Posted by: Chris | January 10, 2008

When Commodities Compete, Branded Service is the Key

You’ve probably heard the news about how McDonald’s is competing directly with Starbucks yet again by installing full-service coffee bars in 14,000 of their locations. You may also have heard about how Starbucks is bringing Chairman Howard Schultz back to take over the CEO role, recently “vacated” by Jim Donald. If you haven’t heard this, let me catch you up:

McDonald’s is competing directly with Starbucks yet again by installing full-service coffee bars in 14,000 of their locations, and Starbucks is bringing Chairman Howard Schultz back to take over the CEO role, recently “vacated” by Jim Donald.

In a recent blog post, Danielle Blumenthal comments on the good and bad of McDonalds’ latest attack. Her “bad” was, I felt, particularly insightful: “it shows how commoditized the Starbucks experience is.”

So, how does one win such a competition? Well, in a commodity service, it all comes down to FLSE’s. It’s been a while since I’ve blogged, so just as a reminder, FLSE stands for Front Line Service Employee. (No, I still have not come up with anything more catchy than that.) If the products are essentially the same, the convenience is essentially the same, and the prices are essentially the same, there’s not a whole lot left on the battlefield. Differentiation must come through the most dynamic (both literally and suggestively) asset: the people who make direct contact with the customer. For the long version, read my paper on Services Marketing and the Branded Service Employee-yes, unabashed self-promotion. Or check out a book I recently started reading entitled Why Is Everyone Smiling? by Bob Spiegelman of Beryl. (Awesome book-surely more coming about it soon.)

I think Starbucks already has this in the bag, and I think that Schultz’s return will guarantee the results. Remember his Jerry Maguire-esque memo from last year in which he expressed concerns over losing the “romance and theatre” of the experience and, even more important in such a commodity service, the “intimate experience with the barista”? These concerns, which were not particularly well-received at the time, are what set one commodity service apart from another, liberating the service from commodity status altogether. And while I can appreciate what McDonald’s is attempting in their service and HR model, I’m not convinced of its efficacy. Starbucks on the other hand is already in the business of differentiated service. I believe that Schultz’s return will only reinforce this model, and will, in the end, win this latest battle and perhaps even lead to the “rebranding” of Starbucks altogether, effectively moving the company into what Blumenthal calls “the ultimate, uncopyable “third space” that is suited for the way we live now.” Should be interesting to see what happens.

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Responses

  1. Although McDonalds & Starbucks may be selling a similar product, their are rarely any little children (expect maybe in a stroller) in the Starbucks. McDonalds on the other hand, has hard plastic seats nailed to the floor to keep the kids from moving the chairs all over the place.

    I think it’s more than the first line service people. I think it’s the couch/chair/table vs the plastic booth & metal chair set up that lends itself to a more intimate conversation. At McDonald’s everything echoes.


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