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October 27, 2006

Starbucks and the Aspirational Lifestyle

After lunch at Pei Wei with a friend and co-worker yesterday, I stopped in the Starbucks next door to pick up a coffee to bring back to work. That led to this conversation in the car on the way back to the office:

Me: So as I understand it, an executive at Starbucks was recently asked about saturation and the limits to growth, and his answer was, in essence, "We don't think we've even saturated Seattle yet."

Friend: Wow. That's amazing. There are the jokes about Starbucks opening up new Starbucks inside existing Starbucks, but the truth isn't too far from that.

Me: It's clear that Starbucks is trying to become a lifestyle brand. Their idea is that people will come visit not so much because they want a cup of coffee, but because of the satisfaction they get from being the kind of person who visits Starbucks. They get the satisfaction of physically being inside the Starbucks, and then they get the satisfaction of carrying a coffee cup around with them that shows they were at a Starbucks. No one I know who visits Starbucks regularly -- including me -- says that Starbucks has the best coffee. It's adequate, but it's not the best. It's not about the coffee; it's about the lifestyle.

Friend: They're not the only ones doing that. McDonald's and Coca-Cola are trying to be lifestyle brands. I've dealt with some of the people at Coca-Cola, and they absolutely believe their product is about a lifestyle.

Me: Who eats at McDonald's or drinks Coke because they somehow identify themselves with those brands?

Friend: I think there are plenty of people who identify themselves with McDonald's.

Me: When my ex-wife and I had little kids, we spent more time at McDonald's than I'd ever care to admit. Why? Because it was cheap, the kids would all find something to eat, and they'd give us a few minutes of conversational time while they played in the ball pit. But I don't think we identified ourselves with McDonald's. It wasn't something we aspired to. And as for Coke, they don't have a physical presence -- they're just a brand in a very competitive market, and not differentiated in any meaningful way.

Friend: What about Red Bull? They're popular now.

Me: Right, but it's a very tenuous popularity. It's a fad that could collapse at any time. I think Starbucks is fundamentally different. It's a lifestyle brand that's powered by physical spaces. And it's aspirational -- it represents a lifestyle that people want for themselves, and by going into the physical space, they can experience that lifestyle for a bit of time.

The more I think about this, the more I see both the opportunity and peril of Starbucks' approach. If they can truly establish themselves as the aspirational lifestyle brand that's accessible on an regular basis, then they could be vastly larger than they are today, and for decades to come. That's an incredible opportunity. But when there's a Starbucks on every corner, will we continue to aspire to it? Is it possible to aspire to something that is everywhere, or does it need to be ever so slightly out of reach? I honestly don't know.

Later in the day, I saw this AP story (found via Starbucks Gossip) on Starbucks growth:

The people who work in Seattle's tallest building face a tough decision: should they get their caffeinated indulgence at the old Starbucks on the building's first floor or the new Starbucks, 40 floors up? And, if those lines are too long, is it too far to walk across the street, where a third Starbucks awaits?

Starbucks Corp.'s recently announced goal of having 40,000 stores worldwide isn't just about spreading green awnings through middle America, the Middle East and other areas of the world not yet tempted by easy access to mocha Frappuccinos and pumpkin spice lattes.

The coffee chain's aggressive growth also hinges on what the company calls "infill" -- adding stores in cities where its mermaid logo is already commonplace...

Starbucks adds a whopping six stores a day on average...

As of Oct. 3, Starbucks had 12,440 stores worldwide, including 7,102 company-operated stores and 5,338 licensed locations...

Starbucks insists that it sees very little cannibalization of its existing business when a new store opens...

It's highly unusual for a company to be able to add so many stores so close together and still see the kind of consistently strong sales growth Starbucks can boast, said John Owens, an equity analyst with Morningstar.

"At some stage there (are) limits to their expansion, but to date we really haven't seen any signs that they are near that point," Owens said.

Still, Owens said there are risks a company faces when it builds out quickly. He noted that McDonald's Corp. suffered after an attempt to expand rapidly in the 1990s. McDonald's has more than 30,000 stores worldwide, compared to about 12,000 currently for Starbucks.

Major concerns could include anything from a drop in quality to the brand losing its luster...

For now at least, Owens said Starbucks doesn't appear to have similar worries.

"We haven't seen any evidence of it, but that's certainly a risk," Owens said. "How can they continue to maintain such a strong connection with the customer as they become just basically a global giant?"

March 03, 2006

What's Wrong with Apple?

I'm not an Apple fanatic, but do qualify as a fan. My first Mac was the original 128K, bought in 1984. During Apple's long downward slide in the 1990s, I switched to Windows, both personally and professionally, but was never truly happy about it. I still have to use Windows at work, but I'm typing this entry on my iMac G5 at home. I have two iPods and are quite happy with them. I've admired how Steve Jobs and his team have turned around Apple since taking over, and I'm delighted that the industry once again has real competition, and that Microsoft doesn't rule every segment it enters.

All that said, I can't figure out what's going on with Apple the last couple of months. In January, they made their always-anticipated announcements at Macworld Expo. What did they show? A radio tuner for the iPod. Web-based photo publishing. iMacs with Intel processors. Renamed PowerBooks with Intel processors. Now, this month, they make another set of announcements, and what are they? A Mac mini with an Intel processor. An iPod speaker.

Moving the iMac and Mac mini over to Intel is all well and good, but in shipping them, Apple is simply doing what they said they would do when they announced their transition to Intel. The only "wow" factor is the schedule, but I think nearly everyone anticipated that Jobs was sandbagging when he first described the transition timeline. The radio tuner and speaker are simply Apple trying to grab more of the iPod accessories market, and while the tuner seems nice, the speaker is ugly enough that I never would have guessed it was from Apple. That leaves the MacBook Pro, which I blogged about earlier and found to be a disappointment: unknown Windows dual-boot capability, no two-button mouse for Windows, no breakthrough design feature, and an awful new name.

So what's wrong with Apple? After a series of hits, they're in some sort of product slump right now.

On the Mac side, it seems like the transition to Intel is sapping their ability to innovate -- as if moving to Intel is all they can manage, and so product innovation will have to wait until the transition is complete.

On the iPod side, it seems like they have hit the wall of what they can achieve without a dramatic shift in their model. Could Apple miniaturize beyond what they've done? No. The iPod nano is as small as it can be without becoming unusable. The iPod can't get any thinner without a battery breakthrough, and it can't get any shorter or narrower without making the screen too small. Could Apple offer a new model for paying for music? The only one that comes to mind is subscriptions, which they could offer, but it would be rightly perceived as a me-too move. No, where Apple has room to innovate with the iPod is in video. When they added video to the existing iPod, it was an evolutionary move -- same form factor, slightly larger screen, and adding music videos and television shows to the iTunes Music Store. The world is waiting for something dramatic and Apple has yet to deliver. Can they not make up their minds about a strategy? Can they not get the necessary partners to cooperate?

Whatever is happening, it needs to be fixed. Apple needs to resume innovating both the Mac and the iPod, and soon. Reading about their announcements earlier this week, some of the correspondents covering the event actually seemed disappointed to have made the trek to Cupertino for it. In the modern Steve Jobs era, until a couple of months ago, that would have been nearly unimaginable.

January 10, 2006

"MacBook"? "MacBook"?

So it's official. The PowerBook G4 is on the way out. Make way for the MacBook Pro.

[For the moment, I'll leave aside my disappointment at the lack of a built-in two-button mouse, which kind of throws a monkey wrench in my plan to switch to an Apple notebook and run Windows side-by-side with Mac OS X.]

The "MacBook Pro"? It's hard to believe that Apple under Steve Jobs would actually name a product that. I can't even begin to imagine the brand equity they've built up in "PowerBook" (and will now lose), but that's not my real concern. At least to this English speaker, "PowerBook" is a wonderful wordmark, one that rolls off the tongue and sounds perfect as it does. "MacBook" is lame. It sounds like something a Chinese knockoff factory would call its PowerBook clone, a clumsy hunk of titanium-colored plastic running a cracked copy of OS X on Intel.

December 29, 2004

Virgin Marketing

In this month's Wired cover story on -- and no, I will not call him "rebel billionaire" -- Sir Richard Branson's new Virgin Galactic (AKA Sub-Orbital Tourism for the Wealthy and the Comfortably Well-Off) is a great explanation of why, in the end, Virgin wants to send people into space:

Will Whitehorn is barking orders into a cell phone. Standing in the lobby of a sleek London hotel, he wears a black leather jacket and carries a flame-red helmet. What he calls "my office scooter," a hulking 650-cc Honda Deauville, is parked outside. At 44, the former North Sea oil-rig helicopter crewman is Virgin's group director of brand development, which usually translates as Branson's right hand...

It was Whitehorn who registered the idea of a Virgin space-travel company back in 1995. Four years later, amid talks with a now-defunct Mojave outfit called Rotary Rockets, he and Branson took the next step, trademarking the name Virgin Galactic...

Among Whitehorn's other contributions is a neat bit of business jargon, "branded venture capital." The phrase describes what Virgin does: fund and launch companies that can benefit from the group's accumulated experience and shrewd application of the Virgin logo. From an 80-person West London headquarters only a short stroll from Branson's town house, Virgin Management controls nearly 200 companies organized in a dozen major groups, with a total of 50,000 employees. Branson and a small group of other shareholders fund new businesses from a $600 million war chest fed by profits, sales of mature assets, and IPOs. Three Virgin companies are on stock exchanges in the UK, Belgium, and Australia, a number Whitehorn says could triple over the next several years, starting with Virgin Mobile's US offshoot in fall 2005. "We're like a little investment bank with a marketing department," he explains.

Virgin Galactic has the potential to be more than just the latest addition to the portfolio. "We've been looking for a flagship company for the 21st century," Whitehorn says, "especially for the US." The trans-Atlantic reference is no minor detail. Virgin Mobile found a sweet spot selling pay-as-you-go cell phones to young Americans who don't want long-term contracts. Still, overall, the US accounts for only 10 percent of Virgin Group's global revenue. So next in line is a low-cost, high-frills airline, Virgin America (Whitehorn calls it "JetBlue with business class"). Even much-maligned Virgin Cola will be getting a new US push.

"Galactic will put the Virgin brand on the American map in a way money can't buy," Whitehorn says. "It will cost us $100 million to take people to space. Vodafone is spending $100 million putting decals on Formula One racing cars. Every time someone mentions space travel, they'll mention Virgin."

I love this. It's brilliant. Whitehorn hits it dead-on. Look at how much press Virgin is getting for this already, and they haven't even finished designing their spacecraft.

This will go down as one of the cleverest uses of a $100 million marketing budget ever.

November 09, 2003

Tagline Creation 101

If you don't know much about American football, the NFL is made up of two conferences: the NFC and the AFC. Fox covers NFC games and CBS covers those in the AFC. (ESPN's Sunday night games and ABC's Monday night games are irrespective of conference.)

So far, so good. However, the ad wizards at Fox decided that their slogan for the season would be, "The biggest stories are in the NFC, and the NFC is on Fox." Fine, but what happens if that isn't true?

As of today, the league's leader in quarterback rating and early MVP pick of most writers (Steve McNair, Tennessee), leader in rushing yardage (Jamal Lewis, Baltimore), leader in team offense (Kansas City), leader in team defense (Miami), and only undefeated team (Kansas City) are all in the AFC.

As it happens, I have a soft spot in my heart for the NFC. My home team (Carolina) and once-and-future home team (Seattle) are both in the NFC. But the "biggest stories"? I don't think so.

When marketing slogans are patently untrue, they become silly and counterproductive. Marketers, you have been warned.

June 22, 2003

Push to Infringe

Via Wireless Week, and according to Yahoo News, Nextel has trademarked "Push to Talk" and is going to go after infringers:

Nextel Communications Inc. said on Friday it would use trademark law to stop emerging rivals of its 10-year-old walkie-talkie service from using the term "push-to-talk" to describe their products.

But lawyers said Nextel, the No. 5 U.S. wireless telephone company and so far the only one to offer a feature on a phone that allows customers to talk at the push of a button, could face an uphill battle to protect the term.

"You can't use trademark law to remove words from the dictionary and prevent their ordinary use," said Steven Bauer, a partner in the intellectual property group at Boston law firm Testa, Hurwitz & Thibeault.

"They may have been the first ones to call it push-to-talk but being the first one to call it that doesn't mean you're the only one who can call it that," said Bauer who argued that the phrase was too generic to be a strong trademark.

Nextel, which also uses the brand name Direct Connect to describe the service, said in a statement on Friday the U.S. Patent and Trademark Office had approved registration of Push to Talk and its abbreviated form PTT as trademarks.

"It makes smart and strategic sense to protect a name that refers to a brand," said Nextel spokesperson Audrey Schaefer.

I did a search using Google Groups. "Push to talk" goes back at least 22 years, having been used as a generic term (along with the abbreviation "PTT") by ham radio operators and pilots to describe the act of, well, pushing a microphone button to talk. My guess is that these terms go back far longer than that. Now Nextel has come along and convinced the USPTO to grant it trademarks on them.

Let's face it: the USPTO is broken. Many proposals to fix it involve spending more money, but can anyone seriously argue that the USPTO granted these absurd trademarks to Nextel due to a lack of funds? The USPTO's principles and processes are fundamentally flawed. Remember, if you have a fire burning, money isn't water, it's gasoline.

May 31, 2003

Premises, Premises

Via boing boing comes word of Premises, Premises, a "peer-enforced marketplace for new ideas" -- like Halfbakery, but with robust tracking of idea authorship, so as to enable idea sales.

My favorite idea so far is for the Smart Alarm:

Smart Alarm is a beautifully built, Internet radio alarm clock at an irresistable price: Free. Just register online, and it's yours. The secret, naturally, is advertising: studies show that the first two minutes of audio programming people hear upon waking have more impact than anything they experience for the rest of the day. For a few precious moments, the brain's quasi-dream state inhibits its filtering of sensory impressions -- giving Smart Alarm sponsors the opportunity to inject words and jingles directly into the targeted user's mind, where they echo and re-play for hours. Advertising via Smart Alarm is expensive, but it's the most powerful way to push your message through the clutter.
There are problems with this idea, but they're solvable.

First, Marketing 101 tells us that people generally don't value things they get for free. So instead of making a free clock, make a subsidized clock and you're on the right track. Second, if the only thing the Smart Alarm plays is the advertising, then it will go into the trash in short order. I would ensure that the clock plays advertising as a part of those first two minutes, but weaves it together with user-selected content.

These problems addressed, it's a great idea. I remember waking up to an alarm clock 15 years ago -- I had to set it early because I had a flight that morning, and when the radio came on, it was playing Madonna's "La Isla Bonita." That memory has stuck in my mind ever since.

April 08, 2003

Luxury

Is "luxury" a marketing adjective that has reached that rarefied state in which it actually means the opposite of its original definition? I can't think of the last time I saw the word 'luxury" used in marketing to describe something that was truly luxurious... but depressingly non-luxurious products and services seem to be so described on a regular basis.

March 15, 2003

Rest in Peace, Mr. Merton

For those among you who are marketers, a moment of silence is in order. Robert King Merton, inventor of the focus group, died last month aged 92:

In 1941 Paul Lazarsfeld, a statistician at Columbia University in New York, got together a group of people representing a typical radio audience and gave them some buttons to press as they listened to various programmes. He was then able to work out which programmes had the most appeal. Helping him at these sessions was Robert Merton, who had recently joined Columbia. At the end of each session Mr Merton asked any in the group who did not need to dash away to stay behind and discuss the radio shows in some detail: they should focus on why they had liked this bit of the show, and not that.

Although it is risky to claim that anyone invented anything, it is generally accepted by sociologists that Mr Merton's were the world's first focus groups, a research tool now used widely in commerce and increasingly in politics.

Focus groups have been much abused over the years. As a tool for developing innovative new products, they can be disastrous -- people will simply say, in so many words, that they want more of what they have now for less money. But as a tool to refine a product concept, or to decrease the chances of shipping a flop, focus groups can be quite useful. (And yet, with this in mind, I look at the Pontiac Aztek and shake my head.)

So rest in peace, Mr. Merton, and thanks for your contribution to the world of marketing.

March 03, 2003

McBiz

Glenn Fleishmann (keeper of the excellent Wi-Fi Networking News) and I have been having an e-mail exchange prompted by his analysis of a story on Cometa in the Red Herring (in what woulud appear to be its last issue). I noted that McDonald's had 13,099 outlets in the US as of December 2001, and then wrote:

In late 2001, I heard a rumor that IBM Global Services was working on Wi-Fi deployment deals with Subway and McDonald's. I've heard nothing of this since, but is it possible that such discussions occurred prior to Cometa's launch and continue to this day?
Glenn replied:
Here's the rub: I thought Cometa was providing businesspeople venues in which they could work. If they put 5,000 McDonalds on their network in the first year, does that really achieve their "business" goal? Maybe.
Which led to the following message from me:
You ask a good question about McDonald's.

Perhaps Cometa could be as valuable to McDonald's as McDonald's to Cometa. McDonald's desperately needs assistance on the strategic marketing side. If they were to attempt a brand extension to become "the place for the businessperson on the road," could that help them? Think about the spatial positioning of McDonald's -- often right at highway exits, always clearly marked on exit signs, typically with tall signs on premises (high-gain antenna placement?). When you're on the road, it's usually far, far easier to find a McDonald's than to find a Starbucks.

Think about this, which admittedly is purely conjectural:

McDonald's creates a new branding program. They could call it "McRoad," or "McBusiness," or something else, but let's call it "McBiz" for now. McBiz is a sub-brand of McDonald's. There's a McBiz treatment that extends the existing McDonald's logo -- it's subtle, but once you know what to look for, it's easy to spot (though the uninterested might never notice it). When a restaurant switches to the McBiz branding, this indicates a number of things:

  • There's a Wi-Fi access point on premises.
  • There's at least one customer-accessible power outlet per n seats.
  • The coffee served has been upgraded (new brand, new procedures).
  • The restaurant sells the Wall Street Journal (in addition to USA Today).
  • There are at least n monitors playing CNN Headline News (sound off, closed captioned).
  • There's a customer-accessible soda machine.
I'm not much of a McDonald's fan, but if they embarked on such an effort, and made me aware of it, I'd start paying attention to them. Sure, when I'm on the road, I'd rather go to a Starbucks, but if the choice is pull into a McBiz McDonald's now or drive around for 10 minutes looking for a Starbucks, I'll probably choose McDonald's.

The nice thing about this is that it's a brand extension they can pull off without alienating their core family market. No mom and her kids are going to be offended by someone in khakis and a polo surfing on the Web using his laptop. In fact, Mom might not even be aware of McBiz -- for her, the McDonald's experience is unchanged, except that the coffee tastes better and she can refill her own sodas while she reads a magazine and keeps an eye for her kids in the ball pit.

Glenn replied:

This is a very interesting idea. The big problem is that McDonald's is a kids restaurant, which I don't think I ever understood until just a few years ago. This is its biggest strike against it: they'd have to almost create a separate area that was quiet and cleaned more frequently to make it a reasonable place for a businessperson. Although businesspeople often use places like coffee shops at hours that aren't their busiest...

You make a good case, and the incremental cost for unwiring a McDonald's is pretty tiny. They probably already have some sort of data network -- I can't believe they're running their systems off a dial-up, but you never know. (Starbucks has been until the T-Mobile installations.) Add an access point and provision a VLAN (which might mean a new router) and that's most of the cost.

But is that the image Cometa wants? I was under the impression that they want high-toned business outlets: they want brand names that are associated with business. I might be wrong. If their first deal is one of the top franchises you mentioned, that'll prove it.

This is really where their model breaks down, though. If they unwire every McDonald's (which would be foolish since 20 to 30 percent of them are certainly outside core traveler areas) and all of the other franchises you list, even the competing ones, that might get them the numbers, but not the density. Well, McDonald's would, but I just can't see it.

Regarding the issue of hours of usage, I think this Glenn is on the right track here. In fact, I think this is an excellent argument for McDonald's to do something like this: to increase business during otherwise slow periods of the day. When I'm on the road, my meals are usually spoken for with meetings, and in any case, I won't be eating at McDonald's. The problem comes between breakfast and lunch, and again between lunch and dinner. If I have an hour of down time before meetings, it would be great to stop somewhere and get some work done. But tracking down a Starbucks in an unfamiliar city can be difficult. If I knew that any McDonald's with the McBiz logo had all the features listed above, I wouldn't hesitate to stop there. McDonald's would get my money for a drink and a small snack, as well as share the revenue from my wireless Internet connection. Moreover, I'm helping them to use their facilities more efficiently.

Are McDonald's and Cometa the right partners? I don't know. McDonald's could choose to do this with anyone, I suppose. T-Mobile would seem like a good choice. Cometa is just one potential partner -- albeit a potential partner trying to build out a network of 20,000 access points.

As to the density issue, I think that's more specific to Cometa and their stated coverage targets. As noted, McDonald's could do this with other wireless partners, or even on their own, focusing on those restaurants best positoned for business travelers (Glenn suggests 20-30 percent of the total; this could be correct).

I know Glenn has more thoughts (and certainly a more knowledgeable perspective) on this, so I'll post it and let him take the next swing.

March 02, 2003

Triggering Metal Detectors

Last night was the first time I've flown in two and a half months. My watch, belt buckle, and shoes all set off the metal detector, so I received the personal attention of a now-federalized airport security worker. Now, I should have been smart and put my watch in my jacket pocket when it went through the x-ray machine -- but my belt buckle and my shoes? I can't think of a belt buckle not made of metal, and my shoes were Rockports, which I didn't think would have any metal reinforcing strips. So...

How about a branding program for non-detector triggering clothing and accessories? Some sort of clothing industry council could work on it with the Department of Homeland Security. "FlyReady," maybe, or "WalkOn." There would be a logo associated with it. Clothing and accessories bearing the logo would be certified to have been tested using DHS metal detection equipment and found not to set it off. Shoes could use highly durable plastics as reinforcement. Belt buckles, cuff links, and other jewelry could be made of carbon fiber (which would be cool in its own right). Watches? I don't know. Will the metal in a watch battery inevitably trigger a detector? It may be a lost cause... but we can just get used to taking off our watches, I suppose.

The clothing and accessory industries should be all over this -- it's a chance to sell replacement merchandise to people with disposable income. As for DHS, from their standpoint, it would be a great way to show their concern for the convenience of the traveling public.