Balancing profit maximization, consumer wants and brand authenticity | Starbucks

Over the past few weeks, I have been glued to a new book I purchased; Pour your heart into it, A biography from former Starbucks CEO and current chairman Howard Schulz. It's been a fascinating read thus far and has a variety of lessons from challenging moments the business has faced. The book has elements that relate strongly to myself and my decisions while implementing new ideas here at Kevin Sprecher Golf over the past nine months.

The last few chapters have focused on the expansion of the Starbucks brand into areas such as Ice Cream, Packaged coffee distributed through retailers, and the introduction of the renowned "Frappuccino". I was surprised to learn that the company's decision to look outside the Starbucks core product was highly debated. The decision to launch the Frappuccino, ice cream, and packaged coffee were difficult for the entire workforce at Starbucks.

The brand was built on providing the most authentic, high-quality coffee by investing in premium coffee beans roasted (dark) in Starbuck's traditional methods. The decision to introduce the Frappuccino alongside low fat/dairy-free options was deemed a considerable shift internally, yet externally mainly was seen as a necessary step to meet consumer trends and stay relevant.

Although, as noted in the book, Howard was initially against these ideas yet, over time understood the value they could bring to the Starbucks brand and its customers. Although these decisions had a huge positive financial impact on shareholders, through reading this book, you begin to understand that the decisions that helped fill the pockets of shareholders were an indirect result of focusing on providing value to the customers as much as possible.

In my opinion, one of the most critical elements of a good leader is their willingness to encourage curiosity and experimentation. Although for many of the new launches, as discussed above, the CEO was against their introduction into the business, he displayed a willingness to allocate resources (financial & human) to researching these areas in more depth. Often these findings would be presented to the board and result in some dramatic change in opinions.

One of the main reasons for Howard’s reluctance to enter into the ice cream, packaged coffee, and Frappuccino business was the perception from consumers, particularly the day one (die hard) Starbuck consumers. Howard and other staff from various levels of management had expressed the feeling that expanding beyond the core product would be selling the soul of the business. Rather than focusing on their values of providing the highest quality coffee and experience, introducing new products would be perceived as a decision driven by financial implications.

I have spoken before about consumer trust and its importance for sustainable growth. Again, I want to emphasize how valuable a strong relationship with customers rooted in trust is for a business. I referenced our strong word-of-mouth marketing and how every decision made is in the best interests of our clients. This blog post is due to a recent addition that we made to the KSG business.

The training aid market has a substantial role within the golf instruction industry. Kevin has built a strong relationship with brands that produce training devices that he feels are high quality and effective in speeding up the learning process. Through affiliate marketing, Kevin referred clients to selected companies while providing a discount code, pointing them both in the right direction alongside saving them some money.

One thing that I noticed since joining the business onsite last year was the opportunity to make the process for clients purchasing relevant training devices much more straightforward. As the end of the lesson approached, Kevin would text them a link to a site alongside our discount code for the client to order. A barrage of questions would usually follow this; How long will it take? Which one is it that I need to order? Etc. Can I not just purchase the one I was using? These questions signaled an apparent demand for a more straightforward process for buying the training devices. Our clients wanted to buy the relevant device at the end of the lesson and have the ability to take the product home with them on the same day to get practicing straight away.

Logistically it's a lot easier, too, as they wouldn't need to jump through the hoops of various websites to place an order.

I pitched a concept to Kevin about generating a list of training devices that we believed could add value to our client base (make them better golfers) and be of high quality. I suggested we reach out to the brands individually and create a deal that would allow us to purchase their products at wholesale prices to distribute among our consumer base. This would, as mentioned above, increase the ease for our clients to buy devices that could transform their game.

It's no surprise that this move also had financial ramifications, as many of you are aware affiliate marketing is not lucrative unless done on a larger scale. Our approach towards affiliate marketing was never to make a quick buck as the returns were so low that it wouldn't make a noticeable impact on the financials but were more of an extra benefit of being a KSG client. Who doesn't enjoy saving a few bucks at the checkout?

The shift towards bringing products to sell in-house was challenging and reminded me of the decision-making process Starbucks went through when exploring the Frappucino.

On the one hand, I felt that the opportunity to have products on site would increase customer satisfaction, it was essential that this new concept would not erode the strong level of trust and respect our customers had for us. I wanted to protect the integrity of the business and, like what Howard talked about, not give the impression that we were selling out.

I felt the benefits of this idea far outweighed the drawbacks, similar to Starbucks' decision to partner with United Airlines, but I wanted to ensure that it was correctly executed.

This was done through a strict selection process; we only brought in products from brands we trusted and felt could positively impact our client's game. We maintained the position never to push the product onto consumers but rather to integrate the product into a conversation when appropriate. All products are priced competitively and the same if a client were to order direct from the brand.

This new concept has the potential to have a positive financial impact on the business. Still, I want to emphasize that the purpose of this is to make it easier for our consumers first and foremost while also improving the business's financial efficiency.

Over the past few weeks, it's been fun watching the concept come to life, and I appreciate Kevin being onboard with the decision. This concept will be trialed throughout this season. One of the many great aspects of working here is the willingness to consider my ideas and concepts and a willingness to experiment and trial these ideas; from a leadership perspective, it's a great motivation tool while also potentially creating innovation for the business.

One of the biggest takeaways from the book was how Starbucks implements systems & processes when undertaking a new business venture to ensure it doesn't dilute what the brand was built on. Although these systems and processes are an expensive addition, the investment has strong long-term ROI as new ventures such as Starbucks' partnership with United Airlines can navigate through challenging moments and achieve their objectives!

I am excited to read the remaining chapters and continue to learn about the Starbucks journey.

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