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Back before Star­bucks, most on-the-go cof­fee choices sucked. Star­bucks tasted a lot bet­ter, offered fancy-schmancy cap­puc­ci­nos and, well, seemed a small daily lux­ury a lot of peo­ple where will­ing to spend an addi­tional $3 on.  Life’s too short to drink lousy cof­fee and all that.

Even though espresso-made spe­cialty drinks aren’t really in the same cat­e­gory as reg­u­lar brewed cof­fee (and, frankly, Star­bucks brewed cof­fee is not par­tic­u­larly tasty, IMHO) the pub­lic had been exposed to some­thing bet­ter and was will­ing to divert cof­fee dol­lars to spe­cialty drinks.

mcdonalds_billboardThen McDon­alds unleashed their own pre­mium brewed cof­fee (which really is pretty tasty) and a line of cap­puc­ci­nos and other spe­cialty cof­fee drinks, with Burger King and sev­eral other fast food chains fol­low­ing suit. The choice is no longer between pay­ing $4 for some­thing that tastes good or suf­fer­ing with crap cof­fee.  Now you can pay $1 (or noth­ing on Fri­days) and walk away with a pretty good cuppa joe.

Is it any won­der that Star­bucks closed lots of stores, imple­mented lots of cost-cutting strate­gies, restruc­tured their prices, and came out with a more budget-friendly line of instant cof­fee in order to stay rel­e­vant, attrac­tive, and competitive?

3 Busi­ness and Mar­ket­ing Lessons to take away from this:

1. As people’s options change, so do their buy­ing habits. When was the last time you looked at your cus­tomers options and made sure yours com­pared favor­ably to the com­pe­ti­tion?  When was the last time you thought about offer­ing up a new option?  Bun­dled ser­vices, un-bundled ser­vices, leas­ing, pay-by-the-hour, etc.

Exam­ples:

  • Sat­urn took a merely OK car and made it a suc­cess sim­ply by offer­ing an alter­na­tive buy­ing experience.
  • There’s an HVAC com­pany doing quite well sim­ply by allow­ing cus­tomers to lease HVAC sys­tems (with main­te­nance and replace­ment baked into the lease pay­ment) rather than buy­ing them.
  • One Hour Heat­ing and Air Con­di­tion­ing gave peo­ple the option of not wait­ing at home all day for the HVAC guy and peo­ple took that option in droves.
  • My wife’s pho­tog­ra­phy busi­ness offers cus­tomers a flat fee and they get the dig­i­tal files and print­ing at cost, rather than mak­ing the major­ity of her money on prints.  It has been very suc­cess­ful for her.

Want to grab new cus­tomers?  How about mak­ing them an offer they haven’t seen before…

2. Com­pet­i­tive land­scape deter­mines options.  Often times, you don’t have to be the very first to offer some­thing or do some­thing.  You just have to be the first in your local area or indus­try.  Cap­puc­ci­nos and spe­cialty cof­fee drinks weren’t new cre­ations of Star­bucks. But as Star­bucks expanded, they were often the first to offer them in a fran­chised, wine-bar-without-the-wine atmos­phere for their given loca­tion or town.

For the local busi­ness this has both an upside and a down­side: the upside is your abil­ity to import suc­cesses from other towns, states, nations, and espe­cially to import strate­gies from other indus­tries.  The down­side is that the inter­net and the global mar­ket­place often pro­vide peo­ple with lots of options. If you’re com­pet­ing against the inter­net, you need to face up to that and work that into your busi­ness strat­egy. As Tolkien tells us, “It does not do to leave a live dragon out of your cal­cu­la­tions, if you live near him.”

3. Cat­e­gories don’t define per­ceived options. Before Star­bucks no one would have guessed that you could get some­one to pay $4 for a cup of cof­fee. But Star­bucks wasn’t sell­ing cof­fee, they were sell­ing cap­puc­ci­nos — they just man­aged to steel a lot of cof­fee busi­ness in the process.  And while the jump from cap­puc­ci­nos to cof­fee, from $4 to $1 isn’t that big, the prin­ci­ple remains the same: you are likely com­pet­ing for dol­lars with busi­nesses far out­side your cat­e­gory.  When it comes time to buy Christ­mas presents for the kids, bikes and sports equip­ment and toys and video games and books and trips are all com­pet­ing for the same dollars.

This is espe­cially true if you’re sell­ing a pre­mium or near-luxury prod­uct.  In order to trade up some­where, I gen­er­ally have to trade down some­where else. Con­vince me your prod­uct or ser­vice is the place where I should spend my “trading-up” dollars.

Finally, never dis­count the age-old option of doing noth­ing.  I could buy a new 27-inch iMac, or I could do noth­ing and be happy with the my cur­rent Mac lap­top.  I could go on a vaca­tion, or enjoy a stay­ca­tion instead.  As an adver­tiser, doing noth­ing is often your biggest com­pe­ti­tion, and yet, many copy­writ­ers ignore this com­peti­tor entirely.

And that’s all for me — I’m off to get a free cof­fee at Burger King ; )

Comments

  1. Brian Killian on 11.22.2010

    At least Star­bucks cof­fee isn’t as bad as Tim Hor­tons which I’m mostly stuck with in Canada.

  2. Jeff on 11.22.2010

    Yeah, but Tim Hor­tons has those Wal­nut Bars, mmmm ; )

    Actu­ally, I hate to say it, but I’m not a huge fan of Star­bucks’ brewed cof­fee. Their espresso drinks are nice, but the brewed cof­fee is roasted too dark and brewed a bit too strong for my tastes. Leads to a very bit­ter cup, IMHO.

    If you check around, I bet there are a cou­ple of places in your home town that roast cof­fee. Best bet is to pick up a pound of fresh roasted beans, grind your own cof­fee, and brew it to taste. I’ve been doing that lately and have been more than happy with the results.

    - Jeff

  3. Jason on 12.08.2010

    One note, GM says that Sat­urn was never prof­itable so I don’t think you could call it a suc­cess. Maybe Hyundai would be a bet­ter example.

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