Brand Autopsy

There are lots of Halloween traditions and festivities but none as odd as what the Fault Line Flyers soaring club does every year.

Yesterday in Briggs, TX (about 50 miles outside of Austin), glider pilots and their designated bombardier attempted to hit a bullseye by dropping a pumpkin from the sky.

Yep. You're in a glider. A thousand feet above land. And dropping a pumpkin on a target. It ain't easy. But it's fun. The winning drop was a mere 9-feet from the bullseye.

Curious to watch?

Here's what goes down every year at the Fault Line Flyers "Pumpkin Bombardier" Day...

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Some of you know this, while most of you suspect this. The designer brand name clothes you buy at outlet mall stores were most likely never sold at full retail price in a store. It's retailing's not-so secret dirty secret.

According to a BusinessWeek article, as little as 10% of the designer brand name merchandise sold in outlet stores was actually on the shelves of an upscale retailer.

At Off 5th stores from Saks Fifth Avenue, only 10%-to-20% of the merchandise comes from Saks markdowns. Which means, about 80% of the merchandise is made by vendors solely to be sold at Off 5th stores.

Same thing happens at Nordstrom Rack outlet stores, where up to 75% of the merchandise was never sold inside a Nordstrom store.

While many of us during this recession have decided to do more shopping at outlet malls, the goods we've gotten might not be the goods we thought we were getting. Just thought you should know this dirty retail secret.

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Earlier this year Starbucks made Internet access totally free in all its company-owned U.S. stores. Now, Starbucks has launched the online Starbucks Digital Network, available exclusively in its U.S. locations.

This network, according to a company press release, is "a collection of hand-picked premium news, entertainment and lifestyle content along with local insights and events. Developed for screens big and small, customers with Wi-Fi enabled laptops, tablets or smartphones can visit the network while in line or while enjoying their favorite beverage in the café."

To bring this digital network to life, Starbucks, along with Yahoo!, is working with lots of content partners including: Apple, New York Times, Wall Street Journal, USA Today, Rodale (health and wellness publisher), LinkedIn, Zagat, and SnagFilms. Essentially, this is a "walled garden" of online content that Starbucks and Yahoo! will tightly control.

Mark Walsh from MediaPost questions the sanity of Starbucks digital network strategy. Mark remarks, "My initial reaction to the Starbucks digital hub is 'why?' Isn't free WiFi enough of an incentive to bring in customers who might otherwise not come to Starbucks? The swelling laptop and netbook population in stores since the company switched to free Web access in July attests to that."

Agreed. Why bother?

Here's why according to Stephen Gillett, Starbucks executive vice president, chief information officer and Digital Ventures general manager...

"Our customers are the inspiration for the Starbucks Digital Network. They’ve told us they want to be the first to know what’s happening in their neighborhoods and around the globe, to have an easy way to discover new music, great books and important films and find ways to be more involved in their communities. And they’re connecting with the brand digitally in numerous ways. These points combined with our passion for creating a unique customer experience, our heritage of recommending culturally-relevant works and focus on giving back to the community, led us to create this new, one-of-a-kind, localized content experience with Yahoo!."

Disagreed. How bothersome.

Let's get real. Here's the real why bother.

If we put Stephen's words through a digitization monetization translation filter, we learn Starbucks has overcomplicated all of this because they are trying to make money from all of this. Starbucks has already done something uncomplicated to get customers to linger longer inside its stores — it made wi-fi access totally free. (The general assumption being if customers linger longer inside Starbucks using the free wi-fi, they will buy more goodies.)

Perhaps a more accurate quote from Stephen should read like this...

"Our ancillary need for profit is the inspiration for the Starbucks Digital Network. The analysts working on Wall Street have told us we need a systematic way to discover new revenue, great profit and important mechanisms to financially leverage our community of customers. We're monetizing our customers with our brand digitally in numerous ways. These points combined with our passion for creating a unique revenue stream, our heritage of being a relevant high-growth stock and focus on giving back to the Wall Street community, led us to create this new, one-of-a-kind, monetizable experience with Yahoo!"

We've been through this before.

Remember how Starbucks, in the early 2000s, spent too much of its time and talents trying to sell CDs, books, and movies to its customers? I remember. I also remember Starbucks selling real estate space inside its stores for Kozmo.com drop boxes. We can go further back and dig up Starbucks failed dot-com strategy from 1999, which cost the company millions.

As it relates to the Starbucks Digital Network, rest assured, it is more about making money than fostering community.

Starbucks contends it is not charging program partners $$$ to be involved with its network available exclusively to tens of millions of its affluent customers. While money may not be changing hands, Starbucks is sure to have bartered receiving advertising placements inside the pages of their newspaper partners and display ads on the websites of all their program partners. Starbucks will also benefit financially from money its customers spend with any content provider while on the network.

All of this potential money making activity that's far outside Starbucks comfortable home of coffee troubles me today, just as it did in 2004 when Starbucks strayed from what it does best. Then, Geoffrey Moore, business strategist and venture capitalist, made a smart observation that applies today... "If Starbucks is just trying to find more ways to monetize the traffic that comes through, this is a bad idea. At some point the customers will start to feel abused."

I'm afraid Starbucks, with it's newly launched Starbucks Digital Network, is falling victim to a proven failed strategy of trying to monetize its customers in ways unrelated to coffee.

Why bother Starbucks? You already know how this will turn out.

The following is a homespun reenactment of an "Ignite Talk" I gave recently in Austin, TX. Cameras were rolling at the event; however, the video will not be posted online for weeks. So ... I've recorded a video of my slides (advancing every 15-seconds) with a voice-over of the key points I shared during my talk.

The title of my talk was FLUENT TALK ON STUTTERING. Watch below to learn why I'm qualified to talk fluently about stuttering.

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>> YouTube video link

Three economists won a 2010 Nobel Prize for developing a theory based upon "markets with search frictions" to explain why people remain unemployed despite plenty of job vacancies.

For non-economists like me (and like most everyone reading this blog), I can't begin to understand "markets with search frictions."

Thankfully ... Justin Lahart and Jason Lee, from the Wall Street Journal, explain this with simple text and simple visuals. I found the following worthy of a just-created 2010 Novel Piece Prize for Luminance in Economic Explanation.

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Justin writes...

"Peter Diamond on Monday shared the Nobel memorial prize in economies for research into the difficulty buyers and sellers face in finding each other and how that can disrupt a marketplace. The laureates showed that such 'search frictions' can lead to increases in unemployment, despite classic models of supply and demand.

For example, if your inability to sell your house keep s you from taking a job elsewhere, that can have an outsize effect on the job market. In a seminal 1982 paper, Mr. Diamond used a strikingly simple parable to illustrate the point — a parable that applies to today's unemployment problem." [source: Wall Street Journal, Oct. 16, 2010]

Jason draws...

Congratulations Justin and Jason on being 2010 Novel Piece Prize winners for Luminance in Economic Explanation.

"Amid customer complaints that the Seattle-based coffee chain has reduced the fine art of coffee making to a mechanized process with all the romance of an assembly line, Starbucks baristas are being told to stop making multiple drinks at the same time and focus instead on no more than two drinks at a time." Wall Street Journal article (Oct. 13, 2010)

This conversation of balancing speed of service with soul of service isn't a new one for Starbucks.

It's territory we've covered here many times (and its territory covered in my TOUGH LOVE screenplay about the drama surrounding a fictitious Starbucks known as Galaxy Coffee).

Just a few years ago, Starbucks closed all its North American stores to retrain its Baristas on the "Art of Espresso" in hopes of finding a better speed/soul service balance. And today, the Wall Street Journal reports Starbucks is rolling out revised drink-making procedures designed to "make stores operate more efficiently."

Seems to me the issue here is less about being efficient and more about being effective in serving better tasting drinks to customers.

Former Starbucks President Jim Alling once said, "As much as we want to meet people's desire to produce beverages quickly, we also realize that people want a smile with their drink, that they don't want to feel rushed."

If there is one lesson Starbucks has learned in its nearly 40-years of being in business, it's taste will always trump speed. Starbucks customers are paying a higher-price for a higher-quality coffee experience than can be found at a quick service restaurant (McDonald's, Dunkin Donuts, etc.) People will wait for a better-tasting cup of coffee.

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Originally available only as a digital download, TOUGH LOVE is now available in paperback. Learn more about TOUGH LOVE from these archived posts and from ToughLoveScript.com.

Huge hat tip to @Laermer ... nice find Richard!

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“A business that makes nothing but money is a poor business." -- Henry Ford

Nancy Duarte has just published RESONATE, a prequel to Slide:ology. Inside RESONATE you'll learn the Duarte Design methodology for crafting killer presentations. The methodology is explained in-depth without being preachy or uninteresting. It's solid advice for any presenter needing to resonate with an audience.

However, you might be too busy to read RESONATE. If so, here's a far too short and ultra tweet friendly summary presented visually.

"Craft a visual story that takes the audience on a journey from WHAT to WHY to HOW."

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DISCLOSURES: (1) For my summary, I borrowed heavily from a line found on pg. 23 of Nick Morgan's excellent book on presentations... "Take your audience on a journey from why to how." (2) The publisher, Wiley, sent me a free copy of RESONATE.

The following continues my irregular postings of business book summaries. I’m striving to keep these summaries to less than 300 words.

THE MESH | summarized in about 300 words

How do you categorize upstart businesses like ThredUP, Zipcar, Crushpad, and Etsy? Lisa Gansky, founder and CEO of numerous Internet companies, gives these businesses the label of being a "Mesh" business.

In her just-published book, THE MESH: Why the Future of Business is Sharing, Lisa Gansky explains the characteristics guiding Mesh businesses. She uses "The Mesh" as a metaphor "to describe a whole new phase of information-based services" that "share information to facilitate access to new customers, customer preferences, and goods."

The four characteristics of Mesh businesses are: Sharable, Smartphone friendly, Tangible products, and Socially-networked.

Sharable
The basic offering of a Mesh business is "something that can be shared, within a community, market, or value chain." For example, ThredUP is a kids clothes swapping business where members, on the ThredUP website, list shirts and blouses they want to swap and want to wear. You choose, you ship, you swap, and your child wears something new.

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Smartphone friendly

Since Mesh businesses are designed for the web-savvy, being accessible to conduct transactions by a smartphone is a must. Zipcar, a car-sharing business operating in 49 states, makes it easy for its members to use smartphones to rent a car for a few hours.

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Tangible products

The Mesh, according to Lisa Gansky, "enables businesses to profit handsomely by streamlining access to physical goods and services."

It's not easy to get into the wine-making business. Meticulously tending to grapevines isn't an option for most, nor is having all the wine-making equipment needed to make and bottle wine. Crushpad gives regular wine lovers access to high-quality grapes and the equipment plus expertise needed to make and bottle their own wine.

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Socially-networked

One of the more compelling characteristics of Mesh businesses is how they've baked social media into how they engage with customers. Etsy, an online seller of homemade arts, crafts, and goods, has thrived because it fosters a community of engaged buyers and sellers who use social media to tell others about the cool stuff for sale made by a passionate craftsman.

Of course, "many Mesh businesses are at the beginning of their life cycles" so time will tell if the Mesh recipe is truly characteristic of business success today and tomorrow.

WORD COUNT: 366

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[NOTE: I often receive free copies of biz books from publishers and publicists. The publisher, Portfolio, sent me a free copy of THE MESH to review.]

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“People may talk about a brilliant advertising campaign, but they will never advocate an ad the way they advocate a product they love." --Douglas Rushkoff