The “Bucks” Ends Here…

One of the core principles of our 5 Laws at Marketing 2.0 Win is the Law of Process = Chaos. What this principle says is in simple terms is that process in the service of strategy is a good thing, however if it is the driver or central organizing principle of a company’s marketing or in this case public face, take care, take very good care.

We can see this playing out on a grande scale right in front of our eyes with coffee giant Starbucks. After an incredible run of phenomenal growth on a global scale, we see the symptoms… declining stock price and unhappy investors clamoring for relief, bringing visionary Howard Schultz back into the CEO role at the company. His self proclaimed goal… to help the company get back to its core… the coffee/community experience that in today’s Starbucks’ corporatized environment seems lost.

How? Howard himself gave us a couple of examples… of this disconnection: fresh-locked packaging, where you can’t smell the product anymore. And “goof proof” espresso machines. Machines that make it simple and fast to “build” a specialty drink, while put a wall between the customer and barrista and taking the artistry out of the drink making process.

I agree with that these are customer disconnects. But do they disconnect with the brand that Starbucks is?, enough so, so as to flatten sales in existing stores, like we have seen with Wal Mart, Dell and others?

In this case I am going to argue the answer is NO. The issue is not a brand conflict here.

Yes, these changes matter to some degree… but they are fixable and incremental issues, touch points that need to be aligned, indeed, but not a commodity-busting strategy that they really need to fix the problem.

You can see this in action in the Got a Great Idea/Tell Us, community function that now is front and center on their web site. I love the concept. Surrender control and open up the floor for your customers to offer their insights and then respond back, with action.

Some popular customer generated ideas… Free WiFi, a Loyalty card (buy 10/get one free) and others are incremental ideas… and sound hardly new or radical. My advice… implement them. However, don’t expect they will turn the tide.

The real issue is that the Starbucks concept is now approaching the mature phase of the product lifecycle, as these ideas so clearly demonstrate. The reality is that the Starbuck’s concept is now a commodity, which in fact the company with its “goof proof” drink making process helped bring about. This means that price, lower price and greater non-differentiated competition are the business drivers.

Look at it this way. MacDonald’s is now rolling out espresso/specialty drinks. Dunkin Donuts, one of the big winners in the Starbuck’s phenomenon, has been offering these lower cost specialty drinks for the past couple of years. Soon enough it seems every fast food chain will offer them. So now what?

Let’s take a closer look at Dunkin Donuts, because here is where the solution lay. At the outset, I admit it, I am a Starbuck’s regular. It is not my favorite, but with locations it seems at every corner nationwide, Starbucks delivers a consistent and premium product that meets my expectations almost every time.

Last week I offered to make the office coffee run, and one of my colleagues ordered not a Starbuck’s but a Dunkin Donuts coffee, medium vanilla. It was then that my mind was blown.

We know that Dunkin is not a premium coffee but a more everyday product, a blend I am told of Arabica and other less expensive coffees. It is a lower wholesale cost, more generic product. But when I saw the price for the cup at Dunkin which was $1.79 or in essence $.10 less that a similar size Starbuck’s, I was floored… generic product at a premium price! The folks at Dunkin must be smiling all the way to the bank! Thank you Starbuck’s!!!

So Starbuck’s is in an interesting position… its premium product is being attacked by generic products and commoditized… forced to concede on price or lose customers, because as we know, you can get a specialty drink anywhere… for less!

What is Starbucks to do?

Howard Schultz, if you read this… incremental, process-oriented activities focused on your existing customers are good but in fact cannibalizing, because these kinds of activities are pulling revenues from your existing audience. I will argue that the way forward in this case is to reposition Starbucks and counterattack to build market share.

In other words, Loyalty is important, but it comes at a cost and won’t drive growth. Look at it this way, “free WiFi” and “buy 10 get one free” are tactics and I will argue not nearly enough. Nor is “watch the barrista” or “smell the coffee.” Although appropriate, these tactics do not a growth strategy make.

Just as Dunkin and others offer what we can argue is an inferior product at a better price thanks to you, Starbucks now needs to execute a jujitsu strategy and show consumers in simple and clear terms the added value of their premium product over the competition. This is a classic re-positioning strategy.

So… ladies and gentlemen, the drum roll please… time for the Pepsi… ooops, the Starbuck’s challenge. Put your product up against the competition in “blind” tastings and build a campaign around it… Wow! This really is better!

As it stands, an espresso is an espresso is an espresso, and it will stay that way until Starbucks does something about it. That time, I will argue, especially if I was an investor and I am not, is NOW. And by doing so, the company can carve out MacD’s and Dunkin customers who in fact are ready to appreciate the difference premium makes. The key is to connect the dots positioning wise and make it clear to them what this difference is where the rubber meets the road, and for Starbucks that is in what is a better tasting cup of coffee every time.

The Case for the Negative Brand?

What a week in the airline industry! We all know the airlines are suffering. High fuel costs have decimated profits and now it appears many carriers as well. Just today Frontier went into bankruptcy in attempt to reorganize, and Aloha and a number of others out of business entirely.

Now add to it the FAA and the “inspection crisis” plaguing American Airlines in particular and their MD80 airplane which makes up more than half of their fleet. For the last couple of days, this fleet has been grounded for apparently long overdue wiring inspections in the wheel wells of each plan, causing thousands of flights to be cancelled and over a quarter million customers inconvenienced at best, often stranded in locations they didn’t intend for hours and even days.

Passengers by law can be compensated for hotels should they be stranded overnight, and of course American will rebook passengers on any carrier and will even issue vouchers for cancelled flights as long as you initiate your next flight by April 17.

And if you go to their web site at http://www.aa.com/index_us.jhtml, you can see crisis control marketing in action… notably an “ADVISORY: AIRCRAFT INSPECTIONS AFFECT SOME AA TRAVEL” on the home page and special jump page at dedicated just for this at http://www.aa.com/aa/pubcontent/en_US/urls/md80.jsp.

If you look carefully you will see that American is terribly sorry, its not our fault, safety is concern #1 and please e-mail us if you are stranded overnight. It appears to be written by a team of lawyers to mitigate liability, nothing else.

Are you kidding!!!

E-Mail us with your travel info and we will get back to you… it doesn’t appear that effected passengers are buying it either. Phone lines are jammed, and customers have been know to try to get through for hours on end with no luck. And ticket lines at airports are no better. Passengers are waiting for 4 and even more hours just to talk to an agent!

What a mess! I will argue, especially in light of the inspections, our trust is shaken, passengers are having vacations ruined, businesses are being disrupted, and all American can do is offer an apology and tell us to e-mail them. The only thing that’s even more surprising to me is the apparent lack of outrage by the public and government officials.

Now let’s go back to Valentine’s Day 2006. A snow storm hits the east coast of the US, shutting down JFK in NY, hub to another airline, in this case a brand that is beloved by its customers. This disrupts Jet Blue to its core. Thousands of passengers are stranded again, some for days. In other cases, they are actually stranded on planes on the tarmac, without electricity, running water and other amenities for hours, in one case up to 14 hours. Not good.

On top of that, their phone systems went down, planes and crews that could have been mobilized to take up some slack, were not utilized and sat idle. There was no apparent recourse and outraged customers went ballistic.

The media also took up the charge. Business Week, which was getting ready to announce their Top 25 Customer Service Champs, had just enough time to publically eliminate Jet Blue, who was ranked #4 overall, from their list entirely. And the talk shows went crazy, with Leno and Letterman all over it.

In this particular case, here was a darling brand in trouble, and Jet Blue rose to the challenge. CEO David Neeleman responded authentically and quickly to the challenge as you can see in this You Tube video produced in response that you can see at http://www.youtube.com/watch?v=-r_PIg7EAUw.

First you can see Mr. Neeleman is tieless and clearly upset. He is not rehearsed or smooth at all. It looks and feels authentic. He apologized, of course, immediately, and then takes responsibility… and potential liability as well. Then he announced 3 steps they were taking to attack the problem immediately and to top it all off, announced their new, groundbreaking Customer Bill of Rights to ensure better performance in the future.

Talk about getting ahead of a crisis!

Contrast that with American. JetBlue messes up and creates outrage, the far bigger American messes up on an even grander scale, they blame the government, seek to minimize liability and we just yawn and thank the powers above that it wasn’t us on one of those flights.

The difference from our Marketing 2.0 perspective… is brand. American’s brand along with the other once platinum carrier brands is tarnished, almost an anti-brand. When we think of major carriers today, we think delays, inconvenience, lousy service, and with all this FAA stuff going on, minimal trust at BEST.

So a problem like this comes up for American, and from a brand point of view, its business as usual. We expect it. Yikes! No brand conflict here, clearly.

Jet Blue on the other hand was another story. People love flying on it for a number of reasons and have a strong brand connection. That was why when they stumbled back in 2006, the brand was in conflict and we were outraged.

I will argue that in the long term, JetBlue understood that they had to act, and that action, pro-active action would have a cost and a short term negative financial impact on the business. I will argue that these kind of issues can be considered a marketing issue and fixing it marketing spend, which as we now see has strengthened customer loyalty and is likely keeping the business healthier in these times.

American has no brand, nothing to protect. Their quote unquote marketing is all about damage control at best and placing the blame on others. This is not a good indicator of American’s marketing prowess, and long term health of that and other similar airlines.