I first met Zane Safrit at a Word of Mouth Marketing Association Conference in Orlando back in 2006. He was on a panel discussing how he, as then CEO of Conference Calls Unlimited, baked Word-of-Mouth into the corporate culture of his company. By far, he was the most lucid and approachable of the panelist. I was impressed.
These days, Zane is working on the next phase of this career. He's also blogging and hosting a weekly conversation on Blog Talk Radio with interesting businesspeople. And earlier today, we chatted.
We chatted about the Five Common Causes of Brand Demise [at 8:40], the business challenges Starbucks is facing [at 32:45], and lessons Whole Foods Market has learned from recent failures [at 71:45]. Some the advice I share about what Starbucks could do to regain vitality might surprise ya [at 53:00].
Listen in ...
I could be biased. I just don't like Starbucks coffee. The local shop makes killer French press coffee and doesn't have to cater to the masses the same way Starbucks does. .
I guess what I don't understand is: how has the Starbucks brand failed if they have a virtual monopoly of the market? They are becoming as associated with coffee as BandAid is to bandages and Google is to search engines.
The stock may have declined, but that's probably because people are naturally suspicious of monopolies as they limit personal choice and raise prices. People are hostile to their omnipresence rather than their branding.
Lattes are also a very elastic good. When the economy hits the tank, it's generally one of the first things we cut in lieu of the standard "cup of coffee". I'm not sure how I'd brand myself out of that, other than making the coffee cheaper or having a loyalty program of some stripe.
Thoughts?
Posted by: Michelle Greer | August 28, 2008 at 07:31 PM
Michelle ... the Starbucks "brand" hasn't failed. In the peaks and valleys of business, they are in a valley. This is the first valley in the company's 37-year history.
During the company's initial growth spurt from 1992 to 1996, the US economy wasn't the best. Yet, people were freely buying expensive coffee drinks. Specialty coffee at that time was viewed by Starbucks as being an inelastic good. Since specialty coffee ain't as new today as it was then, we all know $4 Lattes are more of an elastic good.
SBUX is anything from a monopoly. There are an estimated 17,000 independent coffee shops in the US. Starbucks has 7,000 US locations.
Think of Starbucks this way ... they are an "alternative band" that got popular ... really popular. Does this "alternative band" make the best music? Probably not. Did this "alternative band" change music forever? YES. Is this "alternative band" as cutting edge as it was when it was undiscovered. NO. Will this "alternative band" keep churning out music that people will buy? Yes. Will this "alternative band" ever regain the status they once had? Probably not. Given this ... doesn't Starbucks begin to look/feel a lot like REM?
Posted by: johnmoore (from Brand Autopsy) | August 28, 2008 at 08:01 PM
Starbucks introduced the latte to the American populace and then somehow made it stick. Some of this was marketing for sure, and some was being in the right place at the right time. My parents never drank lattes. Then Cafe Medici came in and made it better for the same price and to a local audience. If anything, Starbucks opened more coffee bars than it closed because now we have a whole sector of people who can't get by on anything less than a double espresso.
Unlike REM, Starbucks still has an outrageous percentage of the coffee bar market, even though their coffee is just sorta meh. People drink Starbucks because they need a caffeine fix and it is around, or they don't know any better, IMO.
Posted by: Michelle Greer | August 28, 2008 at 09:57 PM
Michelle ... you are right -- no Starbucks, no Cafe Medici. That we agree.
We also agree Starbucks competes today on being convenient more than being unique.
What's great here is because Starbucks is so "meh" ... it offers lots of opportunity for coffee spots like Cafe Medici to be so much better than "meh."
Starbucks has done more for the independent coffee scene than anybody or anything else. Why? Because Starbucks has initiated more people into appreciating a higher-quality cup of coffee that comes at a higher price. And because of this, Indie coffee shops are able to charge a higher price allowing them to deliver a higher-quality cup of coffee.
Starbucks has been successful. They have succeeded in the game of business. To hate the player is to hate the game. Dig?
Posted by: johnmoore (from Brand Autopsy) | August 28, 2008 at 11:16 PM
I do dig. And now I want a $4.50 cappuccino. Damn you, Starbucks!
Posted by: Michelle Greer | August 28, 2008 at 11:50 PM