Tag Archives: customer retention

Starbucks Lean #2

From our search engine stats I can see that there is considerable interest in the lean programme at Starbucks. We wrote about it back here in our Starbucks Lean Improvement post and this one on Lean:Crossing the Atlantic with your Coffee and we could spend a lot more time writing and trying to understand the application and implementation of lean in Starbucks US, from over here in the UK.

However there are people closer to it, who “see” the reality on their visits to the stores, so if you are looking for insight on the latest lean thinking at Starbucks then can we recommend that you visit this page http://www.leanblog.org/2010/09/controversy-over-new-standardized-work-at-some-starbucks-stores/

Over at the Lean Blog, Mark Graban takes comments on the lean implementation from the Starbucks Gossip website and puts them into perspective, which can be afforded by an experienced lean practitioner.

So if you are looking for a good source of lean stories and the progress at Starbucks, you would be well advised to visit the Lean Blog and have a search around.

Does anyone know if Lean at Starbucks has landed on these shores yet? or when it is due?


Starbucks Lean Improvements

In case you missed it Starbucks claimed a TRIPLING of Profits and a DRAMATIC surge in customer satisfaction in recent weeks by using LEAN THINKING, but what exactly did they do?

According to this Lean Japanese Techniques story in The Wall Street Journal, they

  • Saved between 20 and 33% of the processing time in making coffee, which meant customers get a faster service
  • Used some of the time saved to engage with customers, driving customer satisfaction from 56 to 76%, in the branch cited.
  • Re-engineered deliveries to the stores to cut down on the 40 or so trips some staff had to make back and forth with early morning deliveries
  • Stopped making large batches of coffee grinds in the morning and now make batches every 8 minutes to keep the grinds fresh and the aroma wafting through the store
  • Used 5S techniques of layout and colour coding to ensure everything is to hand.

Showing you don’t have to cut go out and just costs with Lean,  you can use the freed up time to engage with customers and other techniques can be employed to ensure customers can get what they want.




About the Author;

Mark Greenhouse has been working on the application of Lean management in Legal and design led Manufacturing companies for the past 5 years. His own Lean journey started back in 1988 when he started study of Production Engineering. He’s applied lean in many organisation types, finance, call centres, banking, FMCG etc. Mark also provides lectures on operational management at Leeds University Business School.

Lean: Crossing the Atlantic with your Coffee?

Read the stories in the UK today about the latest Starbucks results and you’d be forgiven for having no idea that they are running a Lean Thinking improvement programme.

Starbucks managed to TRIPLE their profits, whilst increasing dramatically their Customer Satisfaction, so not a bad result by any measure, I’m sure you’ll agree.

The BBC claimed ” The firm has cut thousands of jobs and shut hundreds of under-performing stores over the past two years to trim costs”,  whilst The Guardian reported “When he [Howard Schultz] retook control, he checked the company’s breakneck expansion, took out almost $600m in costs, closed nearly 1,000 stores, mainly in the US, and shut up shop for a day to retrain its legions of workers.”.

I would say blink and you’d miss any reference to Lean, only there aren’t any, not in anything I’ve read, heard or seen today.

Type “Starbucks Lean” into Google news and you get exactly 1 Hit (22.30 GMT 21/01/10), maybe this blog will make it two?

We looked for references to lean as we wrote this post Barista to Fashionista  back in May, when we learnt of Starbucks foray in to Lean Thinking, and we were intrigued to find out what effect it had on their results.

Go to the Starbucks Earning Call and the fuller story comes out.

Troy Alstead, CFO, claimed that “US store operating expenses were 36.6% of total revenues, a 350 basis point improvement over last year primarily driven by the continued application of lean principles in our store operating model plus the effect of company operated store closures.” So admittedly not Lean on its own but the improvement is hardly just due to cost cutting and store closures. Note it was the CFO talking about it too, how refreshing is that?

Howard Schultz, Chairman of the Board, President & Chief Executive Officer and Founder, commenting on what Starbucks will do in their international markets ” Now that the US business has come back the way it is and we feel it is healthy and on solid ground we’re doing two things, one is we’re doing a comprehensive audit of all the things that we did in the US business that worked, that got our customers back, that put lean in our store and things that not only were consumer facing but also behind the customer as well…..a store, is a store, is a store and we believe that we can provide many of the opportunities throughout international that we brought to the US business.” So Starbucks are convinced that lean is part of their future in the US and Internationally.

Howard Schultz also commented on the vast improvement in Customer Satisfaction “I will point out here that we improved labor management and labor costs in our stores over the past year at the same time we have seen a dramatic improvement in customer satisfaction scores.” Now I can’t be certain but I’m not sure that closing stores improves Customer Satisfaction scores or that traditional cost cutting programmes often lead to improved Customer Satisfaction and as Lean is the improvement project Starbucks refer to then I’d chance a guess that it was Lean that drove up the Customer Satisfaction. Our experience at ResQ tells us that this often happens, along with all the other benefits. (faster customer service, order delivery, higher levels of output, improved quality, increasing employee engagement etc)

So if you’re a Starbucks employee or customer outside the US then it looks like Lean is coming to a store near you and you’ve nothing to be afraid of and if you’re a competitor, how could you TRIPLE your profits and improve customer satisfaction…………?

If you have any comments or questions on the blog above then please fill in the box or drop me a line

mark.greenhouse@resqmr.co.uk or check our website www.resqmr.co.uk



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How to disappoint potential customers and increase waste – an everyday occurance!

Imagine you “buy” something for £200-300 for delivery on a specific date and you start to arrange other parts of your life around it, only to be told later “you can’t have it on that day, you’ll have to choose another” – how wasteful is that and how would you feel as the customer? 

Last week I booked my car in for its’ annual service. I booked it in with a national company and used their on-line booking service, I could have used the freephone number to contact the call centre, called the service workshop directly or even called at the garage in as I often pass by once a week.

Nonetheless I used the on-line service and I was curious when it didn’t give me a time for the service but asked me to bring the car at 8.30am and that I’d be told what time to pick it up then.

I feared I would be part of some large batch of customers all signing their cars in at 8.30 and early on this morning I wasn’t disappointed! I wasn’t surprised either when they couldn’t tell me when the car would be ready.

However when I booked on the Internet I specified what needed doing, the mileage, the registration etc and this was all on a nice neat form in the office. 

The guy booking in my car then had to transfer the details from the Internet booking systems on to a single sheet they use when carrying out the service, so I enquired why? he didn’t need anymore details than I had provided. 

Apparently the Internet system wouldn’t print out the sheets they needed, it never had done and so time was wasted transferring details to the sheets they actually use during the service.

I commented on how wasteful that must be every morning, at which point you may recognise the story; particularly if you’re a Lean practitioner, you start to get all the other problems. I was lucky! the Internet service and the call centre can’t see the diary for the garage so they have a set number of slots to book each day and give each one an 8.30am booking.

The branch staff however are busy servicing cars during the day, as well as booking in the direct phone-ins and the walk-in customers, only when they get a chance to go back to the office do they book in the Internet and the call centre customers for their slots in future days. Many times they find that the Internet and call centre have accepted customers for which there are no slots left and so the garage staff have to waste time ringing up customers who need to spend £200-300 gb pounds with them to move them to another date. You can imagine how that is met by some customers!

So to test this I was told in the garage their next available MOT (compulsory annual vehicle check in the UK) is next Thursday the 20th August. So I go online at midday today (12th August) and the internet will let me “book” an MOT on Monday the 17th August – why? there are no spaces left, the garage staff told me and how many potential customers will go on-line to make a booking for Monday to Wednesday next week and have to receive a phone call telling them they can’t have the date the internet part of the business said was free.

  • Why do companies let this happen?
  • Why do they let the waste of repeated form filling occur?
  • Why do they let the customers waste time booking appointments that they can’t keep?
  • Why do they let the first conversation between the service staff  and the customers, start off  “I’m sorry but……”

Maybe in this case, the car servicing companies feel that in this current recession, with car sales still depressed, many of us are electing to run cars for longer and therefore the need (not desire) for car servicing will grow.

They and their competitors will increase the volume of work and the revenues (the longer I keep my car the more expensive the servicing gets,  I find) they collect, they will prosper and they can just pass the costs of the hidden wastes on to the consumers. 

  • Was my original internet booking date changed? no but it could have been
  • Was I annoyed by the delay at 8.30? no  I expected a batching queue
  • Was I disappointed to find that they didn’t know what time my car would be ready? no I expected it

I’d planned my day around dropping the car off and being in my office sometime after 9 and that I should get my car back sometime after 5, I just lowered my expectations of the level of customer service.

Can I go anywhere and get better service? sadly experience means I’m not sure

Do you REALLY listen?

Do you listen to the Voice of Your Customers? I mean really listen, not just to what they say but what they do and how it affects your business?

Could listening to the Voice Of the Customer (VOC) have saved a UK bank?

Back in autumn 2008, we highlighted the story of Norwich Union (Aviva, if you watch the adverts or are based anywhere outside the UK) who had just started a car insurance marketing campaign which we felt was a really good example of Lean Marketing.


NU (Norwich Union) offered to give its potential customers a quote for car insurance and at the same time it would give prices from its competitors (using web technology) even if they were cheaper.


We hypothesised that NU was testing similar work to that we talk about in Lean Marketing, in which we talk of Customer Value & Loyalty being built on three core foundations;

  1. Features & Benefits – what is it about your product/service that are the hygiene factors? what sets your product/service apart from the competitors?
  2. Brand – what does the brand say about how you’ll treat me as a customer? in these credit-crunch days, how much confidence do I have you’ll be here next year?
  3. Price – often “quoted” as the single reason customers buy from a company however it’s rarely the biggest reason!! (try testing people by asking what their competitors charge – if it’s that important surely they’d know?)

These foundations impact on the value customers place on the total package they receive and on their loyalty, the exact nature of the impact varies, depending on the industry. However we believe NU was saying if you value our Features and Benefits, trust our Brand then our Price is less important and we don’t have to be the cheapest in the market.

I can hear almost what you saying “but they’ll have lost potential customers”.

Almost certainly they have; there are consumers out there who buy the cheapest, but exactly what have NU lost?

Potential customers who were basing their purchase solely on price, so what would happen at the renewal of their insurance? they’d look for the cheapest supplier again. So NU would have invested (marketing & sales) resources in acquiring a customer, incurred costs setting up their details (operational resources), sending out policy document and packs (distribution resources) only to have that customer looking to leave after one year. This type of customer is probably less likely to have bought anything else from NU, the price was their largest consideration.

Contrast this with the customers they may get on their book with Lean Marketing? they are not so readily driven by price, these customers are also placing more value on the Features & Benefits and Brand offered by NU. So again a hypothesis, these customers are probably more likely to buy other products (cross sales) and more likely to stay with the company when it comes to renewal.

Result: the organisation removes one of the “7 Hidden Wastes of Marketing” – the waste of attracting customers who only buy one product once based purely on price! There is always someone else waiting with bigger and deeper pockets ready to compete on price.

Does it work?

Well the advert appeared to run for a couple of months, in Autumn 2008 and then stopped, now it is back and running again, a classic direct marketing test you could say.

We are summarising that the fact that it is back and running is because it worked;

  1. customers acquired by Norwich Union have proved to be more robust, less likely to cancel!
  2. more likely to purchase other Norwich Union products.

we can’t say that they are more likely to renew, the advert appears to have only been running for 7 months so far, we’ll know if this strategy stays past Oct/Nov later this year.

You may have also noticed that the UK price comparison (moneysupermarket, gocompare, confused.com etc) websites have started introducing new features that compare the product features and allow for feedback on customer experience (of the brand) – have they too realised that not everyone buys on price alone?

So could this help anyone else? even have saved a UK Bank?

Back in in 2006/07 HBOS (now part of Lloyds Banking Group) implemented a new mortgage strategy, prior to whch they commanded 21% of the new mortgage market. The strategy which was simple and not too dissimilar to NU’s, was that HBOS would no longer offer potential and existing customers different mortgages @ different prices.  There would be one group of prices and they would be priced to maintain a reasonable margin for the bank.

(In the UK most lenders had a policy of offering new customers introductory rates to entice them in these would rise at the end of a fixed period – though you could move and re-mortgage as a new customer rate with another lender.)

So what was the result? The HBOS share of the new mortgage market dropped 8% from 21% – or a 62% reduction – in a six month period. Other lenders retained their policy of offering great deals to new customers. HBOS on the other hand was offering not so great deals to new customers but offering better deals to its’ own customers coming to the end of their existing deal – to try and improve customer retention.

What were potential and new customers telling HBOS? over half (62%) of the customers HBOS could have expected to sell to, went elsewhere. Was it that

  1. The features and benefits of the mortgage weren’t compelling enough over those of it’s rivals?
  2. The brand wasn’t strong enough to convince these people to come to the company?
  3. Price became the primary factor in the decision making process – effectively customers saying “We’re that strapped for cash we need to watch every penny?”

This last one I find interesting – was it the first warning sign of the economic health of HBOS customers or even the housing market and economy in general?

It certainly should have highlighted that 62% of the customers on the existing mortgage book might not be interested in other products (cross-selling), they might only have bought on price alone. Or highlighted that the branding work and the features and benefits of the HBOS mortgages were not regarded as positively different enough by over half the market – the same conclusion could be drawn about the competitors. Remember these customers came to HBOS prior to their pricing changes.

Did HBOS listen? We’ve no idea, the only articles in the public domain talk of corrective pricing strategies that reversed the previous strategy and boosted their share of new mortgages back up to the 15-20% band.

Maybe HBOS did consider what their customers (existing and potential) were telling them, maybe they changed their features and benefits, maybe they changed their branding work, we’ve no evidence, they never said, maybe they considered all this and dismissed it.

Maybe they considered the shareholder customers above those who bought the product and services. (The share price dropped when HBOS admitted that their share of the mortgage market had dropped.)

If you realised that 62% of your market were

  • in financial difficulties
  • couldn’t discern product differences between providers
  • didn’t believe your brand offered a different experience?

What would you do differently?Listen, ask more questions, change what you do, stay doing the same, get out (let someone esle take the risk)…..

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