Starbucks custom media, learning from failure: Apologies to my five regular readers. This will not be the typical one-paragraph post you’ve come to tolerate. And I’m writing it in first person (mainly because I wrote some of it a long time ago before I began that worn-out homage to Dave Barry). I’ve actually been thinking about this topic for quite some time and have even made little notes from time to time on the topic. And, because I stop by a Starbucks many days a week and am a well-known down-loader of iTunes store music and a regular reader of journalist Rafat Ali’s PaidContent.Org and am in the custom media business…well, the stars all lined up for a long, long post.
Rafat pointed to and commented on the must-read Fast Company cover story about Starbucks’ founder Howard Schultz’s latest effort to transform the brand into “the world’s biggest brand, period.”The article is a fascinating look at what Starbucks is doing with a five-year-old acquisition of the company Hear Music. (Short version of the concept for anyone under age 30 – Think iTunes Essentials or iMix lists burned at a Starbucks while you wait for about twice what you’d pay at the iTunes Store. Short version of the concept for anyone over age 30 – Think endless variations of “K-Tel compilations” with much better songs that can be magically transformed into a CD while you wait.
Rafat and Fast Company do an excellent job of explaining the whole music thing and Fast Company does a wonderful job of capturing the great business quotes that Howard Schultz seems to rattle off in his sleep.
“Great companies are defined by their discipline and their understanding of who they are and who they are not,” Schultz says. “But also, great companies must have the courage to examine strategic opportunities that are transformational — as long as they are not inconsistent with the guiding principles and values of the core business.” And so Schultz finds himself on a precipice, at the edge of just such an opportunity, where he celebrates coffee as both the origins and the core of his business, and yet has dreams of transcending those origins to become something much more. In effect, Schultz is asking the question famously posed by Theodore Levitt, the Harvard Business School professor and father of modern marketing: What business are you really in? Levitt explained that the once-powerful railroads, for example, were blindsided first by automobiles and then by the airlines. It happened because they had defined themselves too narrowly as being in the railroad business rather than the transportation business. As railroads, they were entrenched and invulnerable; as transportation, they were wide open to attack. Theirs was a failure of imagination — the inability to reconceive themselves based on the business they were really in.
Which proves, if ever there were a magazine and a cover-subject made for one another, it is Howard Schultz and Fast Company Magazine. But, I digress.
A couple of years ago, I ran across an otherwise standard “Starbucks as brand king” profile of Schultz that contained the following quote buried deep within:
“…Starbucks has been honest about their successes and failures. On the one hand, music has been a very successful venture — they introduce a new CD at the rate of one a month. These CDs are from many different genres of music; they fit the brand, add to and extend the Starbucks experience, and sell well. On the other hand, a magazine rack is in Howard’s office. It displays issues of Joe. Joe was the Starbucks magazine that published only three issues. Starbucks customers were not going to change their reading behaviors to pay to read a Starbucks magazine.”
Joe was a magazine the company published with the custom publishing division of Time, Inc. The concept was to offer the magazine for sale in Starbucks for customers to enjoy while sipping on their lattes. It lasted three issues before being mercifully put out its misery. Why did it flop? How could the Starbucks masters of the marketing universe brew up such a dud? In a very uncharacteristically way, Starbucks created an editorial product that did not reflect and extend the Starbuck’s experience. The idea of a magazine was not necessarily a mistake, but the magazine it published and the way in which it was sold did not match their customer’s reading desires or editorial purchasing behavior. Starbucks is a company that has carefully crafted a brand that has less to do with logos and advertising than with experience. Yet very little of the Starbucks experience was found in Joe, nor did customers seem to want it.
The Hear Music concepts described by Schultz do make sense to me. More than once, I have later downloaded several songs via iTunes that I first heard in a Starbucks and even purchased an actual shrink-wrapped CD by Tim O’Brien in a music store before my latte got cold. Starbucks has become a branding juggernaut by creating an experience that is both predictable and surprising. I think for a vast slice of middle Americans who are willing to pay $4 for a cup of coffee, this concept makes perfect sense.