Starbucks, facing three consecutive quarters of declining sales, has announced a comprehensive turnaround strategy spearheaded by CEO Brian Niccol. The plan, detailed during the company’s recent quarterly conference call, focuses on operational improvements, menu simplification, enhanced customer experience, and a revamped marketing approach, all aimed at streamlining service and boosting sales. Niccol’s vision centers around delivering a customized drink to customers within four minutes—a goal currently achieved in roughly half of transactions—underscoring a strategic shift toward efficiency. The changes, while ambitious, aim to address key frustrations impacting both customer satisfaction and operational efficiency.
Key Takeaways: Starbucks’ Turnaround Plan
- Speed and Efficiency: The core focus is on delivering drinks in under four minutes, impacting order processing, menu simplification, and barista staffing.
- Mobile Order Optimization: Starbucks will improve mobile ordering accuracy and streamline the customization process to reduce in-store congestion.
- Menu Simplification: A “fewer, better” approach will streamline the menu, improving consistency and speeding up service.
- Enhanced Customer Experience: Starbucks plans to restore its “third place” atmosphere via improved cafe design, the return of ceramic mugs and Sharpies, and the revival of condiment bars.
- Strategic Staffing: Improved scheduling and staffing levels aim to enhance customer service during peak and off-peak hours.
- Revamped Marketing Approach: A broader targeting strategy and reduced reliance on discounts are key components of the updated marketing strategy.
- Pricing Strategy: No North American price increases are planned for the coming fiscal year – targeting a more positive consumer perception of pricing.
- Dairy Alternatives: Removing extra charges for dairy substitutes will offer significant savings for customers and drive positive perception.
Ending the Chaos of Mobile Ordering
A significant pain point for Starbucks has been the overwhelming number of mobile orders flooding stores. CEO Niccol acknowledged the issue, stating, “When it works well, it’s great, but sometimes it can be a challenge for both customers and partners.” Mobile orders currently constitute over 30% of U.S. transactions. The solution involves improving app accuracy regarding order readiness times, separating mobile order pickup areas from in-person ordering, and strategically reducing excessive customization options within the app. Niccol explained to CNBC, “Right now, I think there’s some customization specifically in the mobile order app execution that’s just really wide and unnecessary. So I just think that we need to put better guardrails in place…”
Improving App Accuracy and Reducing Customization
Starbucks is committed to enhancing the accuracy of its app’s estimated wait times. This will allow customers to better manage their time and avoid prolonged waits. Simultaneously, the company aims to curtail excessive customization options, streamlining the ordering process for both baristas and customers. The goal is to offer relevant customization choices without overwhelming the system or slowing down service.
Streamlining the Starbucks Menu
Starbucks’ famously extensive menu is undergoing a significant overhaul. Niccol’s strategy is centered around “fewer, better” offerings, focusing on items that can be consistently produced efficiently. He noted, “There’s always a long tail on the menu, and those items, frankly, we don’t execute all that great.” This simplification is expected to accelerate service times and improve overall consistency. The company is also reviewing items that wouldn’t meet their new four-minute standard for service.
Focusing on Core Offerings and Efficiency
By reducing the number of menu items, Starbucks aims to streamline its operational efficiency. Baristas will be better equipped to prepare drinks consistently, leading to improved customer satisfaction and reduced wait times. While some customers may miss certain less popular items, the company believes that enhanced speed and consistency will outweigh the loss of limited choices.
Reviving the “Third Place” Experience
Niccol emphasized the importance of restoring Starbucks’ image as a “third place”—a comfortable gathering spot outside of home and work. The company plans to achieve this through multiple initiatives. The return of ceramic mugs for customers who choose to linger and the reinstatement of Sharpies to personalize cups are symbolic of the revitalized focus on personal interaction.
Cafe Redesigns and Improved Amenities
Starbucks is conducting a thorough review of its store designs, with a goal of creating more welcoming and comfortable spaces. This involves improving seating arrangements, enhancing textures and ambiance, and implementing design elements that foster a sense of community and warmth. Even pickup-only stores, which often lack seating, will incorporate elements to enhance the customer experience. Niccol emphasized, “The reality is the majority of what we have are these cafes that I think don’t have the right seats, potentially have the right texture, don’t have the right layers, don’t have the right warmth. We need to bring that back.”
The Return of Condiment Bars
A seemingly minor but impactful change involves the resurgence of self-serve condiment bars. Removed during the pandemic, their return will free up barista time and allow for more efficient service. This simple alteration represents a direct response to customer feedback.
Optimizing Staffing and Scheduling
Starbucks has already increased average barista work hours, leading to lower turnover and improved retention. However, Niccol intends to refine staffing levels further to ensure optimal coverage during all periods of the day, including less busy shoulder hours. This focus on optimized staffing aims to maintain consistent service levels throughout the day.
A Fresh Approach to Marketing
Niccol, with his extensive marketing background at Procter & Gamble, Yum Brands, and Chipotle, is leading a complete overhaul of Starbucks’ marketing strategy. The aim is to reach a wider audience than just Starbucks Rewards members and highlight the quality of the coffee itself. Crucially, the company intends to reduce its reliance on discount-driven promotions, viewing them as “ineffective” and potentially burdensome on baristas.
Broadening Reach and Emphasizing Quality
The new marketing campaign will strive to connect with a broader demographic, emphasizing the superior quality of Starbucks’ coffee and overall customer experience. By reducing the number of discounts, Starbucks hopes to foster a perception of value and quality over price-driven promotions. Having tapped former Chipotle alumna Tressie Lieberman as Starbucks’ new chief global brand officer signals a clear commitment to modernising the brand’s marketing techniques.
Eliminating Extra Charges for Dairy Alternatives
Starbucks is responding to frequent customer requests by removing the extra charge for non-dairy milk alternatives, effective November 7th. This move, representing a potential savings exceeding 10% for some customers, aims to boost positive brand sentiment and encourage purchase of plant-based options.
Pricing Stability and Consumer Perception
Starbucks plans to maintain current North American prices for the next fiscal year, which should further help improving consumer perception of price value and increase visit frequency.
