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Don’t Do It, Starbucks!

By Dr. Burt Smith February 15th, 2008

starbucks_1.jpgSay it ain’t so!

Starbucks has announced it’ll be testing a “$1 Coffee” in some markets this year. This is their idea of a prudent response to the forthcoming economic downturn all the experts are so certain is on its way. They think fewer people will be able to afford, or will be willing to spend money on, their gourmet coffee.

Indeed, their numbers may drop some, but I think they are in danger of gambling on what will turn out to be, at best, a short-term gain, and at the expense of long-term losses in brand equity! Howard Schultz and the gang created an entire category! There was no such thing as “gourmet coffee” available to the masses until they came along! They own the words “gourmet coffee” in the mind of the marketplace, for crying out loud! They are a case study in how the market will eagerly pay a premium for a quality experience! They are one of the best case studies in branding we could ever study, regardless of what industry we’re in! Now they want to throw all that away because of a little downturn? You gotta be kidding me! Yeesh!

They’d be wise to do a little case study research of their own. One example that comes to mind is how the motion picture industry experienced its Tipping Point in the 1930s. In the midst of the worst economic depression this nation knew before or since, motion pictures, a luxury good, took off like crazy. This was because the worse times got, the more people wanted to hang on to whatever pieces of luxury they could! Movies were an escape! An experience! Not at all unlike the “luxury experience” one participates in when visiting Starbucks. They would be far better off to simply weather the storm than to dilute their brand and potentially open the door for a new premium coffee experience to be offered by someone else. 

In my ECHO marketing workshop I teach, more like preach(!), the importance of not playing the price game! Anybody can cut prices, but it takes real savvy to build a brand, and once you build a solid brand, you have an asset that will pay for itself many times over. You also have an obligation to meet the expectations of the customers who helped you build the brand.

If you want to cut something, Starbucks, ease back on the number of locations and focus on efficiency.

Or set fire to every location and hope to collect the insurance! That’s what you’re doing to your brand.

Thank You, Tom Peters!

By Dr. Burt Smith February 9th, 2008

If you haven’t had a chance to read Re-Imagine! by Tom Peters, I’d really encourage it. Though it was written in 2003, like a lot of Dr. Peters’ work, it still packs quite a punch!

Somebody got me a daily calendar that has a “quote-a-day” from Re-Imagine! and that’s a neat way to digest and reflect daily upon all this book has to offer. One that jumped out at me was the reminder that in the 21st Century, we are actually returning to job security…kind of!

“But it’s NEW job security. Or actually very old new job security. I’m talking about job security in the first century after our country was founded, which was: Craft, Distinction, and Networking Skills!” – Tom Peters, Re-Imagine!

It’s what we know (our craft and our education), why we’re the better value than any other choice (distinction), and making sure we know how to make sure others know we’re the best choice (networking)!

GreatGameofNetworking.jpg 

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people_in_lineMy wife and I visited Eureka Springs, Arkansas a few years ago and I saw a tremendous example of an organization that understood the value of knowing, and serving, its target market. I made a point of jotting down what was posted on the glass door of one of the restaurants in Eureka Springs. It read:

We pride ourselves in delivering a quality dining experience consisting of a meal that in many cases is prepared from scratch. This means it may take slightly longer for you to receive your meal but rest assured, the wait will be worth it when you taste your food. We also make a point of not rushing your dining experience. As such, there may at times be a slight wait to be seated. If any of these conditions concern you, we will be happy to provide you with a list of chain restaurants within walking distance.

 

At first you may say, “Wait a minute… That’s in direct violation of the marketing concept! How can they do that? How can they stay in business? Everybody knows the customer is always right!”

But get this: There was a line of people waiting to get into this place! They targeted customers (like me) who don’t want a fast-food, standardized, franchise experience but instead want a unique dining experience. Ordinarily I HATE to stand in line and will do so only if directed by a higher authority (my wife!), but in this case I didn’t mind because it was part of my investment in a good meal. The funny thing was, NOBODY standing in line seemed to have a problem with waiting, either, because they were given a good reason for the wait. This restaurant understood how to target a market segment that was willing to wait for and pay a premium price for a quality dining experience. You may be saying to yourself that there’s no way you’d put up with that. Well, bully for you. That means you’re a target customer for someone else’s business and that’s fine with them and they were bold enough to say so. There was a line out the door, remember?

A successful person once said he didn’t know a true formula for success, but he sure knew one for failure, and that was trying to please everyone. In business, regardless of how big we are, we have a maximum capacity. Our goal should be to meet that maximum capacity through a laser-like focus on not just “the market,” but by targeting the exact, right customer for us. That way, we maximize our capacity, and our return on our marketing investment.

Indeed, the customer IS the answer every time, but let’s also remember that the customer is always right only if we target the RIGHT customer!