Is Starbucks Successful Because of Its Coffee, or Something Else?

Services and products are often a marginal part of purchase decisions.

Posted May 07, 2020

A colleague who is a business development manager in a successful hi-tech company met the CEO of a domestic low-cost airlines company earlier this year. After introducing himself, my colleague asked if he could share his experience while trying to book a flight on the company website. The CEO told him he'd be happy to listen. "Look," my colleague said, "the user experience was bad to say the least."

To his surprise, the CEO didn't get too excited. "Yes, I'm aware of that," he replied, "but I decided that at this point we are not going to invest budget in improving the site, I rather investing in other channels like competitive price." "Can I ask why?" my colleague asked. The CEO smiled and said: "The user experience on my competitors’ site is much worse.”

Selling in 2020 Using 2010 Rules

What the CEO doesn't realize is a decision like that was applicable 10 years ago. Back then the competition revolved around who offered a product at a lower price or a wider range of services. But the rules of competition have changed.

We live in a world of abundance, in which the services and products have become a marginal part of the purchase decisions. What drives today’s customers are emotions and feelings, some of which can’t be expressed in words and are triggered unconsciously. The most important element in buying a product is how the product makes a customer feel. The name of the game is experience and experience is determined by emotion.

The new world is characterized by small to medium businesses that still offer discounts and promotions, while successful companies don't talk to their customers about money anymore. Their new currency is our experiences. If in the past, it was enough to offer a good product at a competitive price, the business world has been revolutionized in recent years. This approach does not work today.

From a world of products and services we have entered a new era, the era of experiences. The word "customer experience" is much more than a popular buzzword. A customer experience has become more important than the product itself and companies that will ignore that, will find themselves out of the game.

Starbucks Redefined How We Drink Coffee

Let’s take Starbucks as an example. It's one of the most successful companies in the world, not only in the coffee shop business. It is so successful because it was able to provide an experience that changed how much of the world thought about coffee shops and how many of us drink coffee outside of our homes. Starbucks created a third place between home and work where people can relax, enjoy a cup of coffee and experience the inviting ambiance. Starbucks doesn’t compete with other coffee companies, it competes with going to see a movie. 

A small number of companies have now redefined what customers expect from brands. Businesses face a new challenge: these expectations are not only relevant for the companies that defined them, but for the whole market. If you are a financial institution, you are not only competing with other financial institutions, you are competing with Amazon. Products and services that will not meet high customer expectations are out of the game.

Brian Solis conducted a survey to understand how long was too long to wait for Uber before the person turned to alternatives. He found that in New York the reasonable waiting time was about five minutes, because "why wait more than five minutes for a car to come to where you are to pick you up and take you where you need to go?" Without realizing it, we got up one morning and five minutes felt like too long to wait for a cab—and not just for taxis, but too long to wait for service in general.

In the same way Amazon has defined that two days is the standard amount of time for a delivery and also redefined what's considered good customer service—e.g., don't want the product you bought? You get a full refund without needing to provide an explanation—WhatsApp has redefined what "instant" meant and Starbucks changed the concept of hospitality.

In short, the most successful companies in the world are not characterized by the best products in the world, but by redefining our expectations. Let’s face it, most products and services today are of similar quality. The competitive advantages of the products and functionalities no longer play a role in the purchase decision.

No Company Operates in a Vacuum

Most customers prefer to do business with companies that offer a quality experience over companies that have the best product or that use innovative technology. Take Apple, for example. Its products are no better than its competitors' products in terms of product quality. But when there are so many stimuli struggling for our attention, those stimuli that have the greater deviation from the baseline will evoke a mind-blowing experience.

Companies like Apple don't sell a product, they sell a brand that embodies a delicate mix of dreams and aspirations. That's why Apple's ads don't show product features like memory, speed, or device weight. The commercials are designed to provide sensory stimulation.

To return to our CEO of the airline company: he can't afford to analyze his company's customer experience in a vacuum. He's competing with the experiences created by Starbucks, Apple, Amazon, and Uber. Price and product no longer represent the advantage they once did.