Before Starbucks, most on-the-go coffee choices were dreadful. Starbucks tasted a lot better, offered fancy-schmancy cappuccinos and, well, seemed a small daily luxury a lot of people were 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.
Then McDonalds unleashed their own premium brewed coffee 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 bad coffee. Now you can pay $1 (or nothing on Fridays) and walk away with a pretty good cuppa joe.
Three 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 customer's 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.
Like 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.
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 steal a lot of coffee business in the process. And while the jump from coffee to cappuccinos, from $1 to $4, isn’t that big the principle remains the same: you are likely competing for dollars with businesses far outside your category.
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 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 ignore this competitor entirely.
And that’s all for me – I’m off to get a free coffee at Burger King ; )
This article was written by my brilliant partner, Jeff Sexton.
Morty Silber, CEO
Mad Strategies Inc.
a Wizard of Ads Partner