to improve service speed by supporting baristas with more staff.

For me, it appears as if this move contributed to attracting customers that should actually be left to go to Dunkin Donuts. If the doors of the stores keep opening every other second, and if stressed out customers rush in and out to get a quick cup of coffee, Starbucks jeopardizes everything that makes it strong: the loyal customers that come there every day to enjoy this notion of the “third place”. Very often when doing the calculations in such cases, a decrease in customer lifetime value of the loyal base might mean a much higher loss of profitability than to let go of a coffee drinking segment. And when this customer group does not fit Starbucks’ brand mantra anyway, the long-term viability needs be ensured at all cost.

As described in earlier posts, the stretching of its brand into categories such as instant coffee falls into the same category: a pursuit of quick incremental profit that is likely to lead to devaluing the brand in the long-term. Another interesting post was published recently on brand autopsy, discussing that it is the taste that made the brand stand out and grow - trying to appeal to all consumers with weaker alternatives has not helped the brand.

What might have been an alternative? There is a famous saying that goes: “never change a winning horse”. In the role of Starbucks’ CMO, I would have taken the $40,000,000 and kept investing in the stores’ atmosphere as well as a further market penetration with new stores, especially increasing the number of stores in highly busy areas could be a promising strategy to cater to the high demand while ensuring that the atmosphere of the “third place” remains in place.

Francesco Wesel
www.francescowesel.com
www.brandnewtimes.blogspot.com