Why Starbucks Thinks Fewer Customers Can Lead to More Profit

The Economics Behind Being a Third Place

Starbucks is making big changes. CEO Brian Niccol announced a $1 billion restructuring plan that includes eliminating 900 corporate jobs, closing underperforming stores, and redesigning 1,000 cafés over the next year. The goal? To bring back the company’s roots as a “third place”, a spot between home and work where people want to linger, not just grab coffee and go.

This shift comes after six consecutive quarters of declining U.S. same-store sales, primarily driven by a decrease in customer transactions. Rather than doubling down on speed and convenience, Starbucks wants to slow things down and is betting on experience.

The Economics

At the heart of this strategy is Customer Lifetime Value (CLV). You can think of CLV in two ways: the value of a single visit, or the value of one customer across their entire relationship with the brand. Starbucks’ shift is about moving beyond the one-time transaction to maximize the long-term value of each customer.

Starbucks wants to shift customers from an $8 mobile pick-up order to the kind of customer who treats the café as a hangout or study space. Not only do these customers spend more during each visit, but the experience also builds stronger brand loyalty, creating a deeper, long-term connection that raises their Customer Lifetime Value (CLV).

By focusing on experience and loyalty:

• Starbucks increases the value of customer orders

• Customers are more likely to come back frequently

• Starbucks minimizes its churn rate and customer acquisition costs

This idea aligns with the themes from Unreasonable Hospitality by Will Guidara, a book we recently recommended on Decode Econ. Guidara demonstrates that going above and beyond in the customer experience doesn’t just delight people; it also creates long-term loyalty and economic value.

The Bottom Line

Starbucks’ restructuring teaches a broader lesson: growth isn’t always about adding more stores, products, or customers. Sometimes, it’s about deepening relationships with the customers you already have. Starbucks lost profits when it focused solely on transactions.

For startups and small businesses, the takeaway is clear: don’t just measure success by how many customers you acquire, measure it by how much value you create for each one. Focus on experience, loyalty, and retention. Early customers can become lifelong advocates if you build lasting relationships.

In other words, the path to sustainable growth often runs through CLV, not just customer counts. Focus on the quality of the relationships, not the quantity. Sounds like common sense, but you’d be surprised how often companies lose sight of this and end up chasing short-term sales at the expense of long-term loyalty. The businesses that succeed are those that play the long game.

Reader Question: Which company do you think does relationship building best, and what makes them stand out?