I’ll go to extremes to get my coffee buzz from Starbucks even if it means driving five miles out of my way and past other coffee retailers. But I must have my grande skinny latte! And sometimes, if I stayed true to my healthy eating plan, I will reward myself with another Starbuck’s favourite – a blueberry scone. Yes I know, it is unreasonable, inexplicable and absurd. I know of people who, likewise, show an unyielding loyalty to Tim Hortons, Caribou or Lavazza.
Notice two things here: I don’t hang out at Starbucks much. I only go through the drive just to ensure that I get their coffee. So the free-wifi, hip jazz and the large couches don’t play a role in my loyalty. I don’t have too much variation in what I pick up there – just my favourite cup of java and scone. So what drives me there each time, every time? Is it loyalty?
Loyalty is built across a number of parameters: product, its availability, price point, the environment in which the product is available, offers and customization etc. But most of all when engagement is high, loyalty soars. When I checked last, Starbucks had 35+ million followers on Facebook. Just by way of comparison, Walmart had 32.5+ million on the same day. What is common to both is the level of engagement on their Facebook pages. Practically every post has a response from these companies. It reflects that customer engagement is inherent in their DNA. You can see it across Twitter, Instagram, Pinterest and Google+. The resultant intense loyalty demonstrated by customers keeps competition at bay for what is – let’s admit it -- not a highly differentiated product.
The underlying story here is that there are retail situations where the time available to connect with the customer is limited – I just drive through Starbucks (not literally) – but the opportunities to connect exist. There are online and mobile channels, on which a retail business can listen to customers, interact with them, act on their suggestions and apprehensions and reward them for it. Let me put it another way: it is possible to build a strong brand presence by treating customers as partners. Loyalty card programs and personalization initiatives can then be built around the engagement.
Engaging customers and getting them to participate – on a daily basis and on the scale demonstrated by retailers like Starbucks and Walmart – and then ensuring that their comments, suggestions and ideas are analysed and quickly responded to, is a complex operation. Strategically integrating this into CRM, demand forecasting and product management to extract true value from the engagement takes layers of technology. But in the end, it is worth it.
Here is why: coffee prices fell 28.5% in 2012[iii]. Grocery store packaged coffee brands Folgers, Dunkin’ Donuts and Maxwell House responded by dropping the price of their coffee. What did Starbucks do? It raised the price of its coffee by 1% in the Northeast, New York, Boston, Atlanta and Dallas]. I think customer loyalty gives the brand the confidence to go where few retailers would dare.
Does your business command this loyalty? What are the steps you have taken to ensure it does? I’d like to hear your experience.