Scooters's Starbucks post.

[Mikey P]

Seeing how Scooter is a moderator here I'm a bit peeved he did not choose to post this here, but with all the rubes on ICS, I guess I dont blame him.

With all of the discussion about Starbucks' troubles lately, this blog post nails it. One of my favorite authors, Frank Lane, recently posted about Starbucks' brand confusion. Maybe we can take some cues and clues from it.

The following came from Frank's blog and he gave me permission to share it with you:

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Grounds for Divorce
by Frank Lane

What will Starbucks do next to weaken one of the truly great Killer Brands to emerge in recent years?

First, they established the brand with strong, full bodied, European styled coffee for a different and more compelling expectation. That lured enough coffee drinkers to make them a big time brand.

Then because they didnt appeal to everyone, they introduced lite-note coffees virtually indistinguishable from ordinary coffee. (I do not know for sure this fact, but I have been told by Starbucks managers that lite-note coffees which have been pushed in units for over five years have never reached 10% of beverage sales). Lesson, weaken the brand for very little gain.

Then they licensed the brand to others in other categories, e.g., ice cream. Then they franchised the brand to airports and such where people ordered Starbucks not from trained baristas but from fast food grade employees.

Then last week they hinted at the introduction of cheaper coffee. Today they confirm that they are introducing Consistant coffee at $1.00 per cup.

I admit they have taken a hammering from the economic situation and news shows everywhere showing people how to save money in tough times by foregoing their $5 coffee drinks. BUT STARBUCKS SHOULD BE STRENGTHENING THEIR BRAND RIGHT NOW, NOT WEAKENING IT (NO PUN INTENDED).

Frank Lane's Website

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While Starbucks is a very different product than carpet cleaning, there are several parallels. Off the top of my head it is definitely time to explore and re-explore the value we provide to customers to ensure they fully understand our competitive differences and that their perception of our value is extreme.

The Starbucks parallel also gives us an idea of what happens when the customer starts to view our services as a commodity.

Yes, the economy is on everyone's mind and it is affecting "convenience" more than "necessity" products and services as evidenced by the recent stock highs of value brands like Wal-Mart and McDonalds and lows of high-end brands like Nordstrom and Ruths Chris.

There is definitely a clear but fine line between "affordable" and "cheap". Customers don't like cheap but they also have to view the product or service as affordable, now more than ever.

A $5 cup of coffee may not appeal to the overwhelming majority of consumers, just as .75/sqft carpet cleaning doesn't apply to most people. However, the majority will spring a few more bucks for what they perceive as extremely high quality vs low or avg quality.

Coffee drinkers still drink coffee just as we can't overlook that no matter the economy our services still appeal to those who cannot fathom living with dirt. The new trick is that we have to accept that now more than ever customers are looking for higher quality at what they perceive as an affordable cost.

Comments?

 

[Chris A]

so sendin my old van down to the ghettos is a bad idea?

 

[-JB-]

Great post.

How about just lowering the cost (take a smaller profit margin) on the $5 cup of coffee, for the foreseeable future?

Offer more take less.

Seems to beat offer more, get more; sell less, or none at all.

So instead of having a 50-60% profit margin as SB has, they take a 35-45% pm instead?

Would that kill the giant? or any of us for that matter?

Lets face it how many cc's (owner ops.) are starving out there right now, because the didn't have a high enough pm to begin with?

You can dig out of a financial deficit a whole lot faster w/a 35-45% pm than you can w/a 15-20%pm, which may be the difference between whether you make it out AT ALL!

 

[steve r]

you have to understand that starbucks is a traded company. they have stock holders who make decisions based purely on profit.taking a cut in profit is not exceptable.this is the problem with most franchises or stock held companies.instead of trying to hold on to what they have they want to grow and if they cant theyd rather fail and move on.

the small family owned places who can take a slight loss in profit to keep open will survive this economic crisis.and may even come out on top if handled right.that is if thats what they want.

 

[bob vawter]

so sendin my old van down to the ghettos is a bad idea?

The Ghetto????

The only place that i know that will have money!!!!
Don you guys get it yet?

 

[Scott]

Sorry Mikey. I thought of making it a MB-exclusive but they've been talking about Starbucks and McDonald's on ICS for the past few months and I figured it was more relevant to the discussion there.

However, your being peeved is justified and duly noted. I owe you another Mikeysboard exclusive post.

 

[Brian R]

Starbucks? Whatever


At the end of the day, you have to make money. You decide how much money you will accept. 10 jobs for $100.00 or 3 jobs for $500.00. Which would you rather do?

Step up the image...like starbucks I guess...but do a great job.

If you don't get paid very much...don't do the greatest job and lose money. But I would try to stay away from this because reputation is important.

If you do one lady's house for next to nothin, you will be doing all her friends houses for next to nothin and you will struggle.

 

[RandyHilburn]

I always believed that both Starbucks and Krispy Kreme were oversold. Never purchased one penny of their stock (unless in some mutual fund). The stock price of 'coffee & donuts' were succeeding in a bubble that was long overdue to pop.

Just like $1.50 bottled water (which is as dumb as $5 coffee) the crash is coming for this product too. What keeps bottled water on the shelves today, I have absolutely no idea. You can bet the bottling companies are still laughing themselves silly!

 

[-JB-]

Amen to that bro!

 

[Scott]

If you don't go to ICS, here's what I posted there today as a follow-up

Re: Brand confusion - Starbucks and the carpet cleaner
Posted By Scott Rendall on 2/16/2009 at 12:27 PM

Starbucks brought the word "barista" into the avg. American lexicon. It was a brilliant move, but they've definitely lost their way.

We'll never know for sure, but I think if they would have kept their focus on high grade coffee made and served by baristas instead of dumbing down the brand to appeal to the masses, they'd probably not be in the mess they're in now. Given the reality/perception of the present economy, they may have had to create $3 - $4 cups instead of $5 cups, but defocusing from a specialty into a commodity may very well have spelled their demise. Their stock price sure reflects their lost way.

For those of us who charge more than the avg. cleaning company, by cutting prices to appeal to a wider range we also run the risk of losing our perception of employing "highly specialized technicians" instead of "overpaid janitors". There is a balance to be found in value and cost, though, and the smart owner/marketer will discover that balance w/o diluting their brand like Starbucks did.

Watching the metrics closely and completely tuning into customer needs is the answer.

This economy presents a GREAT challenge and opportunity for all of us. The loosy-goosy companies will struggle and fold while those who completely tune into the customers' needs will be well positioned to take off once the economy shows signs of improvement. When that will happen is anybody's guess, but if you're in this game for the long haul you should be very excited about the future.

 

[Dolly Llama]

When playing golf with Banana Ball Carpatoni

:shock: :shock:

(me on tee box and dude that's never golfed with me watching me address the ball)

"no, the green is over there"
(pointing well off to the right)

he would seek out a gas station for a cup of coffee

and Wal-mart for a can of spray silicone.....


..L.T.A.