atkinson advisor

Onward – How Starbucks Fought for its Life without Losing its Soul

By Howard Schultz

In 2000 Schultz stepped aside as Starbucks CEO to focus on Starbucks’ international expansion.

By 2007 the recession, overexpansion, and changes in consumer behavior were affecting every aspect of Starbucks’ business.

In an unusual move for a former CEO, Schultz decided to return to lead the day-to-day operations in 2008.

Onward gives readers an inside look at Schultz’s concern that Starbucks was at risk of losing the customer-centric focus and the agonizing task of finding the balance between product quality, core values, and profit.

In his return Schultz took a number of risks not popular with Wall Street or customers. In 2008 he shut down all 7,000 stores for three hours simultaneously so that baristas could be retrained in the art of making the perfect espresso. And he removed the breakfast sandwiches from the menu until they could find a way to keep the cooking smell from competing with the experience of walking into a coffee shop intended to delight the senses.

Onward is a must-read for all students of leadership, management, and consumer marketing.

1. Fairness of compensation for their issue
2. Convenience of the resolution process
3. Friendliness and level of concern

Southwest has a history of getting it right. The airline receives high ratings for consumer and business travel. It has succeeded financially while other airlines struggled. And, it’s consistently rated a good place to work.

Add customer service to the list.

Five years ago, the airline initiated a proactive customer communications program when something wrong happens with a flight. Chief apology officer Fred Taylor keeps track of every problem (delays, foul odors, technical issues, etc.) and writes more than 180 letters every year to more than 20,000 customers. The letters usually include free tickets.

Southwest’s program is getting positive attention because of recent negative issues with other airlines. Southwest looks great while its competition struggles to make it right.

Southwest’s program proves that great customer service is systemic not episodic. President Colleen Barrett handpicked Taylor years ago to start the program and has supported him throughout the process. Taylor also says he has to ability to call upon any one at any time in the company to find out what happened in a particular situation.

The Ultimate Question by Fred Reichenfeld

The Ultimate Question is the latest installment from loyalty expert Fred Reichheld, a researcher with Bain & Co. The book revolves around Reichheld’s hypothesis that the crux of business growth and profitability is loyal customers who advocate a business to other customers.

While loyalty is nothing new, the unique element of the book is that Reichheld recommends using only one question to measure customer loyalty and adjust strategy: Would you recommend us to a friend or colleague? The Net Promoter Score (NPS) is the difference between promoters (9 or 10 on 10-point scale) minus detractors (1 or 2 on the same scale). The author’s research concludes that a high NPS indicated a greater likelihood of growth and profitability.

Reichheld developed NPS to distinguish between companies pursuing what he calls bad profits (short-term expense cuts or price reductions) versus good profits (those generated by investing in customer service). For example, Reichheld points out that Amazon.com (NPS of 73) sought growth by investing in free shipping instead of pursuing a national advertising campaign.

American Express, eBay, Enterprise Rent-A-Car, and Intuit are some of the corporations using NPS.

More details and NPS reports for several industries are available at http://www.netpromoter.com/.

Most marketing falls into one of two categories: business to consumer (B2C) and business to business (B2B). Understanding the distinctions is important to shaping and executing the right marketing approach.

Consumer motivation centers around personal needs. We need better cleaning products, more luxurious cars, better tasting food, more affordable medicine, etc. Sometimes, we turn to our favorite brand; sometimes, we comparison shop. We make the decision and complete the transaction quickly.

Business motivation centers around company needs. We need to cut costs, increase revenue, improve security, hire better people, etc. This process is far more complicated. We turn to trusted sources for referrals, issue RFPs, interview prospects, and usually hold a series of meetings to make a decision. Then, we start working on the contract.

The difference in the two purchase processes stems from the long-term implications. Ninety-nine percent of consumer purchases have no long-term implications. By contrast, ninety-nine percent of business purchases do have long-term implications. Individual reputations and even jobs are on the line with each business purchase.

B2C marketing can focus on features and translate those features into benefits for the consumer. The long-term implications of business purposes requires that B2B marketing focus on results achieved for previous clients and thus results promised for the prospect.

Simply Better by Patrick Barwise and Séan Meehan

In Simply Better, Barwise and Meehan present a compelling case that the best strategy for companies to retain and add customers is to excel at the basics of their business category – not by creating a unique selling proposition.

The foundation of the authors’ theory is that customers meet their needs by making a category purchase rather than by buying a particular brand. For example, people choose fine dining and then select from the available brands. They do not say, “I’m going to Ruth’s Chris. Now, am I going to have a burger and fries or the surf and turf?” The same applies for cars, televisions, clothing, etc.

Simply Better provides numerous examples of companies that have an intimate knowledge of the category benefits and have parlayed it into the best overall combination for customers.

The authors recommend that companies improve their category prominence by creating a “pure air” culture based on two principles. The first principle is seeing debate and challenge based upon facts and objective observation as a force of good. The second principle is that no one expects an easy yes for new ideas, meaning that only the best ideas ultimately make the cut.