What a Coffee Cup Tells us About wework
Last Monday morning, as I arrived at my wework office, I decided a cup of tea was in order. So I walked into the kitchen to grab a coffee mug. But something seemed off. The mugs looked…different. Wait, were they smaller? Yes, in fact they were. Over the weekend the entire shelf of regular sized coffee mugs had been replaced by miniature ones. Like, really tiny ones, less than half the size of the old ones.
I wondered, had the staff gotten repeated requests from members asking for mini mugs? Was this part of a hipster coffee trend I’d not yet heard about? What was going on? I’m fascinated by wework’s sometimes clueless handling of its customers, as I’ve written about before.
Later that morning, I was in the kitchen with my office mate Tony, and we asked the manager about the new mugs. She gave it a shrug and swore that they’d “just ordered new mugs and somehow ended up with a smaller size.” Tony was not having it, and he replied, “I call bullshit on that.” It was clear to us that there was a reason behind the switch, and it was also clear that reason was being hidden from the members. Why not mention this in the daily email we get from the community manager?
Here’s the background for the tiny coffee cups: someone with a spreadsheet at wework HQ determined that “we can save $121,000 per year directly to our bottom line if we cut coffee consumption in half. Buy new tiny cups at every location immediately!”
This is a big year for tech stocks going public. We’ve seen uber (NYSE: UBER) and Lyft (NASDAQ: LYFT) both list, and Slack, Airbnb, and wework are next. So far, it’s been a rocky ride, and investors have shown no appetite for tech businesses that consistently lose money. Take a look at Lyft’s stock chart above. wework is terrified that it will disappoint its investors, who have poured almost $13 billion into the business since its inception. In March wework laid off 300 employees. And now the management has decided, by shrinking coffee cups, they’ll avoid a Lyft-like stock meltdown once they go public.
You can immediately see what a bad idea this is. Why piss off many of your customers to save a few bucks on coffee? I am reminded of Scott Bedbury’s great book on branding, A New Brand World. He recounts his days as CMO of Starbucks and says one of the most important lessons he learned was this: if a business has to cut operating costs, they should do it in ways that the customer won’t notice.
The tiny coffee cups are a classic case of misunderstanding who the customer is. wework is confusing investors and paying members. By serving the investor with an infinitesimally higher operating income number, wework is giving customers another reason to go to a competitor. This is bad business and will cost them in the long run. The customer needs to come first. Always.
