The Strategist

The Key Marketing Metric

Businesses that do exceptionally well are those that keep sight of their key marketing metric(s) first and foremost or ingrain it within their systems.

It's this rigid discipline of constantly measuring performance against the key metric that helps businesses outperform the competition and excel beyond expectations.

Costa Coffee vs Starbucks - An observational case study

I say the coffee at Costa Coffee tastes a little better than at Starbucks - a shared sentiment with most people I speak to. The taste has that little bit more 'oomph'. I do feel Starbucks has more variety and adventurous drinks compared to its competition - which I enjoy - but as a pure like-for-like comparison of good coffee, Costa comes out ahead. My personal opinion.

Yet, out of my last 20 visits or so to a coffee shop, I estimate two-thirds of those have been to Starbucks and only a couple to Costa.

For most of my visits, the coffee itself is secondary to the purpose of my visit. My primary purpose usually involves client/associate meetings, reading a book, freelance work or spending quality time with my wife. I rarely go for the coffee itself. For me, the coffee shop is a platform for other things.

I mostly choose Starbucks because I feel it serves my primary purpose better than others. I mostly tend to avoid Costa Coffee, because in the last 12 months, without fail, for every visit that I've made to Costa the service personnel have failed to get my order right. Every single time I specify whipped cream (on the last occasion I made a deliberate point of my request three times) - I never get it on my coffee.

I then have to go back to the staff member at the counter and explain I asked for cream and then have to go through the rigmaroll of insisting I asked for it and to be charged for it, paying the surplus charge (since I wasn't charged) and then waiting for it to be added to my Latte. All while holding up the queue behind me and being told by the staff member that they didn't realise I wanted it!

On top of that, at Costa the coffee is made right in front of my eyes. I see the messy dishes, the milk dripping, the staff member cleaning up after a spillage. Worse still, it's easy to spot when a staff member doesn't care about their work or the customer - it happens often.

It's never a pleasant customer experience.

Things have gotten so bad that I feel a pit in my stomach when deciding between Costa and somewhere else. When I do visit Costa, the thing that's always on my mind is "I wonder if they'll remember to put cream on my Latte?"

Instead of looking forward to the primary purpose of my visit, I'm affected by my worry of the cream.

This isn't an isolated incident of a poor customer experience. There are others who agree, not to mention my track record speaks for itself.

The statement in the Annual Report is of some concern to me.

‘Friendliness of staff’ is one of the highest scoring areas of customer feedback.
Whitbread PLC - Annual Report 2012

Friendly, but not organised or always motivated.

Compare this to Starbucks - I've never seen my coffee actually being made. I've never seen the mess surrounding the coffee machine as a result of serving a 100 or so drinks an hour. Even their extra supplies are cleverly tucked away in cupboards covered in corporate branding. The non-discerning customer wouldn't even realise the posters hide cupboards used for storage. It's discrete, meticulous and efficient. Not something I can say about Costa.

For this reason, my trips are mostly to Starbucks. They get my order right 99% of the time, the staff are personable enough, the coffee is good enough and the whole experience is hassle-free. I have a primary purpose when I get to Starbucks and their process 'gets out of my way'.

But what do the numbers say?

Not being in finance expert it's difficult for me to be certain that I'm interpreting the numbers correctly, but here is what the figures from the respective annual reports suggest.

Figures for UK only / Sources: Whitbread PLC Annual Report 2012 and Starbucks UK Annual Report 2012

Costa UK

Revenue: £377 Million
Total Stores in the UK: 1479 (not accounting for new stores added)

An average of £255k revenue per outlet

Starbucks UK

Revenue: £398 Million
Total stores in the UK: 760

An average of £524k revenue per outlet

I should clarify this is a very simplistic calculation as the size of the stores would vary, so would the type of location etc. But I'm trying to get to a figure of revenue per store to make the comparison as like-for-like as I can, not forgetting that there are so many other variables involved.

It's all about prioritising what creates value

It's difficult to know for certain whether Starbucks is in fact outperforming Costa Coffee on a per-store basis as I don't have enough data to make a sound judgment, but I wanted to use the case study for a simple illustration.

Both companies clearly have optimisations for different measures of what they deem to be value for their consumer.

In the case of Costa their emphasis is on the taste of the Coffee and the inviting feel of their stores. I can't be certain what Starbucks is optimising for - of course all coffee shops care about taste - but I'd say they aim for throughput. I.e. getting you to your coffee as quickly as possible.

Both congruent with my own experiences.

The fact is that you have to understand your target audience and make sure that you continue to create value for them. It's important to make the distinction between whether your customers are businesses or consumers.

For businesses, value is almost always going to be derived from how you create value for them relative to profit. For consumers it's about how you affect them psychologically or emotionally.

Of course, it's best to choose the metric that affects the largest number of people, otherwise you've targeted a very small market which just isn't good business sense.

It's hard to keep sight

Those businesses that don't perform well can be forgiven, because it's not easy to keep sight of these metrics all the time.

This is exactly why I think that Apple has plateaued because they've lost sight of what creates value for their customers within the products themselves, which I believe - as odd as it sounds - was "magic".

When Steve Jobs was around, the products were always exciting. Every product innovation seemed magical, as if it pushed the human race forward. I think that's mostly lost now. I think this is exactly what was meant by Steve Jobs when he said that

"Tim is not a product person".
Steve Jobs - See Business Insider Article and the Steve Jobs Biography

I think it's also the reason why Apple never focused on Enterprise customers and won them only as a product of market gravity, but I don't think they ever intended to go after the enteprise market since their products were optimised for creating value for the consumer. Apple's core strength was always in creating value for the individual I.e. Appealing to the psychological and emotional instincts - A metric that business customers don't judge by.

Ultimately it's about knowing which metric matters most to your target audience and optimising for it.

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Khuram Malik

Hi, my name is Khuram Malik. I am the Founder and Chief Strategist at Stratagem.io . I help Businesses and Start-Ups figure out how to get from 'here' to 'there' regards their business goals. If you'd like strategy help with your business, why not book a discovery session with us at Stratagem.io and let us help you figure out where your growth opportunities are?

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