The Origin of Brands Blog

Backwards is the new Forwards

It’s getting ugly out there. And no, I don’t mean the political battle between Obama and Clinton; I mean the coffee battle between Starbucks and Dunkin' Donuts.

Starbucks has had a troubling year. After a decade of sensational buzz and near constant growth, things have cooled off for the coffee pioneer. This in not untypical and far from surprising since no brand can sustain rapid growth forever. There is always a limit to how much coffee people will drink, sneakers they will wear, hamburgers they will eat or insurance they will buy.

But when growth rates level off, Wall Street screams and management panics. As a result, many companies opt for expansion in an attempt to maintain growth. This tends to have the reverse effect. Instead of fueling growth, expansion undermines the meaning and focus of the brand. Authenticity, quality and the customer experience are frequently damaged. Sales and customer loyality decline.

Sound familiar? It should. It is exactly what has happened at Starbucks. After a decade of growth, same-store sales declined, the stock plummeted and competition heated up. The Street has screamed for action to reheat growth. Starbucks responded by adding more stores and more products to sell. In the last few years Starbucks has been busy adding merchandise, music and ramping up food sales with things like hot egg sandwiches.

But instead of fueling growth, the expansion has damaged the Starbucks brand by degrading the experience, damaging its authenticity and diminishing its quality.

Now what? Backwards is the new forwards. Bringing back the leader who knows the brand, understands the brand and loves the brand better than anybody else in the world is the new trend. Dell brought back Michael Dell. Schwab brought back Charles Schwab. Apple brought back Steve Jobs.

At Starbucks, that fanatical leader is Howard Schultz. Schultz came back and reclaimed his CEO title last month after ousting James Donald, a former grocery executive. (Why they had a grocery executive running Starbucks is beyond me. Groceries are one of the worst industries for branding and focus. Apart from Whole Foods, most grocery chains are a mess.)

To bring back the buzz Schultz has already made several bold and brave decisions. Valentine’s Day 2007, the now famous Schultz memo was “leaked.” In it Schultz bemoaned the watering down of the Starbucks experience. Setting the stage for a brand revamp that has finally arrived.

With Schultz firmly back in control, Starbucks is back to basics. Starbucks is back to coffee. Starbucks is back to baristas. And Starbucks is back to the celebration of coffee, the essence of the brand.

In the last month, Starbucks has cut 600 jobs, is closing 100 underperforming stores, is slowing U.S. growth and is finally getting rid of those foul-smelling hot egg sandwiches. At the same time they are accelerating international store openings which still represents enormous growth potential for the brand.

The piece de resistance of the Schultz master plan was the brilliant three-hour closing of all 7,100 U.S. stores on Tuesday for barista reeducation of all 135,000 employees. It was a public testament to of Starbucks’ renewed focus on coffee and quality.

Was it necessary to close every store on the same day at the same time to educate workers? Certainly, not. Was it a brilliant PR move? Absolutely.

The closing of Starbucks was national news. Celebrities who normally get out of bed around 2 pm were scrambling for their 4 pm “morning” cup of joe. The few bucks Starbucks lost in sales that afternoon was more than compensated by the massive PR coverage. It sent a message to consumers, investors, and most importantly, employees that Schultz was back and that Starbucks the king of coffee would defend its coffee crown with tenacity.

A minor blip in this story is the Dunkin’ Donuts move of offering 99-cent lattes during the Starbucks shut-down. In an attempt to take some of the wind out of the sails of Starbucks and ride the coattails of the publicity, Dunkin’ had a real opportunity to make a mark. But half-price drinks are hardly a reason to celebrate. My Mom won’t leave the house to go shopping unless she has several 50%-off coupons in her purse. They are a dime a dozen these days.

What Dunkin should have done is FREE! Offering desperate Starbucks fans a free trial drink would have caused a commotion and resulted in a meaningful PR story for the brand. Too bad they are not as brave as Schultz; you know Howard would have done that in a heartbeat.

Why Dunkin' Donuts needs to move faster.

Starbucks is the big boy of coffee. With 11,000 units, it’s the world’s biggest coffee chain. With a focused brand and brilliant marketing, Starbucks has convinced me and millions of others to trade up from our .50 cup of joe to a $3 cup of indulgence.

So what’s next? Starbucks has plans brewing to triple its size and become the world’s largest fast-food brand. Not to mention its foray into the music and movie business. (I won’t get into the insanity of those moves.)

I believe Starbucks can and will be the monster global “coffee” brand. I just don’t think they can or should be a global “fast-food” brand. Why try to be everything to everybody? It adds costs, cuts profits and weakens your brand. Why go down the same road of mistakes that McDonald’s has over the years?

In spite of a number of stupid line extensions (remember the Starbucks’ chicken pot-pies?) Starbucks has managed to grow rapidly because no one has been able to compete effectively against them. Why?

All the major coffee competitors have used the “same but cheaper strategy” which never works against the “real thing.” Ever since Avis did “We try harder,” every other also-ran thinks they can say the same and succeed. What they forget is the fact that most people still want to buy from the leader unless the No. 2 can provide a real alternative.

Today, Avis flounders, because trying harder just isn’t enough. In fact, Enterprise is now No. 1 in rent-a-cars because they brilliantly exploited the insurance replacement market against No. 2 Hertz which focuses on airport rentals.

In the coffee category, I think there is one brand that has a shot at owning the No. 2 position if they play their cards right. Which I’m not sure they will, but maybe if they read my blog, they might consider it using the idea.

Dunkin’ Donuts is a 55-year-old company that was acquired last month by a consortium of private equity firms. The new owners have launched what they call “the most significant repositioning effort in company’s history focusing on American values of hard work and fun.” The campaign carries the tagline “America Runs on Dunkin’.”

In the next decade, Dunkin’ Donuts also wants to triple in size by entering new markets (they are most prevalent on the eastern seaboard) and by expanding the menu beyond breakfast. Oh boy, there is that nasty “expansion” word! The idea sounded great until they started talking about the expansion of the menu.

Dunkin’ Donuts successfully built its brand on donuts. But expanding waistlines have moved people away from donut shops and into the Starbucks’ coffee culture. Of course, Dunkin’ Donuts was known for its coffee, too. And it must drive them nuts to see Starbucks successfully pre-empt a product that Dunkin’ Donuts pioneered.

In the past few years, Dunkin’ Donuts has been chasing the latest trends, adding bagels, muffins, hot sandwiches and high-end coffee. All products they have no credibility in.

What should the new owners of Dunkin’ Donuts do with the brand? Well, I believe they do have credibility in coffee, but not the Starbucks stuff. They need their own coffee twist. They need to be the opposite of Starbucks. Strong No. 2 brands don’t emulate the leader, they become the opposite.

Listerine was the bad tasting mouthwash, so Scope became the good-tasting mouthwash. Home Depot was male and messy, so Lowe’s became female and neat.

Starbucks is expensive, slow and snobby. Some people like that. But there are always opportunities to be the opposite.

Dunkin’ Donuts is affordable, fast and down-to-earth. A place without pretense, where hard working Americans feel appreciated. I believe that some of that is coming across in the new campaign, but it’s not strong enough. They need to hammer the idea that Starbucks is the enemy. To truly succeed, they need to focus on “fast.”

Forget about “affordable.” People already know that. Furthermore, affordable is not a benefit. It tells consumers that Dunkin’ Donuts coffee is not as good as Starbucks coffee.

“Fast” has another benefit. It tells consumers their time is valuable. It especially appeals to the upscale crowd who typically head for Starbucks.

Having to wait at Starbucks is probably the consumers’ No. 1 complaint, with cost right behind it. Going after speed is going to require getting rid of menu items. And unless they nail speed, they will never beat Starbucks. Consumers are willing to wait in a Starbucks, not in a Dunkin’ Donuts.

Dunkin’ Donuts can use the same strategy that made Miller beer famous many years ago. At 5:00 pm, after a long, hard day on the job, it’s Miller Time. 

What Miller did in for the evening, Dunkin’ Donuts can do for the morning. Make Dunkin’ Donuts your first stop. Your quick stop.

It’s Dunkin’ Donuts’ Time. The place to stop for busy Americans who don’t have the time (or money) to waste at Starbucks.

* Also check out what John Moore has to say over at Brand Autopsy on April 8th, he is right on. Dunkin' Donuts need to accentuate the hate. Starbucks is the enemy and the brand differences need to be exaggerated, making Dunkin' Donuts more like Starbucks is totally the wrong direction to go in.