Putting the star and bucks back in Starbucks - Starbucks trial brand strategy

Coffee is a regular topic of conversation in The Marketing Eye office. Normally it’s an argument about whose turn it is to make the next one, but now, for a short time at least, we can claim a professional interest.

Recent reports have revealed that Starbucks is planning to open 3 unbranded coffee shops in its home town of Seattle. We are told that each of the new shops will be unique and tailored to the community in which it is situated. One of the test outlets will feature poetry readings and live music and there will be alcohol on offer and free Wi-Fi. The address of the cafe will be used in the branding, for example one is to be called 15th Avenue Coffee and Tea. Most importantly, there will be no Starbucks branding.

Lambasted by the conspiracy theorists as stealth marketing, the Starbucks experiment is a fascinating case-study in brand life-cycles and brand strategy.

Globally ubiquitous, the Starbucks brand is a phenomenon. Since expanding out of Seattle in the 1990’s, it has re-defined the coffee market and become synonymous with the boom years and globalisation. The signs are, however, that Starbucks might now have reached its peak. Last year’s results showed a heavy decline on previous years and in April, Starbucks reported a further 77% fall in quarterly profits.

The reverse can’t be blamed entirely on the recession as the evidence is that, even with less money in our pockets, there is still plenty of coffee being drunk. The Starbucks star has definitely lost its sparkle. We shouldn’t be surprised, therefore, that returning CEO Howard Schultz is looking for new ways to invigorate Starbucks' performance and return it to growth. The brand has got too big too quickly and is in need of re-invention.

Tailoring a product to the needs and wants of the market goes back to the basic principles of good marketing. The ‘one-size-fits-all’ Starbucks’ model needs modifying and evolving. People have grown tired of the homogeneous outlet and its mass produced product. As consumers, we know that a far more satisfying experience is found in the local coffee shop where a bespoke and lovingly produced beverage is mixed with a genuine appreciation of our custom. Schultz recognizes that Starbucks must present itself as a neighbourhood coffee shop instead of the corporate conglomerate that it has become.

Management Today said: “The move is interesting because it’s essentially a reaction against the kind of bland, ubiquitous corporatism with which Starbucks has become synonymous to many people. It’s basically admitting that some customers are now put off by well-known popular brands and are more inclined to favour smaller local ones instead”.

Opinion on Twitter is divided:
@karentoms said: “How cruel, I'd be gutted to find I'd been inadvertently lulled into Starbucks”, whereas, @bellakatz posted:” Interesting idea. I kinda like it”. @danielmarino summed up most people’s views with his simple: “questionable, but very interesting” comment.

The chief concern seems to be about honesty. @jeremyrandall said: “Unbranded shops feel like subterfuge. How about unique cafes/names, but keep a small Starbucks logo, so it doesn't seem like trickery?”

Starbucks will do well to heed this tweet of wisdom. Adopting and implementing a local marketing strategy under the umbrella brand would be seen as a much more open approach.

As we have said in previous posts, there is no reason why a business shouldn’t operate two or more brands and even allow the brands to compete against each other.

A different brand for a different market is not a new concept: Toyota does it with Lexus: Donna Karen does it with DKNY and there are many more examples. The important point is that there is something different in the customer experience and the customer promise. The early evidence is that this is the intention with the new Starbucks brand, but the strategy will unfurl if it can’t be maintained. The organisation will undoubtedly want to leverage the efficiencies of its larger operation, for example in purchasing. If that also extends to recruitment and training, one wonders how different the customer experience can really be. Same coffee, same staff, same processes - will we essentially be left with only a change in decor?

To work, the change must go deep into the core values. As The Community Room posted on its blog: “Starbucks needs to whole heartedly handover its stores to the community.... How many people would love to host something in these pieces of real estate? Let customers run everything and change the emphasis, so it’s honestly about the local community”.

Starbucks will be faced with some fascinating dilemmas if the new stores out-perform the branded ones: What is the future of the corporate brand? How does it achieve economies of scale in a brand with unlimited physical iterations? How does it become welcomed and not isolated by the communities it wants to be part of?

The authors of brand and marketing text books around the world wait with bated breath.

Leave Auntie AIDA alone - understanding consumer buying behaviour

The esteemed consultants at McKinsey have been burning the midnight oil to come up with the startling revelation that consumer purchases are, wait for it, needs and wants driven.

Yes, it’s true. In its recent paper on the Consumer Decision Journey, McKinsey challenges the linear progression of consumers from awareness to purchase and now says that consumers start with a trigger event that spurs them into action: they decide they need or want something and then set about finding it.

Well, knock me down with a feather.

The disturbing thing, beyond the fact that people are actually paid to come up with this stuff, is that Mckinsey is confusing the psychology of buying with a marketer’s approach to intervening in the process.

The linear progression that McKinsey challenges is based on AIDA – Awareness, Interest, Desire & Action.

To my knowledge, nobody has ever maintained that this is how people buy. We have understood since Maslow was a boy that human actions are based on fulfilling needs. When we have a need, we set about fulfilling it at a speed dictated by the urgency of the requirement and the degree of risk in the decision.

A B2C or B2B marketer’s challenge is to intervene in the process and create a purchase of their product at the highest possible price. This could involve stimulating an impulse buy or making sure that the brand is on the consideration list for a more measured acquisition.

‘A’ stands for ‘attention’ or ‘awareness’ and makes AIDA a good guiding principle when developing the approach to anything from a new brochure to a long-running multi-media campaign.

In the context of a shop, AIDA can mean grabbing attention with a compelling display and then turning the initial curiosity into desire with a great product and packaging. This, in turn, should lead to the action of a purchase.

A brochure or a website, be it B2B or B2C, should follow the same principle. The creator must find the compelling Home page or cover message that encourages the reader to delve deeper and deeper until action is taken.

Awareness comes into play for the more complex decisions when the purchaser may decide to explore the market. A marketer needs to create awareness to ensure the product or service is in the consideration set in the first place. This awareness could be created by brand advertising or a face-to-face relationship, either way it is a necessary pre-curser to interest in the marketer’s product, the decision that it’s the right solution and the action of purchasing it.

AIDA remains valid and has its place for those that understand it. To claim insight from the revelation that purchases are needs and desires driven is like proclaiming the Earth orbits the Sun.

Next...

When the tail wags the dog – the great sales versus marketing debate

How can you tell if a salesperson is lying?

His lips are moving.


Don’t you just love the arguments between salespeople and marketing? Ali v Foreman was nothing compared with the constant bickering between these two old adversaries. Like brothers, they defend the family honour in public and snipe at each other in private.

I came across an excellent LinkedIn discussion last week started by a sales guru who was giving marketing both barrels: sack the Chief Marketing Officer; make every marketer spend at least a year in sales and measure marketing performance solely on the basis of reductions in the cost of sales where among his more strident remedies.

Never one to resist an argument, I couldn’t help but wade in with a view.

So, let’s try and resolve this once and for all. Should the marketing department be a support function to sales or is sales a function of marketing?

In my career I have seen examples of both. Now I’m running my own business, I see it from yet another perspective.

Among my favourite definitions of marketing is the one provided by Professor Paul Fifield who says that the sole purpose of marketing is to sell the maximum amount of units at the highest possible price.

So there you have it, even a Professor of Marketing admits that, in the final analysis, marketing has to deliver sales and profit. Perhaps the salespeople are right? Marketers should immediately bow down to Sales and accept their true position in life.

But what would happen if they did?

I have worked in organisations where salespeople rule. The top roles were filled by the top salespeople and every conversation was about turnover and pipeline. In this environment, the role of marketing was invariably limited to tactical direct mail campaigns, brochures and corporate gifts: all geared to supporting this week’s idea and today’s income target. To create a discussion, let alone gain sponsorship for more strategic initiatives was all but impossible.

This is not to say that the salespeople who were promoted into the senior management positions didn’t have the ability to be strategic. Of course they did, but because the culture was so heavily geared towards short term measurable results, tactics tended to dominate the decision making process. Business performance was highly cyclical as a result with great highs and near catastrophic lows.

Another great definition of marketing is ‘making friends with people who might need you one day’.

The definition needs some work. ‘Might need you’ feels untargeted and ‘one day’ too uncertain, but I love the whole concept of marketing and business being about ‘making friends’ and forging relationships. The idea that a customer would consider a business a friend is a brand Nirvana, providing as it would a platform for long-term sustainable growth and resistance to the worst highs and lows of economic conditions.

Inevitably the idea of building a brand and making friends is too soft and intangible for many people.

Let’s be in no doubt, and I see this first hand in my own business, Sales is one of the most important components of the marketing strategy. If the leads aren’t being found and converted, there is no long term to plan and position for, so the marketing department needs to get its finger out and do its bit to feed the machine.

But Sales is exactly that: one part of the marketing strategy and it puts the cart firmly in front of the horse to have Marketing reporting to Sales. All of the elements of product, price, place, promotion, people, process, physical evidence and positioning need to combine before a business can make friends with customers and sell the maximum number of units at the highest possible price.

A Head of Sales who has the ability to do all of this - manage sales performance as well as think about strategy, targeting and positioning - isn’t a Head of Sales at all, but a Head of Marketing... and thoroughly deserving of the title.

Let me entertain you

With Wimbledon filling the screens and my old chums at RBS coming under attack yet again, this time for laying out £300k on tournament tickets, I couldn’t help but stick my oar into an online discussion about corporate hospitality.

Twitter led me to a blog post aimed at the professional services sector. The post held that entertaining clients and referral sources wouldn’t, by itself, lead to new client work. The phrase ‘by itself’ saved the post from being overly contentious, but I couldn’t stop myself jumping to the defence of good old fashioned client entertainment.

The recession has led to a rapid reining in of hospitality. As The Marketing Eye reported in its news pages last month, many marketers have considered removing corporate hospitality from the marketing mix altogether. A corporate paranoia has emerged, where companies are afraid of being perceived as being profligate in their expenditure on clients.

This is understandable, but we shouldn’t throw the baby out with the bath water.

The value of corporate hospitality was reinforced to me on Friday when the business development manager from our printers came to see us. Brian might be described as being from the old school of sales. There’s nothing he doesn’t know about us: where we go on holiday, how many children we have, what our hobbies are – is all information stored in his mental hard drive. And, of course, he doesn’t just know about us; he has the same information stored on all of his clients.

Brian’s knowledge of his clients is second to none. The occasional lunch has been part of his information gathering strategy and has done wonders to reinforce our opinion of him as a genuine nice guy. The result is a loyalty that is hard to break.

While we wait for the economy to recover, there are few better investments than getting to know clients. Generation Y decision makers might be satisfied with getting to know people through Facebook profiles, but until they dominate there is no substitute for getting to know customers face to face. Relationships will always be deeper, more enduring and more productive.

Whether it is to seal a deal, embed a relationship or say thank you for the business, lunch or a round of golf is an ideal way of spending a concentrated period of quality time with a client or prospect. Just remember why you are there.

Anyone for tennis?

Tweeting about a revolution

As the events in Iran unfold, we are witnessing what many will claim to be the first Twitter enabled revolution: a situation where the social networking tool is credited with sidestepping the censorship efforts of an authoritarian regime to allow democracy and people power to win out.

Monitoring #iranelection over the past week has been fascinating and disturbing in equal measure. The tweets are so numerous and so rapid that it is almost impossible to keep up with them.

"Iran Khodro workers on strike, Vahed bus drivers announce solidarity. If oil workers join movement, this can change history."

"Basij marking homes again! Check before entering, & wipe it off w/ oil"

"We've been beatn, tortured&killed for the last 30yrs. Nothing supreme liar says can break our will for freedom"

"#Neda video, a girl being shot in Tehran by Basij sniper http://bit.ly/4GxhY"

We are told that the government in Iran has slowed internet speeds to a crawl and is blocking popular communication sites. Twitter, which can be updated from mobile phones, has allowed the messages to keep coming out.

"RT @persiankiwi Yahoo, Gmail and Hotmail is now completely out of service in Iran"

Tweeters are turning their avatars green in support of the people of Iran, a call that has been widely taken up as a tide of emotion and solidarity sweeps across the globe. President Obama warned Iran on Friday that "the eyes of the world are watching you" and nowhere is this more true than on Twitter. Time magazine said: "President Ahmadinejad finds himself in a court of world opinion where even Khrushchev never had to stand trial".

As Andrew Sullivan observes in today's Sunday Times, it is tempting to reflect on how things might have been different in the Chicago demonstrations of 1968 had Twitter been around. One wonders too how the government of the day would have reacted - would it really have been any different to the way Iran is reacting now?

There is a need for caution, however. For all Twitter's influence we have to be careful that we don't get swept up in a one-sided view of events.

Twitter is a populist media. Uncensored and unedited, people can post anything to it they want. Identifying the truth from the rumours, lies and misinformation is almost impossible and while it is wrong to question people's intentions, it is evident that there are a number of people jumping on the 'go green for Iran' bandwagon without a proper analysis of the facts.

If Twitter is going to be a true tool for democracy, tweeters and their followers have to be discerning in what they post, read and believe. However distasteful it might seem on occasions, the medium also has to be available to both sides. Whenever we see any hint of support for Ahmadinejad, or possibly even an attempt by the regime to use Twitter for it's own ends, it is quickly denounced.

"DO NOT RT anything U read from "NEW" tweeters, gvmt spreading misinfo" was a popular tweet last week.

Ashton Kutcher called the creation of Twitter "as significant and paradigm shifting as the invention of morse code". That may be the case, but the role of 'old-media' journalists in gathering the facts and giving voice to both sides of the argument is now more important than ever.

Speed networking - is it worth it?

This post is by Bryony Saunders, Marketing Executive with The Marketing Eye.

I walked into my first ever speed networking event slightly late. I was delayed by a road accident on the way and by the time I got there, everybody was already in full flow. Bemused, nervous and embarrassed, I watched and awaited my fate.

People were seated at tables facing each other in deep conversation. Everybody looked so confident and business like and I could feel my heart beating inside my chest as I scanned the room for exit options. Unfortunately, my scheming was interrupted by the shriek of a whistle signalling the end of the first 4 minute networking session. This was it; I was taken to sit opposite my first victim.

I had thought through what I would say: I would introduce myself and then add a 2 minute piece about our company and what we do. I didn’t, however, expect to be put on the spot immediately. Sympathetic to my nerves, my first contact agreed to go first.

Then my turn came. I tensed myself to speak, but before I could even say our company name the whistle was blown. I had to move on...I had let him fill the entire four minutes talking about himself!

Right, I thought, I’ll do better with the next one and actually get to speak.

To my pleasant surprise the next victim was very handsome, which caused different problems. I immediately went red, started to stutter and lost track of what I was saying! Gosh, this is not what I expected at all...why is it so hard?

When my handsome opponent spoke, he was so well practised that his spiel was almost robotic...not very natural or interesting at all. My heart sank!

As I moved down the row of people every 4 minutes, the ritual did seem to get easier. Everyone relaxed a bit, become more natural and took more interest in what the other person had to say, rather than worry about themselves. I even started to enjoy it myself.

The people that came across the best were the most natural and slower speaking ones. The hard sellers were off-putting and the too well rehearsed just un-engaging. But you do need to know what you want to say and remember why you are there – to get business.

My advice, if you are going to give this networking style a go, would be:

1. Think about what you are going to say, don’t rehearse it word for word, make it a quick and effective message about your business and the type of customers you are looking for


2. Take your business cards to hand to each person


3. Take a notepad to write details down about each contact – you’ll struggle to remember them all afterwards


4. Be genuine, smile, and if you are not interested, try not to look too bored!


5. Don’t promise things that you don’t intend to follow up on later simply to be polite


6. Think about what you are looking to get from the event and measure your success


7. Follow up any opportunity or interesting connection as soon as possible afterwards. Strike while the contact is still hot.
   

So is it worth it?

Well, once you get past the initial shock, I found it a very good way to network.
You get to meet lots of people quickly. At normal networking events you usually only speak to the people that are closest to you. At a speed networking event, you get to meet everybody, whether you like or not!

And everybody knows why you are there, so you can just cut to the chase! The time is long enough for you to work out if the person will be of any benefit to you without having to engage in all the awkward small talk that goes with it.

Even if you think the person you are talking to will have no use for your product or service, they are likely to have a large number of contacts. Most business people have several hundred contacts and you never know where your business card might end up.

If there is a downside, it is that everybody is there to find customers, not suppliers, which is why, I think, a lot of promised contacts come to nothing afterwards. The leads that are most likely to be successful are those where there is an opportunity on both sides.

At the end of the day, I came away with a handful of leads and a purse full of business cards. We’ll see what they come to, but on balance I would say yes, give it a go!

B.

Banking on a brand

Santander has announced that it is to rebrand all of its UK operations.

Bradford & Bingley, Abbey and Alliance & Leicester are to disappear from our High Street to be replaced by Santander, creating the prospect of 3 branches of the same bank in every major town - for the time being at least.

The driver for the change is a strategy to establish Santander as a global brand. Arguably one of the best managed banks in the world and currently 7th largest by asset size, Santander doesn’t yet have the perception of scale of an HSBC or Citibank.

To Santander, the solution is to make the brand ubiquitous. All group business will carry the Santander brand and there will be an ongoing programme of high profile sponsorships and media placements to support it.

But will this be appreciated by the customers?

As we look across the landscape of major banks in the UK, we see a variety of brand strategies in operation.

HSBC, like Santander, favours the monolithic brand approach, branding all of its businesses and marketing as HSBC.

RBS prefers to manage a portfolio of brands that includes NatWest, Coutts, Direct Line, Churchill and Lombard.

Lloyds Banking Group, like RBS, maintains a number of brands, including Cheltenham & Gloucester and recent acquisitions, Halifax and Bank of Scotland.

Barclays, on the other hand, is taking a sub-brand route with Barclays Capital, Barclays Wealth and Barclays Commercial, among others, being allowed to spin off and develop their own brand personalities.

So, why the different approaches and which one is right?

One brand applied to all businesses helps build brand recognition and is infinitely easier and less expensive to manage. There are limitations, however.

HSBC has been eminently successful in creating one of the world’s leading banking groups and its logo can be seen in all corners of the globe. The ability to adapt the brand to suit a particular target market is, though, constrained and being seen as a banking behemoth is not universally attractive. HSBC has had to invest heavily in the global ‘The world’s local bank’ campaign to show it is still in touch with its customers, whoever and wherever they are.

A monolithic brand strategy is fine in the good times, but when part of the business’ reputation comes under fire, the whole brand is affected. Never has this been more clearly demonstrated than in the current banking crisis.

The RBS brand, once hailed as the home of astute and savvy Scottish bankers, now finds itself a symbol of the meltdown of the whole financial services industry. The bank now has to hide the RBS brand under a bushel and promote the individual businesses for fear of derision if it does anything else. Fortunately, the brand strategy gives it this option.

Conventional wisdom says that if the target market, customer promise and proposition are different, then a separate brand should be used.

The multi-brand strategies operated by Lloyds Banking Group and RBS have allowed them to tailor different propositions to suit the different audiences they talk to. The cachet that the Coutts brand has to its high-net-worth clients, for example, would be lost under a re-brand to RBS Private Banking.

A multi-brand strategy also allows these banks to attack their markets on several fronts. A customer that decides against Halifax for a mortgage might still choose Cheltenham & Gloucester, be it through lack of awareness, convenience or some other perceived difference in the product, price or delivery proposition.

This then leaves the Barclays approach, which seems to be neither one thing nor the other and has all the hallmarks of an internal battle being won by certain sections of the business. We understand the breakaway started in Barclays Wealth, where the management felt their association with an everyday High Street bank was constraining their ability to win business. Rather than show the specialism with copy, image style and appropriate media choices, the bank has allowed a sub-brand to be created, which has then had to be replicated through the other divisions in the organisation. The danger of a sub-brand strategy is that, without careful management, the number of sub-brands gets out of control and the master brand becomes fragmented and diluted.

So, is Santander right to re-brand in the UK? We think not. We believe customers would have enjoyed the choice between the 3 businesses and that, in taking the route it has, Santander has given up the opportunity to position each brand for a different market. This would have given more options to consumers and created cross sales opportunities for the organisation.

We have no doubt that Santander will achieve the benefits of its scale, whether it rebrands in the UK or not. Organisations should keep in mind though that scale matters to the City, not to customers, and that analysts are more than capable of working out who owns what.