How Starbucks Took Over the Market with Just Okay Coffee

This is something you hear in almost every business class. People are warned that if your product doesn’t stand out, it’s hard to succeed. Think about things like coffee, school supplies, or even flights. These products, called commodities, are everywhere, and there’s often not much difference between one brand and another.

It’s tough to make money in these industries. Here's why:

• Lowest Price Wins: If your product is just like everyone else's, people usually go for the cheapest option.

• Too Many Competitors: Since it's easy to sell common products, many businesses jump in, and it becomes crowded.

• No Customer Loyalty: When products look the same, people don’t feel tied to any one brand and will switch for a better deal.

• Little Room for Innovation: There's not much you can do to improve basic products like coffee or plastic straws, making it hard to stand out.

That’s why it's so interesting when a company like Starbucks dominates, despite offering just an average cup of coffee.

What Makes Coffee So Challenging?

Coffee is everywhere. Every day, over 2 billion cups are consumed globally, and about 73% of Americans drink it regularly.

Yet, it’s hard to make your coffee unique. Almost everyone uses the same beans: Arabica (mostly from Brazil) and Robusta (from Vietnam and Indonesia). So how can one coffee brand stand out when they’re all using the same ingredients?

With over 38,000 coffee shops in the U.S. alone, it’s no small feat that Starbucks has managed to rise above the rest.

How Starbucks Became the Coffee Giant

Every castle is built one brick at a time — for Starbucks, that began in 1971 with a humble Seattle coffee bean shop.

Over the next 15 years, Starbucks built its presence in Seattle, growing to six locations and introducing espresso drinks in 1986.

It wasn’t until Howard Schultz, a young entrepreneur from Brooklyn bought the company in 1987 that things really took off.

By 1992, Starbucks had grown to 140 locations across the U.S. and was ready for its IPO, valued at $271 million.

Inspired by Italy's coffee culture, Schultz wanted to create a place where people didn’t just grab coffee and leave. Instead, he envisioned a space where people could hang out, like the Italian cafes he saw during his travels.

This idea wasn’t just about the coffee—it was about creating a cozy environment where people could meet, work, or relax. And this focus on the experience, rather than the product, is what made Starbucks a massive success.

So, what did Starbucks do differently?

The answer is simple:

“Starbucks figured out that the secret to winning in a “commodity market” wasn’t just about their product—it was all about the customer experience.”

While in Italy, Howard Schultz (Starbucks CEO) noticed something different about Italian cafes. People didn’t just grab their coffee and rush out like they were in a fast checkout line. Instead, they sat with friends or their work, took their time sipping coffee, and spent hours in the cafe. These cafes weren’t just for getting food—they were places to relax and hang out.

Starbucks took this idea and created their “3rd Space” strategy.

They aimed to create a place where people would want to spend their time outside of home and work. To make this happen, Starbucks focused heavily on the atmosphere of their cafes. It wasn’t just about the quality of the coffee; it was about how the store felt, looked, and sounded. Every tiny detail mattered to them.

Here are some ways they did it:

• Employee Training: Starbucks invests heavily in training their employees. They spend more on this than on ads! As a result, Starbucks baristas tend to stay longer and give better service than workers at other coffee shops.

• Personalized Orders: At Starbucks, every order feels special. Customers can customize their drinks in countless ways, making them feel unique. Writing customers’ names on cups adds a personal touch, even when they spell it wrong—it feels like an inside joke!

• Focus on Experience: Starbucks doesn’t just care about the coffee; they care about every little detail, like how warm the coffee is, how fast orders are made, and even how loud the music is in the store.

• Welcoming Atmosphere: Starbucks cafes are designed to be comfortable, with friendly staff, free Wi-Fi, and the perfect background music. It’s a space where people want to hang out, even if they’re not buying coffee right away.

• Consistency: No matter where you are in the world, every Starbucks feels the same. This is intentional. They want customers to feel at home, no matter which store they walk into.

• The Logo Everywhere: Starbucks put their green mermaid logo on every cup, turning customers into walking billboards. Every time someone walked down the street with a Starbucks cup, it was free advertising for the brand.

Attention to the Smallest Details

More than anything else, Starbucks’ success is thanks to Howard Schultz’s focus on the tiniest details. He knew that the experience inside the store mattered just as much, if not more, than the coffee itself. Schultz believed in what Jim McKelvey, the co-founder of Square, calls an “innovation stack.”

McKelvey said that an innovation stack is a bunch of small improvements that, when combined, make a company special. For example, people thought Square’s success came from making a simple card reader that plugged into phones. But in reality, it was a bunch of little improvements that, together, made the product a game changer.

The same thing happened with Starbucks.

Other coffee shops sold coffee too, but they didn’t have the same attention to detail that Starbucks had.

Starbucks created a feeling—a place where people could relax and feel at home.

Most customers didn’t notice all the little things Starbucks did behind the scenes. They didn’t think about the fact that every store looked the same. They didn’t realize that the names on the cups made them feel special or that the music and design were carefully chosen to make the store feel comfortable. But those details mattered. They created a special experience that made customers keep coming back.

What We Can Learn from Starbucks

The big takeaway from Starbucks is simple: that last 1% matters. Howard Schultz’s intense focus on every little detail gave Starbucks the edge. Whether it’s the smell of the store, how the baristas greet you, or holding a cup with your name on it, all those small things really add up.

At the end of the day, Starbucks didn’t win because they had the best coffee. They won by creating the best experience. And that’s a lesson we can all use, whether we’re running a coffee shop or any other type of business. It’s not just about the product—it’s about how you make your customers feel.

The lesson here? Pay attention to the details. Whether your business is small or global, those little things can make you stand out. It’s that final 1% that can make all the difference.

So, the next time you sip a coffee at Starbucks, remember—it’s the little things that make the big difference.

Want more insights like this? Stay tuned for the next issue of The Beanstalk!