If you’re in the working world, you’ve probably sat through a 401(k) benefits meeting and heard the spiel:

“Saving for retirement is really important. And if you just set aside a little bit per day, you won’t even feel the contributions coming out of your paycheck. For example: think about how many times you go for that morning coffee at Starbucks. Now do the math. $5 per day x 7 days a week x 52 weeks in a year…”

When it’s framed like that, it’s hard to argue that a daily Starbucks fix can add up to a pretty hefty dent in your bank account. Yet interestingly, roughly a week ago, Starbucks became the first brand to surpass the 10-million-fan mark.

From a Luxury Brand to a Listening Brand

In these tight, recessionary times, with unemployment rampant and people everywhere feeling the financial pinch, Starbucks, once an icon of edible luxury, has emerged as a winner, warming consumers’ hearts like a peppermint latte on cold winter day.

It wasn’t too long ago that Starbucks was dubbed a brand in crisis with eroding sales, rampant store closings and plummeting stock prices. But now, in August of 2010, they are firmly on the rebound and own boasting rights as part an elite group: the 10 million fan club, which includes such social media superstars as Lady Gaga and President Obama. So how did they do it?

Returning to Their Roots

From a business standpoint, they took extreme action. Earlier this year, we covered some of the sweeping in-store changes Starbucks implemented to get back on course. They brought founder Howard Shultz back as CEO. They right-sized. They restructured. They researched. But at the heart of the turnaround was this: they went back to listening to their customers. As Cliff Burrows, a Starbucks exec in charge of American operations, stated: “All of a sudden you start to see it’s not a numbers game — it’s about consumers.”

Sounds like common sense, but nowhere does this philosophy resonate more clearly than Starbucks presence online. From Facebook to Twitter to YouTube and mystarbucksidea.com, Starbucks has used social media masterfully, as a pivotal touchpoint to engage with consumers. And they’ve set the benchmark for brands struggling to find the silver bullet of customer engagement.

Tips from Starbucks’ Social Media Maven

At the Word of Mouth Marketing Supergenius Conference last December, we were fortunate enough to glean some guidance from Starbucks’ Global Social Media Director, Matthew Guiste. Here is a run-down of 6 pointers you should employ online to jumpstart your social media strategy—with the ultimate goal being to drive action.

1.  Only post content that adds value. In order to get fans to read or watch your content, follow two rules:

A) Ask yourself: does it add value? Will it provoke thought, teach something, or make someone smile? If not, don’t add to the noise.

B) Test & refine: Experiment with different types of content (promotions, polls, videos, etc) to see which ones resonate with your audience. Guiste cited a rough 50-50% split between planned and reactive content.

2.  Look for opportunities to amplify a trend. If you want customers to respond to your message, take the time to listen to what they’re already talking about, what interests them, what irks them. Tap into the hot buttons and drive action through liking, voting or commenting. A great example: they didn’t have any promotions planned around seasonal drinks but they noticed a lot of chatter about Pumpkin Spice Lattes in the Fall. They immediately developed the “Red Cup Celebration” campaign to engage in the conversation.

3.  Social media is a value exchange. Encourage sign-ups, follows, fans, likes and email opt-ins by offering up something in return, be it promotions, coupons, tips, exclusive benefits, etc.

4.  Inspire sharing. Sounds basic but it’s true. If your content is perceived as valuable, if it resonates, your customers will naturally want to share it with friends, family, co-workers.

5.  Use social media to sell. Engagement with customers is hugely important in and of itself, but Starbucks’ business turnaround is directly linked to actions impacting their bottom line. Adept use of promotions via social channels has been a key factor in driving traffic and sales to Starbucks retail stores.

6.  Create advocates: Happy customers equal loyal customers. Positive brand interactions (such as happiness, motivation, good service or escaping from the everyday) can have a ripple effect, and the amplification online can be exponential. “Free Pastry Day” at Starbucks drove their biggest traffic day ever, with no traditional advertising—only owned media (Starbucks.com), Facebook, Twitter and earned media (PR). According to Guiste, they have experienced the most success using social media for short-term, high intensity promotions, but they are also quick to point out that coordination across channels (digital and PR) is key.

Though the economy has created huge challenges for marketers, Starbucks is a great example of a brand turning around its business by returning to its roots and reconnecting with its customers. The most interesting takeaway: that their social media success is not about coffee at all—but how the coffee makes its customers feel. Tapping into that insight took them all the way to 10 million+ fans and counting.

Celia is the Marketing Director for Critical Mass globally, with a desk in our Chicago office.

Nearly two years ago, I wrote about Starbucks as a brand in decline. They were suffering because they had lost sight of what differentiated them from other companies competing for the “third place”: their product and the customer experience.

After years of focusing on cutting costs and driving efficiencies across their global footprint, the benefits of these activities plateaued in 2006 – as reflected in their all-time high stock price, just shy of $40.

They installed automatic espresso machines, introduced flavor lock packaging, ‘templatized’ store layouts and expanded their available selection of merchandise. While this all sounds good, it was implemented at the cost of the customer experience. The automatic espresso machines took all the romance and artistry out of pulling the perfect shot and the machines were so high that they blocked the line of sight between barista and customer. The flavor lock packages of coffee stripped the air of the rich scent of coffee beans. Stores became carbon copies of one another – sharing, for the most part, similar footprints and interior design. And their merchandise selection reflected a weakening focus on coffee.

By the time I wrote my post in 2007, Starbucks had lost 25% of its market capitalization. By the end of 2009, as bad as it was for just about every company, Starbucks shares had dropped to just under $10 – a whopping 75% loss of market cap.

Fast forward to today – something has changed. Starbucks is now a brand on the rise with a renewed focus and commitment to customer experience. Bruce Temkin put it well Monday when he said “Starbucks brews a comeback with purpose”. (Bruce wrote a post about Starbucks’ misfortunes in 2007 too.) Starbucks stock is now trading in the $22 range and is rising.

Starbucks has learned a few valuable lessons over the last four years and their change of fortune is a reflection of applying what they’ve learned.

So what did they learn? Bruce points us to a New York Times article that provides us with clues:

1. As Starbucks CEO, Howard Schultz, explains it, they “went back to start-up mode, hand-to-hand combat”. In essence, they went back to their roots, looking for those jolts of energy that fuel inspiration and innovation – a vital head space to be in when trying to tackle challenges as large as the ones faced by Starbucks.
2. They’re speaking the language of customer experience again. In the New York Times article, Schultz is quoted as using phrases like “the authenticity of the coffee experience” and “the romance, the theater of bringing that to life” in reference to one of their new Seattle shops.
3. Local matters! Starbucks is no longer out of touch with what their customers want and how those needs differ across the country. They’re also rolling out store designs that are more reflective of their locale.
4. While this isn’t called out in the New York Times article, we can’t ignore the importance of top down executive vision. The best customer experience companies rest on the shoulders of their CEOs and that CEO’s ability to galvanize employee belief in customer experience. Schultz had retired as CEO and came back to lead the organization out of the mess that had been created. Schultz’ vision for customer experience at Starbucks is absolutely essential to their continued success.

Starbucks’ rise is great news for other large companies who have lost focus of their core values. The strategy is simple: it really does come down to customer experience and product (or service). What’s not easy is the execution. But, if you can get the focus right, get a vision in place and create a team that is committed – you can do it. If Starbucks can, any large organization can.

Photo attribution to Flickr user Seadevi.

At the annual investors meeting last week, coffee brat Howard Schultz, Starbucks CEO, went on the offensive regarding the perception that his coffee is expensive.

Howie (I feel like I can call him that since Howard is my middle name) made two key points. First, that Starbucks has “…become the poster child for excess…” Man, Ozzy Osbourne might have an argument with that if he could still form a sentence.

The second point he made was that because of the extraordinary taste of his coffee, it is a great value. “Don’t let anyone tell you their coffee is the same as Starbucks because it is not.” Oh, and by the way, they have plenty of coffee under $4.

Finally, Howie announced a forthcoming ad campaign that will convince people Starbucks is not as expensive as they are perceived. He said that recent campaigns have generated strong response. So here is my question – what exactly is a “strong response”?

I’m a believer that all campaigns should be driven by an insight, a consumer truth as one of my colleagues here likes to say (thanks for the line, Roger). So, yes, the fact that we are in a recession/depression/AIG induced spiral and people want to save money is an insight. But is it the right insight for Starbucks to act on?

My argument is that Starbucks and the whatever $ cup of coffee isn’t about the cost. It’s about the brand. People who drink it — drink it religiously and I don’t think it’s about the taste. Its about walking around with that logo on the cup. Maybe it says, “Hey, I can afford Starbucks.” Maybe it says, “I’m cool.” Maybe it says, “The coffee my office gives me tastes like mud water, the kind that Bear Grylls drinks.”

Is that a Grande or a Venti?

Look up Starbucks on Facebook. There are over 125,000 addicts (more than the amount of people Oprah launched with). You can send authentic Starbucks coffee to your friends. You can do the same with Dunkin Donuts, but the amount of people signed up is significantly less.

The point is that if you are going to launch a new campaign, especially in this environment, you better have the insight right. You better be sure that price IS the main driver to influence consumer behavior because if you are wrong, and you are Howie, you risk withdrawing from your brand bank in a way that you may not ever be able to deposit again. <Insert your own AIG reference here.>