CX Stories

Starbucks Could Have Avoided Losing $20 Million, And So Can You

The leaders of Starbucks, the world’s favorite coffeehouse chain, have often encouraged their customers to consider the outlets to be a “third place” – a place where people spend their time outside of homes and offices: a perfect hangout spot.

However, a video released in April 2018 invoked myriad emotions in people, making them not wanting to visit a nearby Starbucks any time soon; some were infuriated, some were saddened, but most of them were just confused. It was a video of two African-American men being arrested at a Philadelphia Starbucks outlet.

Source: Mellisa DePino | Twitter

The entire world called it to be an act of racism. As revealed later, these gentlemen, while waiting for a friend to arrive, just wanted to use the restroom. But, the manager denied access as Starbucks’ policy is that only (paying) customers can access the restroom. And within two minutes of them having arrived at Starbucks, she called the police to report trespassing, saying they weren’t willing to purchase or leave.

Racism is a very sensitive topic and I am not going to discuss. The manager might not have intended for them to get arrested and be held in for more than 8 hours. However, having said that, I believe it was, in part, a fault from the manager’s end for reporting on two customers, who were just waiting for another person to join them. All this for a waiting time of a paltry two minutes!

Post this incident, thousands of protesters took to the streets, the stock prices went down, and Starbucks incurred a huge loss. Additionally, after the leaders at Starbucks publicly and personally apologized to the two gentlemen, they also announced that they would shut down more than 8,000 stores on May 29, 2018, to provide racial bias training for 175,000+ employees. The closure has been estimated to be a whopping $20 million in the lost sale!

Another shocking incident saw its daylight back in 2015 when another Starbucks employee had crossed the line of terrible customer service.

Source: Youtube

Post this incident, the customer, Ruby Chen was apologized to and offered a gift card worth $100. The employees who wronged the customers in both the incidents no longer work with Starbucks. But, since both of the videos went viral and spread like wildfire, recovering from such a huge sales loss and regaining the trust of the customers was a daunting task for Starbucks. It definitely impacted customer retention and loyalty, negatively impacting the sales and increasing the negative word-of-mouth.

These unfortunate situations cost Starbucks losses worth millions of dollars. I believe, if all organizations focus on the following strategies, they would avoid such untoward situations.

Hire the right employees

Studies show that nearly 82% of customers in the United States leave a company because of poor customer experience, out of which, 73% leave because the employees were rude. 78% of customers leave because of poor customer service experience and 68% deflect because of the kind of poor treatment that they receive from the organization. Imagine the impact that employees have on customer experience and customer retention of the business!

Organizations must understand and act on this at the very first step by hiring the right employees. Look for employees that are empathetic towards customers, and have the capability to deal patiently and pleasantly even in the most adverse situations.

Do not end the training period in 15 days

Every organization has a training period for its newly-recruited frontline employees. These sessions generally last for some time, ranging from a couple of days to a couple of months at the most. However, in my opinion, training should be an ongoing process. Don’t sportspersons keep training round the year to stay fit and perform better as compared to the previous year? Employees are the sportspeople of any business. Customers change, their needs change, the ways of delighting them change and the competitors always look for ways to be better than everyone else. So, to keep up with changing times, employees must always keep up with those standards and continue learning.

Empower employees to go beyond policies if required

Companies have strict policies for certain reasons, and we know that. However, if the policies act as barriers in delighting a customer, abiding by the policies must be deprioritized. Trader Joe’s has set an extraordinary example of going against the rules and delighting a customer when it decided to help an 89-year old retired World War veteran who was snowed in and could not leave his apartment to buy food supplies.

This can be achieved only if the employees are encouraged to go the extra mile for providing top-notch customer experience and creating customer loyalty, even if it means that they would need to go beyond the company’s rules occasionally.

What other lessons about customer experience can you take away from this Starbucks incident? Do let us know in the comments section.

The Washington Post
National Public Radio

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