• Julia Loughlin

A cautionary tale from Starbucks...

I was chatting with a client the other day about a new brand they're creating. They're at the crucial point of making the trade-off decisions about choosing their target market and it got me thinking...

A big part of the marketing conversation is about knowing who your business is as a brand. But perhaps even more importantly, it's about understanding what it is not.

Positioning has been described by the experts as the space your brand occupies in the mind of the consumer. It’s essentially their understanding of your business relative to the competition.

There will be some things that you have in common with your competitors. If you’re a coffee shop for instance, you’re (hopefully) going to be able to make a decent cup of coffee.

So, to create a strong, unique brand, you need to differentiate on something else. Maybe it’s your affordability, your speed of delivery or your premium service. In the coffee world, there is the legendary example of Starbucks creating the ‘Third Place’ between home and work.

They attracted customers by creating an atmosphere with music and comfy couches and quality (it’s all relative) espresso coffee sold at a premium.

Then there are the points of difference because you choose not to do them at all. You make the call not to play in that space. Not because you don’t think you can win, but because it’s not who you are as a brand.

Starbucks was not about creating fast-food, ultra-convenient, cheap coffee.

Until it was.

Eventually the quest for greater short-term profits over-ran the long-term goal of building an enduring brand. Its desire to turn over more customers and cut costs to boost profits led Starbucks to lose sight of what it was. It entered Dunkin’ Donuts’ and 7-Eleven’s territory of automated, sub-par, budget coffee.

What happened? It saved some cents on the cost of each transaction but revenue dropped because the price-point changed and the number of transactions fell because it lost its core customer base. Its market capitalisation plummeted.

It proves the old adage true: If you don’t stand for something, you’ll fall for anything.

Starbucks is a cautionary tale. Yes, it had the added pressure of being a public company but diluting your brand through sloppy decision-making is a risk for any business as it seeks new growth.

For a chance of mitigating this risk you have to know- and continually remind yourself -who you are. And you won’t ever really know who you are until you know what you are not.

P.S. Starbucks eventually got back on course (and surpassed its previous height of success) with the return of founder Howard Schultz to the role of CEO.

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