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OMG! I am No Longer Relevant!

What does a company do when their core value proposition becomes less than relevant – overnight?

That’s the problem Starbucks was facing when its longstanding “Third Place” value proposition (A place to meet that is not home or work/school) became superfluous to a population so fearful of Covid-19 that they didn’t even patronize their usual second place.

In last week’s 8-K filed with the SEC we learned Starbucks’ plan.

As a part of what they called “A Transformation of our Business,” Starbucks is introducing a new store format called “Starbucks Pickup” for to-go and delivery orders. “We believe this transformation of our store portfolio, blending Starbucks Pickup stores with traditional Starbucks stores in dense metropolitan markets, will elevate the customer experience and position Starbucks for long-term growth.” Starbucks is serious about this change as they are planning to close 400 existing stores to make room for Starbucks Pickup.

Wow. What happened to third place???

Well, the letter further explains that “the third place experience occurs from the moment a customer envisions” ordering a Starbucks beverage to “wherever they enjoy that Starbucks beverage.” So is third place now more symbolic than literal?

Hmmm. It turns out this change was not as sudden as it seems. Starbucks had been concerned about a transformation in societal coffee consumption patterns long before Covid-19. Indeed, Starbucks had noticed that about 80% of all U.S. transactions before the pandemic were for to-go or delivery.

In fact, Starbucks stated that the process of reevaluation and store redesign had been ongoing for two years prior to the outbreak. It was just because of COVID-19, that the company had decided to accelerate the change.

So what can we learn from this?

  • Covid-19 is often the excuse, but not the reason, for change. Business owners can, under the cover of the pandemic, make much needed changes to their business model or value proposition, often with less customer resistance.
  • Data is king. Business owners who neglect taking long, hard looks at their business data or don’t perform continual analysis, do so at their own risk.
  • A powerful value proposition, brilliantly executed, will pay enormous dividends in allowing a business to continually stay relevant, even when the value proposition needs to be changed

Think about the tremendous, consistent and expensive effort Starbucks expended over so many years to establish and reinforce the “third place” value proposition. The success of that effort gave the company the confidence that consumers could now be ready to expand their definition of third place from a literal one to a more emotional, metaphorical definition.

The result – a powerful brand that can much more easily adjust to a pronounced change in consumer behavior to become more efficient and improve the customer experience.

Can your business do that?

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