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Selling an experience
Since the company opened its first store in Seattle USA, Starbucks has been very clear that its all about selling an experience and not just a cup of coffee. The company defined the Starbucks store as "a third place between home and work." A third place where you hang out, where you spend quality time with friends - of course over a cup of coffee.
Stores were designed around the third place concept to create the image of an upscale coffee bar. Light wood, glass and chrome were used in the interiors while upholstered chairs and sofas, hard-backed chairs around tables created an ambiance of functional, upscale comfort. The combination of upscale and comfort design captured the essence of the third place concept and welcomed customers to hang out. The store offered free outlets for customers to plug in their laptops, free Wi-Fi was also available.
In addition to the design, the company was also focused on offering premium coffee to its consumers. Employees were discouraged from wearing strong perfumes that might interfere with the aroma of coffee and most stores were non-smoking. The company also focused on choosing darker coffee roasts that had a strong coffee flavour and was easier to maintain consistency. To quell any concerns of ethics-oriented consumers, the company became one of the biggest buyers of Fair-trade certified coffee.
The company focused on training its employees to give a personalized service to customers. The company's training focused not only on product information but also creating good customer relations and the basic principles of success and empowerment strategies. Employees were encouraged to find out consumer needs and respond on a personal level when feasible. With a corporate culture that called its employees partners, and gave generous stock options to all employees, it was able to create a corporation where employees also felt invested in the success or failure of the company. The company trained its staff (partners) to "embrace resistence" - to convert negative feedback from customers into ways to improve and strengthen the business. Beyond the workplace, employees were encouraged to get involved in the community. This corporate culture resulted in a staff turnover that was significantly lower than industry average and helped Starbucks deliver on a personalized service and offer premium coffee.
An eye to detail on every aspect of the customer's experience is what makes a cup of coffee at Starbucks worth it for millions of consumers across the world including India - never mind that you are paying many times more for the same brew that is served in more humble surroundings.
When Starbucks tripped
With the success of Starbucks stores in the stores, the company expanded across the globe. However, not all locations were success stories. In mid-2008, the company was forced to 61 of 84 stores in Australia. Why weren't they able to duplicate the success they had elsewhere?
Unlike other countries where the brand had expanded its footprint, Australia had a thriving cafe culture well before Starbucks entered the market. The company did not recognize the market dynamics and understand that Australian customers had plenty of cafe options to go to. There was a lack of focus as the company tried to grab all customer segments instead of identifying customers and targeting those who would be willing to pay a premium. Rather than spending on advertising, the company relied on the brand to bring customers to the door but many Australians did not put a value to the Starbucks brand. With the customers that trickled into the stores, there was pressure on staff to sell more. Employees were forced to compromise on personalized service and the stores lost their distinguishing edge that separated them from other cafes. As a result, Australian consumers could not understand why they had to pay a premium at Starbucks for a cup of coffee when they could get a nice cup of coffee in a regular-priced cafe as well.
Selling a mutual fund or an investing experience?
AMCs offering direct plans sell mutual funds. E-commerce platforms in due course will also sell mutual funds. IFAs on the other hand sell an investing experience. Your job as an IFA is really help investors distinguish between selling mutual funds and offering an investing experience. You will find some who simply want to buy mutual funds, you will find many who value a holistic investment experience that you offer.
When you promise a holistic investment experience, you need to ensure that clients actually experience it - just as consumers around the world experience when they go to Starbucks. When you say you only do goal based planning - ensure that you live by that promise. When you say that you will regularly track and rebalance client portfolio, live up to that promise every single time. When you say you will proactively communicate with clients whenever markets move sharply either way, ensure you do that each time. When you say that your biggest value lies in ensuring that clients don't make investment blunders acting out of greed or fear, ensure that you actually engage with clients continuously to deliver on this promise. When you say that all service requests will be turned around in 48 hours, deliver on the promise, every time. When you say that a tax folder will be proactively mailed to the client's CA by 15th of April each year, do it.
And of course, very importantly, please let your prospects and clients know upfront what you are promising. Let them know exactly what is the investing experience that you offer. Let them know the difference between buying mutual funds and availing a holistic investing experience.
One sobering thought though: what Starbuck's Australia experience suggests is that when you get into expansion mode, ensure that the personal touch of the investment experience that is central to your proposition is not lost in your haste to build volumes. When the experience is unsatisfactory, the price looks high. You are not in this business as a price warrior. You are not competing on price - you are competing on the value proposition. You are not selling mutual funds - you are offering a holistic investment experience. The "price conscious" Indian consumer is actually "value conscious" - show her value and she pays the price for it. Trip up on value and she will look for the best bargain in the market.
All content in Marketing Wiz is created by Wealth Forum and should not be construed as views of Kotak MF.
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