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What You Can Learn From Starbucks' Mistakes

August 1, 2008  

Comedians used to make jokes about cities with a Starbucks on every corner. It seemed ridiculous at first, but we've gotten so used to their ubiquity that the closure of 600 stores came as a surprise to many customers. And in a post at Harvard Business Online, John Quelch argues that the Seattle juggernaut made a few key errors in the management of its premium-priced brand:

Losing the loyalty of early adopters who appreciated personalized service and a relaxed coffee-house atmosphere. "To grow," he says, "Starbucks increasingly appealed to grab and go [sic] customers for whom service meant speed of order delivery rather than recognition by and conversation with a barista."

Introducing a bevy of new products that appealed to a broad audience. Customizable drinks were conceived to draw those grab-and-go customers, but diminished in appeal when they took longer to make. The pricey concoctions also seemed expensive when compared to premium alternatives from budget-minded competitors like McDonald's and Dunkin' Donuts.

Creating artificial growth with new stores. "Eventually," he notes, "the point of saturation is reached and cannibalization of existing store sales undermines not just brand health but also manager morale."

"None of this need have happened if Starbucks had stayed private and grown at a more controlled pace," says Quelch. "To continue to be a premium-priced brand while trading as a public company is very challenging." And we think the concept of moderating growth to protect your brand is pure Marketing Inspiration.

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