A short business story for you about the growth of Starbucks.
We can learn a lot from Howard’s business journey, his dedication and resilience, and also the belief he had in selling the experience to his customers.
However, the Starbucks story could have been very different if Howard hadn’t taken action in 2009 to turn its fortunes around.
Here are the highlights:
{01.45} Howard Schultz
{02:31} How it all started
{08:42} Name on the cup
{13:57} Closing every store in America
{15:52} What we can learn
About Symco Training:
Symco Training was founded in 2000 by Simon Bowkett and it was his belief that the business had to offer its clients something different. That difference was clear to Simon from his days in the dealership when he experienced many sales trainers who had all the answers, but were unable, unwilling or both to actually show the delegate how they could be implemented. It remains the ethos of the business today. You see, Symco only employ trainers that are committed to delivering not only in spiring and insightful training, but are equally as happy to demonstrate these skills and techniques with real customers in your own showroom. We believe in order for sales training to be effective and in Simon’s words ‘real world’, it needs to be tried and tested in the only place it matters the showroom floor. There is no room for theory when your goals are for your team to sell more cars, hours or parts and retain more profit. In dealerships around the world the focus applied by many of the sales executives is to try and sell a deal. Symco specialise in getting your teams to focus on selling themselves, the product and then supporting this with the deal.
To find out more visit
www.symcotraining.co.uk
Welcome to the Selling and the Motor Trade Podcast, an association with Symco Training. This is the weekly podcast where we share best practice tips and ideas on how to sell more cars, improve your service department and generally put more profit into your dealership or dealer group. I'm your host, Simon Bowkett. As some of you probably already know me as Skippy, I will start by saying thank you for taking the time to listen to this podcast. Do you have an appetite for an open sales training program? You see, we normally run our sales training programs for dealer groups or manufacturers so we can get enough people in a room to make the training cost effective. But every year I get lots of people saying, oh, I've got one dealership or I've got just two dealerships, I've got three salespeople that could really go through your training program. And we're often saying, I don't know how well it's going to stack up for you. Now you have options. You could also go to Amazon and get the book Words That Sell Cars. It's a great book and we have lots of clients give that to every salesperson when they start in the industry. Of course, you could always go to our signature sales fitness training program. If you listen to our podcast, we plug that all the time. It's cost effective because it's only £299 for three months of digital online training that gives your salesperson a great start in their career. You could do that. But what is an appetite for an open physical training course? Now guys, we have to run that course interactively. It's not one of these courses where your salespeople sit there, cross an arms, just listen to it board throughout the day. It won't be death by PowerPoint. So that sounds like something you'd be interested in. Go to our website. It's simcotraining.co.uk. Look for the tab about open courses and you get all the details you need right there. Hi, welcome to another episode of Selling in the Motor Trade. It's a special request today. Someone said, can we have more of the stories, more of the business stories because this person likes to blame in the sales meeting. I'm sorry, I can't remember who requested that. I know why he said to someone, I'm in the studio today. I said, yeah, great idea. Let's do it. My apologies. I went back and have a look at my emails and I just can't find out who it was. So this is for you. So if you're sitting there listening to this and your sales manager said, that was me who requested. That was me who requested. It probably was. Okay. So my apologies, I can't remember. But this is for you. And today I want to talk to you about the story of Starbucks. Howard Schultz is the man that's largely credited or actually was for developing Starbucks everywhere. But let me tell you about how it started. It's amazing that there's things that happen in your life that really shape you. There's a couple of times in my life that's been sliding door moments where I could have gone one way or the other. And I always wonder how my life would have ended up if I didn't go down that route. But this is one for Howard Schultz. He was seven years old and his father lost his job. Apparently he damaged himself in work or something like that. Accident. He couldn't work. And they had no insurance. So very early on, he learned what it was like to be in severe poverty. So that's how Howard Schultz started. In fact, he went through school and university. He had to sell his own blood to pay for his way to get through school. I mean, that's seriously bad if you happen to sell your blood to get your way through schooling and university. But Starbucks originally started in the 70s. No, I think it was the 60s actually. A man called Gordon Boca. Now Gordon Boca went through Europe, found himself in Rome and worked out that coffee was so much better in Rome. The Italians really know how to do coffee so much better than Seattle where it was. So he thought, I like the idea of this. Let's start importing coffee beans into the American market. They called the company Starbucks because this guy apparently was a schoolteacher. And Starbucks was a character in the Moby Dick book. Now being an English teacher, he was teaching students Moby Dick at the time. So he called it Starbucks because there's always a bit of a weird name. And they were just selling coffee beans. He went back and had two other friends. So the three founders were just selling coffee beans and the Maruster machines to make your own coffee. It wasn't a coffee shop. You had to buy the beans. You had to buy the machine. Go on and build it yourself or make it yourself there. So Howard Schiltz, he was working for another company and he was a supplier to Starbucks. And I'd do it really well. Okay. Being a supplier to Starbucks, I don't know what he was selling them. Maybe it was the machines or something like that. It kind of reminds me of the McDonald's story with Ray Crock because Ray Crock was apparently selling milkshake machines. If you see the movie, the founder to the McDonald brothers. Kind of similar thing, I'm guessing that Howard Schiltz was a supplier. He thought, oh, I like this. He went to have a look at the coffee shop. I was saying coffee shop, not a coffee shop that you imagined today. And this was back in 1981. And he said, you know, I like this. This is a great idea. Come on, can I buy into Starbucks? I want to come and work for you guys. Now, the three founders said, no, no, no. Apparently he bugged these people for 12 months writing letters saying, I can see this. There's a huge opportunity here. I want to come in. I want to come in. So actually he was just an employee at the time. His parents were telling me, you're mad. What are you talking about? You got a good job where you are at the moment. What are you doing? Finally, they relented and said, Howard Schiltz is now working for Starbucks, selling coffee beans and the actual machines. But then Howard himself goes to Europe, binds himself to them, Italy. He works out that, yeah, OK, the coffee's good in Italy, but there's something else. He said, no, no, no, it's the experience is so much better. He went into a coffee shop in Rome and realized that it was theatre to the way that they made the coffee. The barista called the names of who the coffee was. In fact, the baristas knew who the actual customers were. He said, it was more of a family feel to it, OK? You could smell the coffee because the grinding of the coffee was there in the background and the whole, when you went into a coffee shop there, you could smell it. He said, right, I need to start selling the experience to the American people. That's the difference. He wasn't selling coffee. He was selling the experience. Guys, never forget, we're not selling the car. Of course we are, but we're selling the experience as well, OK? So he went along to the investor and said, right, I want to start our own coffee shops. Now these three school teachers, I think they're all school teachers actually. I was a level when I do these stories. Someone will actually contact me and say, no, there was one school teacher and one plumber or whatever it was, OK? But these guys said, no, we don't want to have our own coffee shop. We sell coffee beans. We sell the actual machines. What do we know about running a cafe? We don't want to do that, OK? And they kept us saying, no, no, no. So what did how shorts do? He said, oh, well, there's a good idea. No, he went and started his own coffee shops, OK? Now, imagine this. I can't blame the three teachers, OK? Well, the three founders we should go on, OK? Because could you imagine going on Dragon's Den back in 1981? OK, in fact, he actually bought it in 1987. That's when the deal was actually done, OK? So let's let's go through the timeline here. 1981, he wanted to join the three founders. 1985, they wouldn't do it. So he started his own shops. And two years later, he buys Starbucks. So I'll tell you about that in a second, OK? But he imagined, OK? What the founders were going through? Could you imagine now going on Dragon's Den? OK, you know, Peter Jones of Norocasian Islands, you know, all that, like, or Shark Tank, I think, they call it in America, OK? And going on and say, hello, dragons. I would like 3.8 million for my company called Starbucks. Oh, interesting name. What do you do? Starbucks is it telecommunication? Is it Hollywood? Is it movie industry? Something like that? Like Star Wars? No, no, no, no. We sell coffee. OK, tell us about your unique idea. Well, you can get coffee anywhere across Seattle for about 50 cents. I'm going to start selling coffee for about $3, maybe $4. Right. How's your coffee going to be different? Well, we'll get good beans to start with, but we're not going to have lots of different types of beans because that's too expensive, OK? Because you need a different grinder, each different beans. So we're just going to have one type of green, but bean, I should say. But we'll make people feel different because you can have a little short, strong one. We could have one with lots of milk in it. We'll have this latte, which we've never heard of over here. OK, around Christmas time, we'll put some Holly and Chite in it, make it feel Christmassy, but let's be honest, just coffee. Right. What? How else is it going to be different? OK. Well, actually, you could buy coffee at any diner across Seattle, where they have lunch and breakfast and dinner. We're going to sell just coffee, OK? Well, that people have some Christian stuff like that. That way, we can play the dumbest people we can find. People can't even spell. So we can pay a minimum wage. Clearly, I'm joking. If you worked at Starbucks, I'm only joking. OK. OK. How else is it different? OK. Now, this is only very first business plan. OK. He loved the idea that the Bristol's in Rome were calling out the people's names. I've heard these favourite sitcom at the time was Cheers. And if you're old enough to remember the sitcom called Cheers, it's start with a theme tune where everyone likes to go, wherever I know your name. He said, I believe that's true. So he said, I'm going to start writing the names on the cup. They do that not to make sure the cup gets to that customer. They write their names on the cup, OK? Because very quickly, my baristas are going to learn that's the customer. Hi, Simon. Is it the medium cup of Chino today? No, I'll go for a large there. And very quickly, people like to go, but people know their name. And also, there's something else on their very first business plan. OK. Think about the names. I use the word large there, medium, small. Starbucks don't call them that. He actually said, if I can get people going from a smaller coffee to a larger coffee, it's almost pure profit in upsell. You think about, if you go from a small medium to large, what's the customer actually buying? Hot water in a lot of cases. So he said, if I can get people to go to larger, larger sizes, OK, we're going to earn a lot more profit. And he did that by changing the names of the cups. What does Starbucks call their small coffee? You're right. It's tall. He starts with tall. What does Starbucks call their medium coffee? It's a kurunde. And what do they call their large coffee? Which, by the way, is a bucket of coffee. It's a vente. This was always very first business plan. Now, you know what, guys, I can go on for you. I'd be guilty. Probably all of us would be guilty saying, you're mad. Don't be stupid. And he went to something like 273 banks, looking for investment there. And you know what? They said they were mad as well. The three founders said he was mad. That's why he had to start his own coffee shops. But then, how did he get back in the Starbucks? A couple years after this, so it's 1987 now, the three founders want to retire. They said, OK, Howard, you can come and buy our coffee. Starbucks, a coffee business if you want. He said, brilliant. It was $3.8 million. And poor Howard didn't have any money at all. He had to go and look for investors. That's where it was. I believe it was 273 banks. It might be a little bit more, a little bit less. OK? Looking for this $3.8 million to buy Starbucks. OK? And Lawson said, you're mad. You're mad. You're mad. OK? Until he finally got in there. He went to these investors. He finally found an investor and said, oh, I like the idea of this. No, this is good. This sounds really good. He thought he was there. But the investor decided to try and cut poor Howard out of it. He went directly to the three founders. OK? And so we'll deal with you. And they came out of his own deal. OK? As you imagine, Howard was, like, really frustrated with this. He's speaking to a friend one day and telling him about all of these woes. He said, oh, you need to come in tomorrow and speak to our senior partner. He said, who's your senior partner? Bill Gates, senior. So he went in to see Bill Gates, senior. He tells the story. And Bill Gates, senior said, right, come with me. Let's go see the man. And march over and see this guy, the investor that was going to cut him out. And he turns around. Apparently, Bill Gates, senior is a tall man, six foot six or something like that. And he said, I can't believe that you're trying to cut this young man out of this deal. You should be ashamed of yourself. You back out of the deal right now, otherwise you'll have me to deal with. And the investor listened to him. Might be nice. And friends like Bill Gates, senior's, or Bill Gates father, OK, on your side there. So anyway, he buys the coffee shop. Have a listen for a timeline then, OK? So 1987, he buys it, OK? He has his own stores as well. He puts them together. And by the end of that year, they've got 17 stores. OK? So that's 1987. Go all the way through to 2008. And they're opening seven shops or stores or whatever you want to call them every single day. Think about that. Seven a day. They got 17,000 stores worldwide. He got the process right in just duplicated, duplicated, duplicated, 17,000. But what you might not know in 2009, in his own words, he said, we were struggling. We expanded far too quick. He actually said they were close to bank roughly. So within 12 months, they would have gone under. That's Starbucks. He said, because what happened is we expanded too quick. And the whole experience was watered down. So what did he do? He turned around and he said, right, let's get back in there and make sure the experience is right. He closed every single store in America. He retrained 100,000 baristas. Imagine what would that have cost them in lost revenue alone? OK? He said, we had to do it. The experience is what we had to get back to. He said, we expanded so quick. People forgot that we weren't selling coffee. We were selling the experience. We had to get back to selling the experience. So listen, if you're a car salesperson, listen to this. Remember, a few takeaways from this. For me, what I take away is the name. Using people's names is always important. Make people feel welcome. That's what happens when you go to a Starbucks. OK? And listen, go beyonds with you. I don't like your Starbucks. I think it's too bitter. OK? I love their business story. I prefer a cost of coffee if I'm brutally honest. OK? But you've got a hand of turn. Currently, I think they've got something like I think it's 30,000 stores globally there. But the next thing is they shut down the whole store. OK? Every store, sorry, in America, 100,000 people, they've retrained because he knows that training is the right way. Now, if you start at Starbucks and again, this is how, Chills, I don't know if that happens or not. If you work at Starbucks, let me know. OK? But apparently, it's 24 hours of training. That barista gets before they're led to serve a real coffee to a paying customer. Again, I don't know if that's true or not, but that's how they know the experience is right and get back to selling experience, just not coffee. Anyway, listen, it's a bit of a business story there. OK? I'd always amazed me how these companies start and what they do. But also from Howard Chills, I'm going to tell you, his dedication, he never gave up, never gave up there. Even when things were looking bad there, OK? You know, at 273 banks, he went to to find the funding, to find an investor, OK? When everyone was telling him, no, you're mad, OK? And it does sound like a mad thing, but give it to him. Hasn't he changed the white people consumed their caffeine in the morning? I used to think when I first come to the UK, OK, in 95, OK? In Australia, it was not long after our winter America thought, goodness me, they love their coffee over there. They'll never work in the UK. They'll never work in Australia, because we're more of a tea drinking nation. For goodness me, did I get that wrong? If you listen to this in Melbourne, isn't a coffee culture there? Of course it is, OK? Listen, a lot of that has probably got to do with Howard Chills. That's not the best product world, but his processes and some of the experience. Anyway, I hope you like that story. And we might do a few more of these in the future. Let us know if you like these business stories. We'll do a few and see what takeaways we can get from them. Anyway, thank you again for listening to this. Again, please subscribe to this, send this one through to the other salespeople within your dealership there. Again, this podcast keeps growing from strength to strength, and I just want to say thank you for that. That just leads me to say that all details of this episode and other episodes on the selling in the Motor Trade can be found on our website, simcotraining.co.uk. Go there to get a copy of our book, Words That Sell Cars. Go there to sign up to a free trial of our sales fitness online sales training program. Easiest way to get hold of me is Simon Bowkett, food link to it. Thank you.
