It seems every company wants to show just how customer-centric it is these days. It’s increasingly common to hear PR machines toss around phrases such as, “We value our customers,” or “We put our customers at the center of our business.”
But it’s easier said than done. When it comes time to make a decision that pits customer interests against a chosen corporate strategy, do you really make decisions that put your customers first?
A.P. Giannini, founder of Bank of America, said, “The purpose of a business is to create a customer.” If, in the process of evolving your business, you choose to forsake some (or all) of your customers, you not only have no longer put customers at the center of your business but also have given up the business those customers represent.
A recent stark example of the conflict between a chosen corporate strategy and a customer-centric one is the recent decision by Starbucks to close a number of its brands, including San Francisco icon La Boulange.
La Boulange is a chain of bakery cafes in San Francisco that has a reputation for quality food at reasonable prices and has earned the trust and devotion of San Francisco Bay Area locals. This is important to this story, as earning the trust of San Franciscans, as a whole, is not easy, and locals tend to fiercely defend local brands, often at the expense of national brands.
When Starbucks acquired La Boulange in April 2013, there was a local uproar. Would they keep the beloved cafes open? Would we be deprived of La Boulange baked goods? What would happen to the people working at them?
Starbucks is one of those companies that claims to employ a customer-centric business strategy. Putting customers first means making a promise to those customers, then keeping that promise. And, of course, not breaking it. Starbucks made a promise. They kept that promise—until they broke that promise by making a decision that clearly put their chosen corporate strategy ahead of their customers’ wishes.
Make a promise: At the time of the acquisition, Starbucks stated it would keep the cafes open and even offer La Boulange baked goods in its Starbucks coffee shops.
Keep a promise: It held to this promise. It even opened more locations of La Boulange during the two years since the acquisition.
I cannot overemphasize this point: Starbucks made and kept a promise to the segment of consumers who value and frequent La Boulange. San Franciscans breathed a collective sigh of baked-good-induced relief.
Break a promise: Last week, Starbucks announced it would close all La Boulange locations by the end of September 2015.
The justification for the decision was, in Starbucks’ words, “Starbucks has determined La Boulange stores are not sustainable for the company’s long-term growth” and that the decision was made because “Starbucks continually evaluates all components of its business to confirm they are aligned with key priorities and strategies for growth, which includes the continued analysis of the store portfolio.” Notably, the decision was not made based on profitability, as the company claims the La Boulange brand achieved 16% year-over-year growth, and industry reports show that the newly opened stores far exceeded expectations.
In a company that claims to put its customers first, what is missing from this decision is any consideration of the promise to the customers.
Which brings me to the difficult question Starbucks faced: Do we follow our chosen corporate strategy or do we make our strategic decisions by putting our customers first? I wonder how you or I would make the same decision.
Traditional corporate strategy says a company should choose its competencies, market, and customer segment, pursue them to the exclusion of other options, re-evaluate those choices periodically (or continually), and make adjustments.
Customer-centric strategy demands a different approach. If the customer is truly at the center of your business, then your business must choose its competencies, approach, and services to focus on the needs (known, unknown, or even unanticipated) of the customer. This is true whether your customer is an individual consumer or another business.
Making the choice between a chosen strategy and customer-centricity is not always as stark or obvious as it is in this case. Companies face decisions every day that pit delivering value to customers against the chosen strategy of the business. If your company chooses the chosen strategy and moves away from the customer it created, it must either create a new customer or face the fact that it no longer has a business (at least in that segment).
Starbucks’ mission statement is “to inspire and nurture the human spirit—one person, one cup and one neighborhood at a time.” The core Starbucks brand will continue to do that. But the La Boulange brand did that exact same thing for a different customer in a different way (appropriate to that different customer). Despite Starbucks’ statement that this decision was one that keeps their mission intact, it seems that the other decision (to keep La Boulange open) would have done that as well.
So, while the decision does not directly conflict with the mission statement, it does conflict with any claim of customer-centricity.
All of which presents us with a stark example of how even the best companies make difficult strategic decisions when customer interests collide with a chosen strategy.
Have you faced such a decision? How have you handled it?