There are at least five places right on the UNR campus that I can buy coffee, so the competition for those selling Joe is stiff. Coffee is sold in the fast food joint in my building, but I usually prefer to take a walk to buy from either Starbucks or Peet’s Coffee, which are located within 40 yards of each other.
The tall (small) cup of Starbucks coffee of the day sells for about $1.62. You can always count on that coffee being fresh because they brew a new batch every 30 minutes or sooner based on how fast they are turning over inventory. The coffee is kept behind the counter and poured for you by a Starbuck’s associate.
Last week I discovered that Peet’s Coffee sold a 12 oz cup of coffee for $.99. That coffee was kept in a decanter on the counter, so you had no idea how fresh the coffee was when the associate handed you a cup for you to pour your own coffee. But that was the best price on campus for a cup of coffee, so I switched my purchases from Starbuck’s to Peet’s. I bought my cheap coffee from Peet’s all last week, and Monday and Tuesday of this week.
I assumed that’s what Peet’s wanted me to do – buy product from them instead of their competitors. Isn’t that what you want to do as a business, train your competitors’ customers to buy from you instead of them? More than that, you want to get my butt (and the wallet next to it) in your store, because if I never step into your store to buy my $.99 cup of coffee, you have no opportunity at all to suggestive sell me anything else you offer (e.g. bagels).
Today I walked across campus for my $.99 coffee from Peet’s and when I got up to the counter I was told “we are out of that.” Excuse me! Assuming that all coffee from decanters sitting next to each other on a counter that I have to pour myself is all the same, I asked “well, why can’t I have one of those for the same price?” She explained to me in all seriousness that they only have so much of the “special” coffee every year and when they are out, they are out. Oh, my goodness.
My money was already on the counter, but I picked it up, put it back in my pocket, and walked out. I went across the way and gladly paid Starbucks $1.62 for fresh coffee and extremely friendly service. I will never return to Peet’s. The Starbuck’s product is consistently superior, as is their service, so when price is no longer a factor, I’d be an idiot to pay the same for a colder and older cup of Joe.
What could management at Peet’s be thinking? Having successfully retrained customers to switch their buying habits from their larger and better known competitor, why would Peet’s want to alienate customers by taking away the deal? Even if you assume a conservative profit after controllables (PAC) of 20%, why would you want to surrender this position? Remember, from a competitive perspective, not only are you making profit off your sales, you are keeping your competitor from making a profit off the same sale.
All you have to do is compare the traffic flow between Starbuck’s and Peet’s, as well as the labor on the floor (5 associates at Starbucks to 1 at Peet’s) to know that Starbuck’s is kicking Peet’s butt. Love or hate Starbucks, at least they know how to compete.
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Bret,
Your story is a great reminder of how value transcends price of product/service. A simple “a-ha” that so many businesses still forget.
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Bret L. Simmons Reply:
February 4th, 2010 at 10:16 am
I am a big believer that the little things matter. I spent the first 10 years of my work life managing stores for McDonald’s, and back then we actually paid attention to details. It was great training and really helped shape my views of customer service. Thanks, Catherine! Bret
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Bret, it’s interesting to note that Peet’s was a major inspiration for the founders of Starbucks to start the company. They also learned how to roast Coffee Beans from Peet’s. Maybe Peet’s can learn a thing or two from Starbucks today.
I’m not a big fan of the Starbucks coffee product, but I am a fan of how they train their associates to give relatively consistent and good customer service in their stores. That may be why their customers are willing to pay more for a cup of coffee there than anywhere else. It’s easy to forget that good customer service can be a competitive advantage, especially in today’s economy.
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Bret L. Simmons Reply:
February 4th, 2010 at 6:19 pm
I did not know that, Ajo! Good customer service is a MUST in this economy. Can’t believe how many still have not taken their game to the next level. Thanks for the comment! Bret
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Dr. Simmons,
I agree, but I have to say that not all Starbucks offer the same level of expertise that you just explained, at least not in my experiences. One coffee shop in town that I prefer over anywhere else is Bibo’s on Mt. Rose Street. Every experience there has left a smile on my face with great coffee and superior customer service. To me, it’s how a coffee shop should be. It’s friendly and it’s tucked in a quaint neighborhood instead of on every corner. It’s not so corporate. I am not saying that Starbucks doesn’t have plenty to offer, but sometimes it’s nice to appreciate the little guy. Try them out sometime…
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Bret L. Simmons Reply:
February 10th, 2010 at 10:35 pm
I totally agree, Nicole. When Starbucks is on its game they are impressive, but we’ve all been in ones that are poorly managed. Have you ever tried The Hub Coffee? THAT is the best coffee in town. Try it and see if you don’t agree. Thanks! Bret
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Bret, I would have to agree that it’s foolish to lure customers to your store based on a limited-time special, even if the special might last for months. They had better have a long-term plan to keep you coming in once they have you! Starbucks makes great strides with their ability to be consistent in their quality, service, and price.
On the other hand, it amuses me greatly that humans will go to great lengths to save a few dimes. This doesn’t apply as much to your story, but people will travel many miles to save a dollar on a tank of gas, for instance.
Scott
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Bret L. Simmons Reply:
February 21st, 2010 at 11:03 pm
Welcome, Scott! I must confess that I am one that only buys gas from Costco or Sam’s, so I do time my trips. As good as they are, Starbucks is not perfect. I find their reward card to be VERY frustrating. Staff are not very well trained about how the card works. Just last week I was told one thing by an employee at Starbucks on campus, and the very next day an employee at the same store gave me a very blank look when I asked for what I was told to ask for. Ugh. Thanks! Bret
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