March 03, 2008

Was Starbucks' 3.5 hour closing worth it?

On the surface it sure seems so. The number of high-quality placements they received in the national media was amazing. Even the Daily Show did a three-and-a-half minute piece on it:

The markets definitely liked the move and their stock price had a nice bump. Plus the news was timed perfectly (or accidentally? Probably not) to cover up the news of their 600-person lay-off just five days prior.

Other retailers shouldn't view this move as a sure fire success. But it does seem that Starbucks made the most of it. They began by informing the media with the right message ("we're improving our service and quality"). Then they made sure they communicated the same message to customers.

They chose a slow day (Tuesday) and time (5-8:30) for coffee drinking to close all 7,100 U.S. company-owned stores. After the closing was concluded, they posted signs in their stores explaining their new promise to customers ("Your drink should be perfect, every time. If not, let us know and we'll make it right.")

And all 135,000 baristas that were trained received that special warm fuzzy from their employer that will hopefully result in higher retention rates and better service.

If you do some simple math you can estimate the value of this closing to the company. 3.5 hours times 7,100 stores times an assumption of average sales activity of $5 every 5 minutes produces an estimate of 1.5 million in lost revenue. Sounds worth it to me.     --Ken


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