Using a White Cup for Crowdsourcing: a Starbucks Initiative


As one of the leading players in coffee& snacks retail industry, Starbucks is a well- known brand all over the world today. Holding a market share of 39.8% among all coffee chains in US and 25% in the UK, the firm is the main target of competition for many rivals (Statista, 2016).  For instance, Dunkin Brands, the closest competitor of Starbucks in the US market, has a share of around 25% and many other rivals such as Costa Coffee and Tim Horton’s are closely following Starbucks in terms of share and quality (Geereddy, 2014). Within the North American coffee retail market, the players usually distinguish themselves with specialty and quality of their coffees. This is also what Starbucks had been doing by offering differentiated products such as various flavors of Brazilian, Ethiopian and Arabic coffees in their stores. High- quality service within stores had also been an area of competition among these big players for a long time until very recently. Every specialty coffee retailer in the market is characterized by having trained staff and an efficient way of serving in stores.

The event that changed the course of this game was a campaign by Starbucks in 2014. After seeing that the conventional ways of competing are not effective enough in 21st century, the firm tried and found a gap for improvement in the value they provide to their customers. Considering that coffee consumption was highest among younger generations with increasing trends in previous years (MordorIntelligence, 2018), Starbucks aimed to improve their relations with these customer segments and also benefit from their involvement with the campaign. In order to differentiate their new environment friendly cup, Starbucks decided to benefit from the wisdom of crowds and initiated a crowdsourcing campaign in US and Canada. The firm asked its customers to paint their traditional white cups with any design they want and share its picture with the #WhiteCupContest hashtag (Starbucks, 2014). The business problem in this case was Starbucks’ need for a strategy to contact its customers and run an environment friendly campaign. So, their problem was clear and structured, which enabled them to use crowdsourcing as a means of solving this (Tsekouras, 2019).

To address this problem, Starbucks announced that the winner of this contest would receive a gift card worth $300 and their design would be mass produced and sold at Starbucks stores throughout North America. Starbucks also benefitted from the terms technical and social marginality and how they interact in this project. As described by (Tsekouras, 2019), technical marginality is a solver’s self-assessed technical expertise distance from the problem field, whereas social marginality is a solver’s distance from the social group that is prevalent in the relevant field. Any customer who were confident with a decent level of drawing technique could attend the contest, so the contest only required a basic level of technical marginality. Being common people instead of designers or painters provided them a room for creativity due to high social marginality. With the combination of a basic technical and high social marginalities, the contest provided ideal circumstances for attendants in terms of creativity in crowdsourcing (Tsekouras, 2019). Knowing that most of Starbucks customers already painted their cups for fun during their store visits (Starbucks, 2014), this initiative helped the firm to positively reinforce those in store experiences.

By asking their customers to come up with a design for their white cup, Starbucks actually outsourced the task of designing the cups on their own. Since those cups were to be produced in a way that enabled up to 30 uses, their design was an important part of the initiative. People would of course prefer to use a cup for 30 times when they like its design if not for environmental reasons. Calling for creative and fun designs helped Starbucks to target young adults which represented the early adopters of specialty coffee in terms of age. People at those age usually start adopting their coffee habits, mostly with limited experience on the topic. These age groups represent “the chasm” which is the state of a customer in their journey when they are at the early stage of adopting a product. And according to (Tsekouras, 2019), customers from the chasm is a good source for new ideas to businesses that aim to conduct crowdsourcing. Even if Starbucks was not aware of this, the choice of target customers was correct for the aim of this business idea.

Bottom line: Was this an efficient idea?

As a result of this campaign, more than 4000 cup designs were shared and a 21 years old student from the University of Pittsburgh won the $300 prize. Her design was then printed on the mass produced and reusable white cups Starbucks started to manufacture the following year. The campaign has helped Starbucks to advertise their sustainability efforts with the reusable cup. Afterall, the managers were so happy with the results, they launched the campaign again in 2015 for their store employees (Starbucks, 2015). Considering the efficiency of the idea, these results should not be a surprise. For instance, the idea provided joint profitability by granting customers product utility through giving them the chance to design their daily cups in their own way, and also giving the chance to be the one whose design is used throughout US and Canada. Participating customers received the opportunity to raise their design ideas and receive $300 on top of the feeling of success. On the other end, Starbucks benefitted from advertising their sustainability efforts to the whole North American market and also fostering customer relations by listening what they had to say.

Moreover, the idea was feasible in terms of required allocations; since it did not require any internal arrangements except using their social media accounts for advertising the campaign. They were going to produce and sell reusable cups anyways, so crowdsourcing the design of the cup was actually one less expense entry from the business proposal. Starbucks also did not have any environmental bindings or expenses that would hinder the application of this idea. In fact, they have supported the feasibility of their relationships with environment- concerned social groups with the White Cup Contest. This initiative of Starbucks can be an example for many other retailers which try to incorporate their customers in certain phases of product development.

Sources:

Geereddy, N. (2014). Strategic Analysis Of Starbucks Corporation. [online] Available at: https://scholar.harvard.edu/files/nithingeereddy/files/starbucks_case_analysis.pdf [Accessed 28 Feb. 2019].

Mordorintelligence (2018). Coffee Market Analysis, Share, Size, Value | Outlook (2018-2023). [online] Mordorintelligence.com. Available at: https://www.mordorintelligence.com/industry-reports/coffee-market [Accessed 28 Feb. 2019].

Starbucks (2015). Starbucks. [online] Stories.starbucks.com. Available at: https://stories.starbucks.com/stories/2015/starbucks-white-cup-contest-exclusively-for-partners/ [Accessed 28 Feb. 2019].

Starbucks (2014). [online] Stories.starbucks.com. Available at: https://stories.starbucks.com/stories/2014/starbucks-invites-you-to-decorate-its-iconic-white-cup/ [Accessed 28 Feb. 2019].

Statista (2016). Market share of major U.S. coffee chains, 2016 | Statistic. [online] Statista. Available at: https://www.statista.com/statistics/250166/market-share-of-major-us-coffee-shops/ [Accessed 28 Feb. 2019].

Tsekouras, D. (2019). CCDC Lecture 3.

Discrimination Towards Minority Founders: Is Crowdfunding The Solution?


A Brief Talk about Crowdfunding

Recently, crowdfunding has become one of the most well-known methods for a business owner to get his or her project funded through public contribution. Although, like any other fundraising methods, there are positive and negative sides to crowdfunding. The advantages and disadvantages of using crowdfunding platforms can be divided in two perspectives: firm-level and contributor-level (Tsekouras, 2019).

From a firm’s perspective, utilising crowdfunding platforms can be attractive for several reasons. Crowdfunding enables companies to collect funding in a short period of time. The companies can also tap into a larger pool of potential contributors. The community features offered by crowdfunding platforms (either through social media or its own social networks) help founders with constructive feedbacks for projects and online word of mouth. The tradeoff, though, would be the element of transparency that can disclose not only information about the company, but also personal information about the project creators (through social media). There is also the risk of damaged reputation should the project not meet the public’s expectations.

From a contributor’s perspective, crowdfunding platforms allow people access to exclusive products that better match their tastes more. The community aspect of the system also gives potential contributors a “place to belong”; enabling them to provide feedbacks and improve the projects. However, there are risks for an individual to support projects through crowdfunding. There have been cases of fraud in the past (Rio, 2017). There is also the risk of underperformance by the companies that do not deliver within the expected time frame.

The Minority Problem

Taking a closer look into the matter, with the intention to dig deeper regarding the potential of crowdfunding platforms, Younkin and Kuppuswamy (2016) conducted a research given the fact that there are problems of underrepresentation of minority founders in venture investment markets. This situation is relevant, knowing there is indeed discrimination in entrepreneurship against minorities. There are many examples of this. A research by Freeland and Keister (2014) mentioned that it is more difficult for minority founders to receive credit and another research conducted in 2011 saw that minorities must pay higher interest rates (Pope & Sydnor, 2011). Younkin and Kuppuswamy, relating the problem to several prior studies, explain the possible involvement of several types of discrimination as to why discrimination is prevalent even in the business sector:

1.       Statistical Discrimination: People devalue minorities because they expect that they are less likely to complete projects.

2.       Taste-based Discrimination: Preference to support or reject people of certain races/ethnicities, even if it is not economically efficient to do so.

3.       Implicit Bias Theory: Discrimination is described as subconscious acts reflecting cultural beliefs.

The research then recognises crowdfunding as a possible solution for this minority-founder problem. Crowdfunding, in this case, has several roles: (1) an alternate solution when traditional financial institutions show bias, (2) shifts the focus of funding decision away to the broader population, and (3) facilitates projects that are overlooked by “traditional” experts but valued by the wider population. However, to directly see the impact of crowdfunding on minority founders, Younkin and Kuppuswamy tested whether reward-based crowdfunding platforms like Kickstarter really improve the performance of projects run by black founders. They also attempt to identify which forms of discrimination are involved and ways to mitigate these biases.

Methodology & Results

In their study, the Younkin and Kuppuswamy (2016) combined an analysis of crowdfunding projects with an experimental design. In the former, they had collected a sample 7,617 Kickstarter projects launched between January 2012 and March 2014. Results of their statistical analysis showed that black founders were less likely to succeed as they received both fewer and smaller contributions. Moreover, black founders were not less capable in delivering their project than nonblack counterparts, thus suggesting that discrimination was present.

Subsequently, three experimental tests were conducted to identify the types of discrimination at play for which participants were recruited through Amazon’s Mechanical Turk Service. In the first one, the researchers tested for both types of conscious discrimination by asking participants questions about an example project and its founder. Moreover, subjects were randomly placed into one of four possible conditions with differing salience of founder race. Image 1 illustrates what participants saw during the test. After analysing their data, the researchers found that taste-based bias was driving discrimination.

Image 1. Project Page Example

The goal of the second experimental test was to distinguish between unconscious and conscious bias. This was done by testing whether funders altered their perception of project quality between white and black founder using project quality signals such as “Staff Pick”. Similarly to last time, participants were randomly placed into various conditions with differing degrees of quality signals. Results showed that discrimination was unconscious (i.e. implicit bias), thus invalidating taste-based bias as a driver of discrimination.

In the final experiment, the researchers wanted to test the efficacy of 3 intervention methods in mitigating bias. In particular, they looked at (Younkin and Kuppuswamy, 2016):

  • Debiasing Intervention; involves counteracting stereotypes about how a group acts
  • Group Success Intervention; involves counteracting stereotypes about how a group performs
  • Whitewashing Intervention; involves eliminating any indication of race

The usefulness of each method was once again tested by placing subjects into 9 different conditions. Ultimately, the results of this test reveal that both group success and whitewashing are effective at mitigating discrimination towards black founders.

Strengths

The main strength of this study is its pioneering efforts of studying which forms of discrimination are responsible for the underrepresentation of minorities in entrepreneurship. In particular, the subjective evaluation of investment risk and the capabilities of a founder make it rather difficult to study entrepreneurial settings. As a result, researchers turned towards audit or correspondence studies to assess biases. However, the authors tackled this issue by developing a novel research approach that involves the combination of observational and experimental data.

Managerial Implications

While crowdfunding does not by itself mitigate biases towards black founders, the study lists three methods to mitigate discrimination on the platform (Younkin and Kuppuswamy, 2016). The first two are examples of group success intervention, while the final one is an example of whitewashing intervention. First of all, the authors recommend displaying overt support, such as “Staff Pick”, towards African-American founders. They also advocate showing a list of successful founders on the platform, which includes black founder. Last but not least, they recommend reducing visibility of race on the crowdfunding platform’s project pages.


References

Freeland, R. E., & Keister, L. A. (2014). How Does Race and Ethnicity Affect Persistence in Immature Ventures? Journal of Small Business Management, 54(1), 210-228. doi:10.1111/jsbm.12138

Pope, D. G., & Sydnor, J. R. (2011). Implementing Anti-Discrimination Policies in Statistical Profiling Models. American Economic Journal: Economic Policy, 3(3), 206-231. doi:10.1257/pol.3.3.206

Rio, C. (2017, April 10). 6 Stupid Crowdfunding Scams That Should Have Been Obvious. Retrieved February 27, 2019, from http://www.cracked.com/blog/6-incredibly-obvious-crowdfunding-scams-people-fell-for/

Tsekouras, D. (2019). CCDC.

Younkin, P., & Kuppuswamy, V. (2016). Is the Crowd Colorblind? Founder race and performance in crowdfunding. Academy of Management Proceedings, 2016(1), 11665. doi:10.5465/ambpp.2016.11665abstract