Lots of the big boys, are big boys for a reason – they grew fast. Before there was a Starbucks on every corner, there was a McDonalds. One can argue that the former has a markedly more positive impact on property values, but both companies made the decision to go public. I’m not making a judgment on the decision to go public, rather a statement on what happens to a brand when it moves from serving its immediate public to the nation (or world) audience.
A post at Harvard Business Online, John Quelch argues that the Seattle juggernaut made a few key errors in the management of its premium-priced brand:
Starbucks moved past their early adopters who were among the first customers to help create the café atmosphere to serve the larger ‘grab-n-go’ crowd. To maintain the growth rate the market had become accustomed to, Starbucks had to meet the demand of the middle, larger audience. The focus on quicker service replaced more personal relationships with the barista.
Second, Starbucks targeted the ‘mass-middle’ to broaden its appeal with new products. These new products detracted from the purity of the ‘coffee bean moment’ that Starbucks brand stood for. These new drinks made it hard for baristas to keep up with the long line of customers – essentially turning them into a morning bartender without the advantage of alcohol. Waiting time mounted, personal time decreased and the experience was reduced to a commodity – with all that time in line, people started to wonder what they were waiting for. The experience had been commoditized.
Third, opening new stores and creating new products was the only story that the market would accept. Maintaining growth is an unbelievable pressure top management has to deal with and The Street is one hungry beastie when it comes to bottom-line performance. In Starbucks case, the success of a local store manager earning brand loyalty and increasing purchase frequency in his neighborhood one customer at a time are undercut when additional stores are opened nearby. “Eventually,” he notes, “the point of saturation is reached and cannibalization of existing store sales undermines not just brand health but also manager morale.”
Espresso Shot Insights:
Grow at a controlled pace. Quelch closes his article with “None of this need have happened if Starbucks had stayed private and grown at a more controlled pace. To continue to be a premium-priced brand while trading as a public company is very challenging.” And we think the concept of moderating growth to protect your brand is pure Marketing Inspiration.”
Slow consumption down – for story time. When a company gets tied up in performance numbers, it loses the essence of its experience. When growth is the goal, the middle is the target. The middle is a really unattractive place to be—there’s too much competition and everything is a commodity. There is no time or place for the customer to reflect on your story or the impact their purchase is making (to the store, their community or themselves).
Be conscious and attract conscious customers. Success in the future is not going to be about mass consumption, but about those companies that take a leadership position with values that support the collective.
Starbucks is in an ideal position to do these things.