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ment, books, literature, newspapers and music has always been part of that. We’ve always played music in the store. We would have music playing overhead and people would want to know what it was. Then they’d want to know where they couldbuy it, or if they could buy it from us. We looked at how our customers love music. They enjoy it and say they listen to it frequently. But they don’t buy it that much anymore. It’s hard for them to find a place to buy music and they’re excited about being able to do so at a place where they go so frequently. It’s also a place that helps them discover new music. There are not a lot of people therewho are suggesting or recommending a new CD, song or artist. It’s one of the things that our customers enjoy about the experience as well. They trust the company—they know we’re not out promoting the latest movie on our cup. As we bring forward new ideas it’s not because someone paid us to be in the store. We have an editorial voice and a notion of who our customer is and things that they mightlike to discover. It all fits with the broad relationship we have with the customer, with what people enjoy doing in a coffee house and the whole ambience and entertainment aspect of our stores and the environment. ➜

What business is Starbucks really in? A favorite saying we have around here is, “we’re not in the coffee business, serving people; we’re in the people business, serving coffee.”Coffee is who we are and what we do, and the quality obsession around finding and then roasting and delivering to a customer the best cup of coffee possible is at the core of who we are. Inextricably linked with that is the way in which that’s done, which revolves around the interaction customers have with people—the employees who are in the store—and what the whole environment is about. It’s very muchthe totality of the experience; that’s certainly what the customers would tell you, as well. Does the way that you go about connecting with your customers change appreciably based on things like gender, ethnicity, income, age, and so forth? No, not at all. If you’re a regular customer, we aspire to know what drink you have. We certainly don’t do that all the time or with every customer, but weaspire to know the customer at that level versus having a big magic database where you have some profile based on 15 variables. It’s a “higher touch” experience than that. How does Starbucks’ venture into music fit within that context? We really think of ourselves as a coffee house. A lot of folks—more than 30 percent of our customers—kind of “hang.” They are at Starbucks to enjoy themselves—andentertain-

Anne Saunders, svp of marketing for Starbucks, says creating customer loyalty starts with just one thing: A really great coffee house.

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➜ There have been news reports that your CD-burning venture with Hear Music maybe isn’t going as well as you might have hoped. We’re doing awesome with the music venture overall but we aredefinitely still in test mode with the burning stations. I don’t agree with the thesis that it’s not going very well. It’s been a really strong and healthy part of our business, and we’ll keep at getting the digital piece right. It’s new. No one else is doing it. We really want to make sure we learn and get it right. Are there other aspects of popular culture—like fashion, for example— that mightprovide a similar kind of connection with your customers? Maybe. I don’t know that selling clothes is as core to the coffee house as music or entertainment might be. We resist putting our logo on everything. You look around at companies, brands or people who have licensed their names so far away from the core equities of who they are that the entire proposition is diluted. So, fashion isn’t high...