The new health care legislation has forced many large companies to skimp on health coverage, if not cancel it altogether, for spouses, retirees and part-timers among others. But coffee giant Starbucks is not one of them.
CEO Howard Schultz told me he refuses to cut back because it will send the wrong message to employees, even as the likes of U.S. Time Warner, IBM and Delta Air Lines complain that the law is hurting profitability and job creation.
Starbucks has become as iconic as apple pie in America and throughout the world. I caught up with the CEO of the company that often finds itself on the list of the best companies to work for to talk culture, strategy, economics and how technology is changing his business. Our interview follows, edited for clarity and length.
Question: What's driving your business right now?
A: Last quarter, our U.S. business hit a high-water mark with an increase of 9% store sales and 8% globally because the strategy we put in place is resonating with customers.
If you go back, five, six years, Starbucks predominantly was a business that occurred between 6 a.m. and noon, and the business was morning coffee. We have transformed things to reflect becoming a primary destination in multiple (parts of the) day. We've created products and categories so customers use Starbucks for more than just morning coffee.
Our stores have become the third place for customers between home and work. The environment, the store design, the free Wi-Fi -- everything we've been able to do has created this primary destination. That is the same in Beijing, in Shanghai, in Spain, in Tokyo or in New York City. We've cracked the code on universal relevance. About three years ago, we started to invest heavily in social and digital media, loyalty cards and mobile . We are the leading consumer brand on Facebook, Twitter. We are now processing over 5 million mobile transactions a week.
Q: Is that because of your partnership with mobile processing company Square?
A: Some of it is based on Square. But the primary aspect of it is a Starbucks-developed internal app that we've created. It has given us the ability to build an emotional connection and relevancy with customers outside our stores. From an economic standpoint, the return on that level of emotional engagement has reduced our cost of customer acquisition in terms of lowering the cost of advertising because of the competency of social and digital media, the Starbucks card, the loyalty program and mobile payment. (continued...)
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