Grinds Coffee & Tea House, Capitola, CA,
originally uploaded by Larry Cornett.

I have talked about the commoditization of the coffee business before. You can certainly get a good cup of coffee (or name your favorite coffee drink) at many of the coffee houses that sprang up over the past decade. So, when “quality” is no longer the differentiator that it once was, what is a coffee house owner to do? Well, as many industries are discovering, you start focusing on differentiating through the consumer experience.

I visit Santa Cruz, CA occasionally on the weekend when I need a break from Silicon Valley. For those of you who have spent time there, you know what I mean. Each time I am in the area, I go out of my way to visit the Grinds Coffee & Tea House in Capitola. Sure, I could just as easily hit Starbucks. There are at least five in that area. But, I don’t. Why? Because I’m in Santa Cruz and Santa Cruz has a very specific culture and context.

Grinds is a Santa Cruz experience. It is a bit quirky with the bright green exterior, but very authentic, unique, and pleasant inside. It is a treat to go there and get whatever coffee you want made fresh by the cup. Grinds is a differentiated experience and it certainly fits the Santa Cruz context.

Yes, there are economies of scale in providing the same menu and even interior decorating when you are a global business. And, yes, you will attract customers who want “the comfort of the same.” But, increasingly, consumers are starting to tire of the McDonald’s-Walmart-Starbucks effect and want to experience something unique, something new, something with “local flavor.” Sites like Etsy are yet more proof that the pendulum is starting to swing back.

Sunset in Santorini,
originally uploaded by Larry Cornett.

So many of us love a cup of coffee in our favorite cafe, but I don’t think many would call that a “transformational experience”. However, having a cup of coffee in a small cafe on the edge of the caldera at sunset in Santorini? Yes, a transformational experience that created a memory that I will never forget. What price do you put on such a cup of coffee?

The book “The Experience Economy” briefly mentions a key example that helps explain how a simple good can be economically transformed into an experience for which a customer is willing to pay one thousand times more. The following table outlines this transformation for the simple coffee bean.

We all know that a cup of coffee prepared at home is much, much cheaper than buying a coffee drink at your favorite cafe. Yet, every day so many of us are willing to stand in long lines and pay much more to have that drink prepared for us. Why? In some cases, it is for the service. Replicating the perfect cappuccino at home is no easy task. However, often people are seeking the experience provided by having that cappuccino in the cafe atmosphere. Enjoying the music, watching people, and meeting new friends are all part of the experience you quite willingly pay for.

Starbucks certainly understands this and that has been a key component of their amazing success. In the book “The Starbucks Experience” Joseph Michelli describes 5 key principles for creating a business that delivers an extraordinary experience for its customers:

1. Make it your own
2. Everything matters
3. Surprise and delight
4. Embrace resistance
5. Leave your mark

On page 11 there is a section that captures how important they realized a holistic experience was in converting a loyal customer:

“…the ambience of the store must be inviting; the store must be a place where a person will feel comfortable hanging out alone or with friends. This setting, often reffered to by Starbucks partners as the ‘third place,’ must capture a unique warmth that sets it apart from the first two places in most people’s lives: work and home.”

Consistently offering customers positive (and sometimes even transformational) experiences has been a big part of what makes Starbucks work. Even if you aren’t a fan of the chain, you have to admit they have had phenomenal global success. They get it.