Friday, April 15, 2022

Starbucks Stumbles Understanding the Lifetime Value of Employees and Customers


It is at the intersection of brand development and brand growth the food industry leaders need to pay attention to the blance of employees and customers.  Steven Johnson, Grocerant Guru® at Tacoma, WA based Foodservice Solutions®, stated, “Starbucks once a leader in employees and customer messaging now looks more like a company wanting to go backward rather than forward.”

Starbucks once read the pulse of its employees better than any company within the retail food space. Longing for a bygone era, the new Interim CEO of Starbucks, new tone is to punish, punitive, and pushing employees backward, reinforcing all the foodservice employer / employees stereotypes he spent decades bemoaning.    

The team at Foodservice Solutions® recommends that the Interim Starbucks CEO leave the office, spend 6 weeks in Buffalo, NY paying rent, power & water, phone, cable on 36 hours a week at any Coffee shop.  After 6 weeks with no extra money to spend he just might have some valued insights to share with the leadership of his company. 

Hiring lawyers, sending out PR that is example of what at one time he had distain for does not reflect the actions of a leader for today, rather it reflects what once was bad, and continues to be a bad example, bad for the industry, and bad for the future of Starbucks.  Has your company lost touch with its employees and customers?

All grocerant niche Ready-2-Eat and Heat-N-Eat fresh food retailers should strive to know their customer lifetime value (CLV), a metric that is immensely useful as it can help businesses predict how much customers are likely to spend in the future, and can help them make informed decisions regarding customer acquisition and retention. The same holds true for employee lifetime value (ELV).

It is at the intersection of ELV and CLV that success begins.  It’s that intersection enables businesses to understand customers as individuals, and employees as assets, not just as a broad group. The difference may seem small, but is significant. A customer who buys coffee twice a week is "fundamentally different" than an every-two-weeks coffee buyer, an employee that services that customer twice a week is "fundamentally different".    

In a new report Jessica Shelcusky, a marketing specialist with Paytronix Systems Inc., The old-school, basic CLV calculation is average spend per customer per year multiplied by the number of years before the customer churns. However, this is a very general method that is not totally accurate and can't be used for everyone.

"We know not all customers are created equal," Sheculsky said, noting that one customer may visit once a week, while another will only come in when they are lured by a coupon.

Artificial intelligence (AI) can be used to calculate CLV and understand a customer's habits much more accurately, particularly as part of a loyalty program.

The use of "AI to IA" predictive insights — artificial intelligence to individual actions — can estimate an individual customer's likelihood to interact with a brand, when they make a store visit, when they don't, what day of the week is better for them to receive a loyalty program message, and much more. Building out such profiles is part of understanding their lifetime value, Sheculsky said. 

AI can also calculate specific, important aspects of someone's CLV, including:

·         Recency: How long has the person been in the loyalty program?

·         Frequency: What does the average visit cadence look like?

·         Latency: When was the most recent visit?

·         Spend: How much do they spend, on average, per visit?

·         Predicted future value: How long is this person likely to remain active?

After building a customer's profile using these factors, retailers can plan for how best to communicate with them and motivate them to come back for another visit.

In a Battle for Share of Stomach

Do you look more like

Yesterday or Tomorrow 

"The more data we have on a consumer, the more accurate we can be when calculating their lifetime value," said Shelcusky.

In general, the ratio of CLV to the cost to acquire that customer should be around 3:1. But even if a business sets a different target, the ratio is a good way of understanding their marketing spend. Once a baseline is established, there are a number of ways to use CLV to achieve better programs. Retailers can identify their most valuable customers, see what it takes to increase the CLV of lower-value customers, effectively segment customers into groups for future campaigns, optimize acquisitions, and realize lift.

Another potential benefit of CLV is reducing the cost to acquire a customer. According to Sheculsky, there are three key ways to achieve this: 

1.       Retaining customers longer: Customers can be retained longer and turned from lapsed customers into current ones through targeted 1:1 win-back campaigns based on their profiles. For example, AI can calculate three dates for the base time to reach out to them based on their demographics and specific past behavior.

2.       Reducing media/advertising expenses: Media/advertising spend can be reduced by using loyalty intelligence to inform media buys and identify those customers who are most likely to make a store visit.

3.       Reduce fees associated with third-party marketplaces: Retailers that know more about their customers and have the right data can push first-party ordering, especially if they offer a smooth online ordering experience.

The same hold true for employees.  Think about looking forward, don’t hold onto yesterday to long.

Foodservice Solutions® team is here to help you drive top line sales and bottom-line profits. Are you looking a customer ahead? Does your messaging look more like yesterday that tomorrow?  Visit for more information or contact: Remember success does leave clues and we just may the clue you need to propel your continued success.

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