Is Starbucks still the "third place"?

Starbucks uses the catch phrase “third place” to promote the ambiance of their stores, indicating that “there is home, there is work, and there is Starbucks”. There are two Starbucks coffeeshops near my place in Cambridge. Recently a friend of mine suggested to drink coffee together at a new local coffeehouse around the corner, the “Boston Common”, which is supposed to be much cozier than anything around. What happened to Starbucks? Aren’t they supposed to be the “third place”, everybody’s favorite hang-out? Well, at least in this area the answer would be a clear “no”. Many Starbucks stores have become fast-paced, to-go places, not any different from the Dunkin Donuts from across the street, with doors opening every other second and baristas becoming stressed out in rush hours.

Did Starbucks lose its focus? I believe yes. The major challenge for a powerhouse brand like Starbucks is how to deal with growth. It needs to grow while staying somewhat small; become a global corporation while staying locally relevant.
Let’s have a look back. In 2001, Starbucks sought to become more appealing to the mass market. Research proved that for new customers Starbucks was somewhat “slow”. Young urban professionals want to grab a cup of coffee and rush out again as quickly as possible. Starbucks therefore decided to invest $ 40,000,000 to improve service speed by supporting baristas with more staff.

For me, it appears as if this move contributed to attracting customers that should actually be left to go to Dunkin Donuts. If the doors of the stores keep opening every other second, and if stressed out customers rush in and out to get a quick cup of coffee, Starbucks jeopardizes everything that makes it strong: the loyal customers that come there every day to enjoy this notion of the “third place”. Very often when doing the calculations in such cases, a decrease in customer lifetime value of the loyal base might mean a much higher loss of profitability than to let go of a coffee drinking segment. And when this customer group does not fit Starbucks’ brand mantra anyway, the long-term viability needs be ensured at all cost.

As described in earlier posts, the stretching of its brand into categories such as instant coffee falls into the same category: a pursuit of quick incremental profit that is likely to lead to devaluing the brand in the long-term. Another interesting post was published recently on brand autopsy, discussing that it is the taste that made the brand stand out and grow - trying to appeal to all consumers with weaker alternatives has not helped the brand.

What might have been an alternative? There is a famous saying that goes: “never change a winning horse”. In the role of Starbucks’ CMO, I would have taken the $40,000,000 and kept investing in the stores’ atmosphere as well as a further market penetration with new stores, especially increasing the number of stores in highly busy areas could be a promising strategy to cater to the high demand while ensuring that the atmosphere of the “third place” remains in place.

Francesco Wesel
www.francescowesel.com
www.brandnewtimes.blogspot.com

Favorite Brands

As I will soon graduate with a Masters degree in Integrated Marketing Communication, my job search has now officially started – A common interview question is to name examples of favorite brands. There are so many, but top-of-mind my answer would be Starbucks, Trader Joe's, and Harley Davidson- not so much because I am an evangelist customer of these brands, but because I admire what they stand for and what they have achieved.

Starbucks has redefined the coffee business and shows the value a strong brand can have, turning a commodity such as coffee into a true experience. Along with the notion of the “third place”, the brand has successfully managed to align itself with people’s aspirations to achieve an emotional balance in life. A large part of its loyal customer base cannot imagine a day without Starbucks anymore. The fact that Starbucks became a global powerhouse brand without any advertising at all illustrates that with a great product, word-of-mouth is the most powerful marketing tool. However, in a previous post, I also highlighted my dislike for Starbucks jump on the bandwagon of trying to become everything to everybody.

Trader Joe’s - When coming to the US in September 2008 directly after almost one year in Asia, the average American supermarket represented one of the biggest cultural shocks to me- enormous in size, dozens of products in each category and price promotions everywhere. No matter how supermarkets have looked like in the past, they drifted away from being well differentiated brands towards commodities. What is the difference between Shaw’s, Food Master and Stop & Shop? I have no idea, but a similarity must be that they seem to spend 99% of their promotional budget on attracting the worst customer base imaginable- the cherry pickers who come in there only to go hunting for the special offers of the week. They have trained us to be like that. Abroad,I used to enter my supermarket and buy the brands I have been loyal to ever since, but now my primary attention when choosing a supermarket goes to price and proximity.

In this environment my respect goes to Trader Joe’s. When going there a few months ago for the first time in my life, I figured out how much they are standing out from the average retail jungle. It is price stable, offers a different shopping experience and true brand value. The retail concept is unique, as products do not need to pay for slotting fees or promotions, but only have to pass the taste test, get in and perform. As a result, people are drawn to the great products rather than the price tags. The differences also become obvious when comparing the online presence between supermarkets: Trader Joe’s web site tells a truly unique story; giving an insight into the brand world of the company. Shaw’s homepage, on the other hand, consists to 90% of the latest coupons and saving strategies. Trader Joe’s effort to establish clear points-of-difference in such a market environment is therefore highly exemplary.

Harley Davidson – Even though I would never get a Harley myself, Harley Davidson is one of my favorite brands for two reasons. First of all, Harley has built a powerful brand through a narrow focus- they truly own the word of “big motorcycle” in the mind of the consumer. When the lightweight Japanese bikes or fashion bikes like Ducati arrived in America, Harley ignored them. Most companies would have followed the GM or Ford approach to expand the brand into new, trendy categories in pursuit of short-term growth, while wearing down the brand until it now longer stands for something in the long run.

Secondly, the Harley business concept highlights the value of a loyal customer base for a brand. Like no other company, Harley Davidson succeeded in engaging its customers meaningfully by building a powerful community around its brand - the Harley Owners Group - whose name seems to perfectly incorporate the brand essence (HOG = big motorcycles). As only Harley owners can log in to the site (members.hog.com) and events are organized only for them, the brand offers a strong sense of exclusivity, value and prestige. As a result, Harley owners might be the biggest evangelist consumer base a brand has ever managed to create. The popularity of Harley tattoos and apparel exemplifies how the most loyal customers have been transformed into powerful word-of-mouth machines.

Francesco Wesel
Integrated Marketing Communication
www.francescowesel.com

CEO vs CMO

I recently read an article by Lloyd Truffelman titled "Blame CMO turnover on metrics mania" (originally published on June 18 edition of AdAge).

As markets, the media landscape and consumers are becoming more and more diverse, a strategic approach to marketing is fundamental. Undoubtedly, marketing and communication needs facts as a solid basis in order to be tailored to specific market segments and choose appropriate mediums from a wide variety of media channels if it wants to be successful.

Nevertheless, times have changed, making it difficult for traditional marketing difficult to be realized. The initial pure informational marketing efforts did not survive the constant social developments of time. An growing partial attention of the consumer due to the abundance of available channels, as well as an overflow of communication messages have created new challenges for the entire industry. It has become increasingly difficult for marketers to capture the attention of the audience, which is why creativity is has long been a buzz word in the industry. The common belief has been that marketing and communication needs to be creative, new and original in order to be successful. Consequently, while having a strong strategic fundament, today’s marketing needs to be of an entertaining or interactive nature and at the same time offer a strong emotional appeal.

In that context, it needs to be highlighted that marketing is not a battle of products, but a battle of perception, which often forms the major discrepancy between the mindset of a CEO and a CMO. People believe what they want to believe; and see what they want to see. Truth is illusive, making it impossible for marketers to change a consumers mind even if rational facts show promising focus points for their brands. Even though “fast” might be the major DMU to prefer one fast food chain over another, Burger King cannot use it as a central theme in it’s communication, as in the mind of the consumer the word is owned by McDonalds. Management however often focuses on facts, because they believe in objective reality. It is then of course easier to believe that truth is on their side. Armies of researchers are employed, focus groups conducted, questionnaires tabulated and what comes back in a two pound report is often a wish list of what consumers want. But if brands go after everything, they might risk standing for nothing. No two companies can own the same positioning in the mind of the consumer. It is therefore much more complex, involving a combination of issues and trends of the market and consumer environment with one’s own brand mantra. And that largely involves the intuition, the gut feeling of the CMO, in order to come up with a creatively original execution.

As the Trufelmans article rightfully points out, an “overreliance on metrics” can “crush creativity”. This pattern holds true for battles between general management and the CMO as for interagency dissension between –for instance- account planners and creatives. The big challenge therefore often consists of finding the right balance between strategy and creativity. If marketing was indeed like Jazz music, the musician would have to ensure that his music is unique and new, while being in line with the contemporary taste of the listener as well as general music market trends, in order to be successful.

Undoubtedly, a consequence from these constraints on the CMO is that companies often try to "communicate" when they should actually be trying to "position." And in today's over communicated society, it takes endless repetition to achieve this effect. For instance, as Al Ries repeatedly exemplifies in his columns, the BMW might not be the most fun car to drive, but with their consistent claim of “the ultimate driving machine” they have anchored the "driving" position in the mind. For a typical consumer brand to come to this point, that might mean years and years of advertising and hundreds of millions of dollars. Most companies don't have the money, vision and patience to do that and if immediate results are not visible, the marketing department is usually the first one to blame. Consequently, companies jump from one message to another, hoping for an eventual magic pick that will energize their brands. However, this approach does not work today. It appears as if Pepsi changes their logo, marketing messages and slogan continuously and with that never succeeded in surpassing “the real thing” Coca-Cola. The only thing that works today is the BMW approach of strict consistency. Integrated marketing Communication means not only a synergy of different marketing tools but also to have a brand with a common sound, look and feel over time. And that simply is not possible with an average CMO tenure lasting only 26 months. Marketing Managers need time, trust and creative freedom to achieve enduring success and strategic advantage in the market place.

For another interesting perspective on the subject, note this podcast episode of "The Ries Report" by Laura Ries:

Francesco Wesel MA
Integrated Marketing Communication
www.francescowesel.com
www.brandnewtimes.blogspot.com