Tweet

Product Differentiation: "A Success Story"

Guest post by: Edward Abel

Article Overview: Just how did Howard Schultz pull of selling a cup of coffee for $3 to millions and millions of people?

Product Differentiation: "A Success Story"

In 1983, Howard Schultz was inspired to buy the Starbucks Coffee Company, and according to his book Pour Your Heart into It¸ this occurred because of a cup of watered-down, bland instant coffee that he was served on a flight to Canada. On that flight, he was inspired to bring a European-caliber appreciation for coffee to the United States. Prior to the arrival of Starbucks, many Americans had never heard or, let alone tasted cappuccinos, lattes, and espresso. However, the price to maintain such pristine coffee houses would prove to be very costly - Schultz would never be able to charge $3.00 for a cup of premium coffee while a gas station was charging $.75 for a cup of coffee. Yet, he was convinced that if he could introduce the United States to a "coffee culture", his new company would become one of the most recognized brands in the world. Schultz opened up Starbuck's coffee houses that were furnished to look like a combination of a living room and a reading room. The soft lamps and the plush décor were more than inviting. The menu suggested that one needed to be sophisticated to order coffee from there; he introduced new terms and concepts just for ordering coffee. The baristas (Starbucks employees) educated their customers about coffee in a brand new and passionate light. Rather than purchasing a Styrofoam cup of bland coffee from a gas station, coffee purchases became personal and social experiences.

Schultz's main goal was to have his employees forge relationships with his customers through education, while creating real personal relationships with them. Soon enough, "Community Activity" boards hung in Starbucks - Community and town meetings were consistently being held in local Starbucks. Beyond that, the baristas were asked to memorize the drinks that the "usuals" ordered, and believe it or not, baristas are oftentimes requested by certain customers to personally make their drink.

Ultimately, the inflated price of the coffee was dwarfed by the intimate and extraordinary experience provided by Starbucks; thousands of newfound coffee connoisseurs vowed to never buy coffee anywhere else.

Is Starbucks' coffee really better than anywhere else that sells coffee? You'll hear mixed answers should you pose that question. However, the answer to the question itself is irrelevant - Howard Schultz is a master of product differentiation. He chooses to layer his product in a package of multiple benefits that make the customers feel both tied AND loyal to Starbucks. He became so well-versed in coffee culture, that the difference between his company and his competition was more than obvious; Starbucks was the new synonym for coffee.

Howard Schultz didn't reinvent the wheel. Though many people enjoy his coffee, there are many other people who believe that coffee from Dunkin' Donuts is just as good (if not better). However, the customer service and customer relations truly separate Starbucks from its competitors.

Related Articles
  The Fear of Differentiation
  Differentiation is the Key
  The Science of Differentiation
  How to Expand Your Referral Base
  Differentiation – Smart Marketing Strategies for the Solo Entrepreneur

Article Tags: business coach, business coaching, business consultant, business owner, business owners, business training, entrepreneur, ideas for small business, opening a start how to business plan



Related Forum Posts
Re: THE SECRET TO SUCCESS IS ALL IN YOUR HEAD...RIGHT NOW!!! - Success = Thinking (Head) + Heart (Feeling / Interest) + Hand (doing/ action). Success - H3 Robert
Re: What Do You Outsource Mostly? - When building a New Product, I do find it helpful to outsource marketing (articles - blogging - major social network site etc) Otherwise, you may feel bogged down when you should be focused on the overall BIG PICTURE.
Show the Benefits - Offer a free test drive of the Product or Service with a Money Back Guarantee - Take the Risk out. This will help them make the decision but you have to work with them to realize it by explicitly state the benefits they are receiving.
Offer Credit instead - I'm not sure if ChrisH was referring to this but i'll state it more expicitly .. Charge upfront and offer a refund of double the value back in "Credit" towards your Product or Service you have for sale at the end of the event.
Re: what position to request? - What do you think of: Executive Manager? Director of Product Management? I am not interested in working as a freelancer. As I mentioned, the purpose of what I am doing is to get involved into a startup that may become successful in the future. This is a situation when a group of people get together to launch something promising and invest into this their time and energy and even may be money.


Share this article with your friends. Fund someone's dream.

Leave a comment below or share on the left and you'll help support entrepreneurs in Africa through our partnership with Kiva. Over $50,000 raised and counting - Please keep sharing! Learn more.

Tweet

Newsletter

Get advice & tips from famous business
owners, new articles by entrepreneur
experts, my latest website updates, &
special sneak peaks at what's to come!

Name:
Email:

Popular Articles

The Value of Small Businesses

In the Year 2020 . . . Process

How To Be A Management Legend

Suggestions

Email us your ideas on how to make our
website more valuable! Thank you Sharon
from Toronto Salsa Lessons / Classes for
your suggestions to make the newsletter
look like the website and profile younger
entrepreneurs like Jennifer Lopez.