Restoring the core at Starbucks
Guest post from our new Managing Partner in New York, Carmen Ringlemann
I never expected my morning yoga class to give me marketing lessons, but when Heidi said, ‘know where your core is’ as we were easing our way into a challenging asana position, I thought what a good reminder for marketers today.
In yoga we learn how important it is to be rooted to the core of what holds our bodies together to maintain a posture that sustains good health. As we marketers embark on our stretchy communication and innovation programs, we should also remain rooted in the essential qualities that brought our brands into existence and hopefully fame.
A brand that has recently restored its core from a daunting decline, and thus rekindled its very "brand soul" and so restored profitable growth, is Starbucks.
With rocketing success since its inception in 1971, Starbucks defined a new coffee experience, established the ‘3rd place’, and Howard Schultz became a hero on Wall Street. Starbucks enjoyed unprecedented growth in the 90s and 00’s, adding 16,000 stores worldwide in just 2 decades. But in this rapid expansion, the company lost sight of the fundamentals that made it famous. It chased too much growth, too fast. Attention to detail in delivering a quality coffee experience were lost to the extension efforts. Its core offer was commoditized as the focus turned to food, music, and yet more locations. This showed in the results, a 10% decline in same store sales from 2008.
"The big issue I think was that growth is not a strategy, it is a tactic, and if growth becomes a strategy I don't think it is an enduring one. I think growth covers up mistakes." Howard Schultz, Founder and CEO Starbucks
Howard Schultz returned as CEO to re-take the reigns once again in 2008, as we posted on here. He lost no time to refocus the company on the core coffee business:
– He closed all its stores for 4 hours on the same day to retrain its employees in doing what Starbucks should do best – make great coffee. “It was a shock to the system and public admission that we needed to go back to the core” Howard Schultz
– Starbucks has steadily refreshed and refurbished its core coffee offering, introducing a favored Pike’s Place blend (Pike’s Place was their original store location in Seattle in 1971)
– Introduction Via, its instant coffee
– Launch of a mild roast, Blonde
– Re-focusing on the barista’s delivery of coffee. One of the key success factors we all admired and quoted so often about Starbucks, was their attention they paid to how the consumer received the coffee from the barista and the relationship that ensued.
The lessons from Starbucks are invaluable for marketers who must pay attention to revitalizing their core brands after decades of over-expansion may have diluted its essence:
1. Remember and Refresh:
Look back at what made you famous – bring this back to life with renewed relevance.
Look forward to what’s changing – refresh the core offer to keep it honestly appealing.
2. Renovate in Waves:
It’s a cycle. Spring comes about every year.
Create continuous news in chapters of renovation – total concepts based on big ideas, not just new flavors.
3. Innovate the Core:
Don't think innovation is only "big I" Innovation like Apple stretching into the iPad and iPhond. It can also be "liitle i" innovation to upgrade the core offer, taking a leaf from Shultz
Howard Schultz has successfully turned around the fortune of Starbucks in his relentless efforts to rekindle the core of the brand. In January 2012, Starbucks announced a growth of 9% in comparable store sales, resulting in a 13% increase in net revenue to a record $3.4bn.
At the heart of this brand’s success is another fundamental truth – the passion and purpose of the founding brand leaders add a critical element to a brand’s success: “I didn’t come back to save the company—I hate that description— I came back to rekindle the emotion that built it.”
Note from David: its nice to sometimes call things right. Here's what we said back in 2008 when Shultz returned: "My bet is that one year from now Starbuck's will be in much better health. In fact, I think its time to buy some stock… check back here!"
Well, I did buy stock. And if only I'd added a few zeros on what I bought….. well, I wouldn't be here writing this 😉
