Why we called Starbucks stupid, and why you lie too much

This morning we hit Starbucks in Fairfield, Conn., on a perfect coffee-shop day. Gray skies, overcast, rainy. We dodged the taste-test guys at the door, grabbed a mocha-venti-something, and headed for the second floor, filled with plush couches and wide windows. Beautiful. Except there is no free Wi-Fi.

If you travel, you know Wi-Fi is as necessary as a pressed shirt. We’ve noticed the trend of coffee shops cutting internet access before, but since we’re now on planes three times a month shooting all over the country, we decided to sign up for the Starbucks paid Wi-Fi via AT&T. For $20 a month. $240 a year. And it hit us, getting on the internet at Starbucks is costing us more than a new iPhone.

So we tweeted “Starbucks I Hate You.

Now, this isn’t a rant on Starbucks’ cheapness. We can guess how the game is played. The titanium-craniumed boys from McKinsey come in, provide a black-and-white PowerPoint deck, and tell CEO Howard Schultz he can shave $XX million dollars by knocking out free Wi-Fi. Heck, Schultz can even make money with a rev-share with AT&T, and since he skipped a salary increase in 2009 due to tough times, this likely sounds good.

No, really. You’re a dumbass.

This is a rant about honesty. We tweeted our frustration, and Mullen ad guru Edward Boches wrote back whimsically “Guess they won’t be a client anytime soon.” We’re sure Edward was joking … but is it surprising that an ad agency might say something honest about a company’s mistake?

If you work in advertising you’ve seen lots of presentations to clients, and the worst usually begin with a sycophant complimenting the CEO about his golf game. Schmoozing, oozing flattery leads clients down dangerous garden paths. In fact, almost every campaign presentation is carefully orchestrated to push clients off-guard — watching the new creative on a shining flat-panel screen in a warm conference room filled with coffee, likely Starbucks. The glow of groupthink pervades as compliments abound. This is great. No, you’re great. This campaign will be great. And very rarely do we hear hard-hitting critiques of what could be done better. Agencies often have no incentive, because it costs them more to recut creative or media plans. Clients often don’t push back hard, because they’re already paying big bucks and admitting what they paid for is flawed hurts their own egos. Everyone has an incentive to be slightly dishonest, to say things are better than they are, and substandard ideas go out the door.

But what if we were all honest? What if you had Starbucks as a client, they suggested charging for Wi-Fi, and you looked Howard Schultz in the eye and said, friend, that is one big, dumb-ass move? Howard might be insulted. He might fire you, and have security kick you into the street. But then again, he might avoid a mistake, Starbucks customer loyalty would improve, and the chain might stop closing stores.

So Starbucks, when we say we hate you, we do it out of love. Now we’re going to figure out how to write this down as a business expense, and then get a second cup.

16 thoughts on “Why we called Starbucks stupid, and why you lie too much

  1. Ben,
    Well put. Interestingly I would guess that Starbucks welcomes this dialog. Evident by the fact that they have their crowdsourcing idea site that invites consumer participation. You raise all kinds of points beyond those most evident in this post. In an age of relationships, should a brand really be focused entirely on short term results? In an age of transparency, can a brand really live up to all that it means? In a world where crowdsourcing is easy, does anyone really need McKinsey to identify opportunities? Why not let customers decide? An honest dialog that talks about finances and the need to maintain certain margins and asks: “Would you rather us hold coffee prices and charge for wifi, or offer free wifi and raise prices by 10 percent would get a pretty good dialog going and let Starbucks hear directly from customers rather than from a filtered by a consultant Powerpoint deck. We (business, agencies, consumers) have all been victimized by Wall Streets myopic focus on short term quarterly results now for decades. Of course the real opportunity here is for a new brand to emerge and compete with Starbucks. In Boston we have FlatBlack, a far superior brand, and of course there’s Peets out of SF, which still roasts in small batches. So perhaps the positive is that we’ll see new competition and different models. And that’s a good thing. For that we can say, than you Starbucks.

  2. I honestly don’t get it. Wi-Fi costs about $25 a month. Starbucks has about 12,000 stores in the U.S., so (assuming no leverage in its pricing) its annual cost is about $3.6 million a year. Is it worth shaving a few million in costs to depress customer loyalty?

    Perhaps Starbucks is trying to decrease low-value visits by loitering office workers. But it seems 10 incremental sales a month would more than cover a typical shop’s Wi-Fi. As you infer, this seems an example of short-term gains driven by the Street not balanced with a long-term view of customer loyalty.

    I could be wrong. Starbucks does offer free Wi-Fi, for 2 hours a day, if you get its loyalty card. Perhaps it’s all a complex initiative to drive acquisition of points cardholders, who then have greater loyalty. If so, seems a strange approach.

    Jason Moriber inspired a good response: If I were Dunkin’ Donuts or Peets, I’d set up free Wi-Fi stations next door from a parked car, and invite Starbucks patrons aboard the competitive net.

    PS love the idea of crowdsourcing pricing strategy.

  3. $25 a month?

    Bargain for those of us on the other side of the pond…the last wifi monthly package I bought (and Starbucks seems to alternate between bt and tmobile here) I paid a whopping £30, so $45-$50 a month!

  4. Interesting post, Ben (same too for the comments). As you know, my background is law. I spent 13 years (before crowdSPRING) representing clients in complex commercial and intellectual property disputes. I always took a long-term outlook and was always transparent with my clients about their cases. I honestly don’t know how one could be less than transparent when dealing with your clients about legal issues.

    And I think the same holds true for agencies/brands – and prospective clients. As long as you have a long-term outlook, you absolutely should be transparent about your views. The right kinds of clients will get it – and will value the candor.

    But, as it happens, lots of external forces makes it difficult to have long term perspectives. And so we find a lot of ass kissing – I see a ton of it on Twitter, among other places. Lots more in blog posts. That’s a problem – as you’ve nicely summarized. Because if we all had long term perspectives, both our existing clients – and our potential clients – might benefit even more.

    Now – here’s something for Edward to consider: the crowdsourcing movements built around brands typically don’t have long term perspectives. They live in the now. Whereas DELL, for example, is thinking long-term with IdeaStorm, DELL customers suggesting ideas want DELL to act NOW.

    This tension between what consumers want and long-term strategy provides an opportunity to those agencies who view their relationships and potential relationships with brands over a long-term perspective. Sometimes, the Starbucks of the world need to hear, from smart people, that the decision they just made is stupid. And the smart brands – they listen.

  5. The idea of why Starbucks doesn’t offer free WiFi has been discussed ad infinitum on their MyStarbucksIdea site http://mystarbucksidea.force.com/ideaView?id=087500000004Cr8AAE
    It’s got all the customer input and back and forth you all are asking about.

    And then some.

    The card program Ben refers to was promoted as a response to the hundreds of back and forth comments on MyStarbucks.com where users asked for free WiFi.

    That happened a year ago, maybe longer.

    The problem they have is that most people seem to assume that Starbucks has free WiFi and are indeed shocked to learn that it doesn’t.

    Right now there’s no compelling reason for them to offer it: they have no strong competitor who does and the only people who seem to be driven out of the store are those who want to use it as an office.

  6. And Ben- there aren’t enough Peets coffee outlets to make a difference and no one wants to hang out in Dunkin Donuts (or McDonalds for that matter) – the stores aren’t really set up for it. (Though certain of the McCafes seem like they’re trying)

    If you’re in NYC though, Cosi has free WiFi. As does Panera in the burbs.

    Neither one threatens Starbucks market position, but if you’re in need of free WiFi…

  7. Alan,

    Starbucks is closing 770 stores and is slashing costs to reach a $500 million savings target, to get its stock back on track. I suggest cutting Wi-Fi is just one sign its luxury brand may be in trouble.

    It’s no coincidence that both McD’s and Dunkin’ have remodeled with upscale paneling and gourmet coffee menus.

    My point is if Starbucks doesn’t defend its differentiation, it loses. Why not delight customers with free internet access? Cheaping out isn’t going to help the cause.

  8. Ben – As far as I know, they’ve never had free wifi. People assume they do since there sways seem to be guys on laptops in there.

    If they took away a perk that would indeed be different. But I don’t believe that’s the case.

    Their unique dilemma is not providing a service many (if not most) people assume they have.

  9. Been there, mentioned that a long time ago to go along with Alan’s ad infinitum observation. But I’d counter by saying Starbucks isn’t giving me a good reason for why they don’t offer it.

    People may go elsewhere for free WiFi but they’re also giving other places their business.

    If I go to Panera, I’m also buying something. Does SB really believe people will come in and not buy anything and only use the free WiFi? Shouldn’t they give their loyalists more credit than that?

    Apple offers free WiFi in their retail stores but people sure look like they’re there to buy, not hang out and check email.

    If SB isn’t offering free out of some fear that it will hurt their “image,” what do they think their dumbed-down/simplified advertising of late is doing?

    My point on wireless applies to all brands though, not just SB.

    Why are they charging for what will be ubiquitous? Isn’t free WiFi the price of entry for most brands now, seeing how we’re becoming a wireless generation?

    If Arby’s can offer free WiFi…

    Re: Ben’s point on differentiation, SB is no longer the only game in town for a public that has shown they’ll buy the SB-McCafe experience-for a few bucks less.

    Perception now reality when McCafes start looking like Starbucks darker twins, and helping McDonald’s move past Dunkin Donuts to No. 2.

    And if everyone’s caught up, then SB really hasn’t separated itself from the pack, so why not just offer it?

    With ALL the moves the brand has made, from switching agencies to Paul McCartney tie-ins, etc., why not just try this?

  10. Alan – there’s actually an incredibly compelling reason for SB to include free wifi: consistency.
    You made the comment about the only customers they’re losing are those that want to use their stores ‘as an office.’ A key component of Starbuck’s core ideology is the concept of the “3rd place”. They built their brand on the invitation to just come to Starbucks and BE. Home is #1, Office #2 and SB #3. If SB wants to be our 3rd Place, it’s important that they create that environment, and in this mobile environment, it just comes off as cheap and inconsistent with this key value to avoid the expense.

    And Ben, even though your words may raise some eyebrows considering what you do for a living, I have to back you. I LOVE Starbucks and everything about the brand. That’s the only reason I care enough to be vocal when they make decisions that break it. I don’t even want to get started on Via. Hopefully the criticism is well-received.

  11. Bill nailed it: Starbucks hasn’t given us a good reason why they don’t offer free WiFi.

    Not a reason that the makes sense to board members and financial officers, but one that makes sense to the real shapers of their brand: their customers.

    My freaking mom and pop corner gas station with bad coffee and crappy sandwiches has two cheap tables and WiFi. That’s where the expectation is coming from. That’s why people are shocked/irritated when they find that Starbucks does not offer them free WiFi.

  12. David and Hal, thanks. My strong language was deliberate, intended to show the emotion people feel when disappointed by a brand they love (and to pose whether, in general, agencies are brave enough to provide honest feedback). I don’t really think Starbucks’ officers are dumbasses, and obviously wouldn’t phrase real consultation to them as such. But the raw emotion of being disappointed is powerful, and “dumbass” is the phrase every consumer feels in their heart when a brand disses them. The economic tradeoff of saving money now, vs. delighting customers to build loyalty tomorrow, seems obvious. If Starbucks really wants to be the third place that people congregate, it should make that place rewarding enough by offering things consumers don’t expect… other than $11 bills for coffee and a small sandwich.

    Thanks for the thoughts!

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