I was listening to a book on tape about big companies like mcdonalds or chevrolet spending millions of dollars per year on advertising.
Starbucks is apparently an exception.
Their sales are in the Billions and they continue to grow every year, and yet they spend relatively little in advertising.
Edited 2/20/2008 6:57 pm by mrfixitusa
when you have a store on every corner, why bother.
The book says Starbucks is successful is able to spend a minimum on advertising because they have focused on what they are good at and they have stayed with just that one thing, coffee.The book compares Starbucks to other companies who got off to a good start, but then decided they had to "grow" by offering other products in addition to what they're known for and this dilutes their image.For example, other companies may have started with coffee and then tried to expand into soft drinks, deserts, or even something really different such as clothing, etc.
I read a book last week by joseph A. michelli
" The Starbucks Experience: 5 principles for turning ordinary into extraordinary"
you might like the book-- I read it fully prepared to continue in my general low opinion of starbucks--- I mentally had classified it with home depot, Lowes, walmart, borders etc.--coporate giants crapping on the little mom and pop local business.
actually- it would do me good to periodically re-read the book-it's got some excellent ideas---and I would say i view starbucks with much more appreciation.
Yes- there are some things i don't like about starbucks-and yes- the experience is kind of generic---BUT i have to respect that they take some of the BEST aspects of a local coffee house, and they do them better.
If you have a little mom and pop business, the book has some killer ideas on how YOU can work YOUR business better.
Thanks for the info about the book! I really enjoy those types of books.The book I'm reading predicts that companies, in general, such as Starbucks, will do like other companies and at some point in time will max out. Sales will level out.When they peak and their sales are constant from year to year, instead of leaving things alone, someone will try to tinker with the business.For example, they will start selling Starbucks golf clubs or Starbucks Furniture and this changes the perception of the company and dilutes it's reputation for quality and it just goes down from there.Something else, This book talks about Subway Restaurants.Subway is doing really well and the owner - founder has made a fortune.The credit his success to the name "Subway" (It's a catchy name according to the book)They credit the success to the commericals and everyone knows about Jarod losing 200 pounds by eating subway sandwiches.Thanks again for the info on the book. I don't waste my money at Starbucks. But I see a lot of traffic there so I know they're doing really well.
I think you will like the book
about the wasting money at starbucks( warning ---rationalization ahead)
I notice that when i go- i ask for a "large house blend"---it costs within about 10 cents of what it costs me at the local places I am used to-maybe $1.80. I do that maybe once or twice a week
but i had a young man working with me back in Jaunary--- he had actually worked at a starbucks in Las Vegas-- he told me---- that people with a starbucks addiction--can spend more on Starbucks- then a crack head might spend on crack--- i have no idea if that's true- but he was pretty insistent about it-- his theory being crack is cheap and a lot of people drink strarbucks several times a day- and not the $1.80 house blend, but the $4 double,half caf, super cinamon frapahomo.
also------- don't want to ruin the book for you-but they explain why you may see 2 different starbucks at the same intersection etc.
and yes- somebody at the corporate level will eventually somehow screw things up so that things get boned at the individual store level.
RE: subway- my wife and I have a friend from high school that owns 3 subways.-he wasn't a great student--but he has proved to b VERY intelligent and a shrewd business man- very shrewd.
This book talks about branding and getting your name out there and somehow being able to have the general public just automatically think about you when ever they need the type of service you offer.It's just right there on the tip of their tongue and they don't even have to look through the phone book yellow pages.People have preferences.They talk about the average person going into a store on their way home from work and hey need bread and milk.They say the average person doesn't care what brand of milk or bread they buy. They just kind of grab something and don't have a specific brand in mind.On the other hand, beer and cigarettes are very different. People are very specific when they purchase these items.I guess we all have our priorities.
The book sounds like a good read.
Care to share the title with us?
The Book is "The 22 Immutable Laws of Branding"It talks about Coke vs Pepsi.It says Coke sells more than Pepsi, but interestingly, people like Pepsi better according to taste tests.The book was published 10 years ago so I guess take it with a grain of salt.
Thanks, It's always good to find books that are helpful. This looks like a must have for me.
Sonny recommended that book a few years ago but I didn't get around to reading it...gonna look it up.Advertising = marketing and a brilliant book I just put down that came highly recommended by BTers:Selling The Invisible-A Field Guide To Modern Marketing by Harry Beckwith.Very easy to read and broken down into 1 page lessons with the moral in bold at the end of each page. Still thinking about some of the things Harry talked about:His focus is service based businesses that customers can't see or hold the end product in their hand.And uncommon sense:"the first step in service marketing is your service.First,before you write an ad, rent a list, dash off a press release-fix your service.Write an ad for your service. If after a week your best ad is weak, stop working on the ad and start working on your service."
and that's just the first 10 pages.I am stepping up my marketing from word of mouth and some of the things I am working on include:
updating my business cards to highlight my niche
a well designed sign on my van
a newsletter dropped off around homes I'm working on
asking customer's for written recommendations and asking for referalls
trying to give out at least 1 card a day
basically reinforcing word of mouth. People are less afeared if they are familiar with you...see your name around town and are more likely to remember it when they hear it...part of positioning yerself as a "service experience" which elevates a tradesman to a whole new level.the "silver" service experience
Thanks for all your info - there's a lot to all this.The book talks about failures in business.One of the failures they talked about was Miller Beer.Apparently they developed a new Beer and called it "Miller Regular"I don't remember it.They then spent $50 million dollars advertising it and promoting it.It was a flop. I'm guessing they don't sell it anymore?I guess you just roll the dice and see what happens. There's no guarantees.
the book you are describing- reminds me of a Seminar I attended some years ago.
the seminar folks called the theory T.O.M.-- top of mind
So------when people in your market think of cola-they think Coke, when they think of cofee they think Starbucks, when they think of facial tissue they think Kleenex, when they think of roofing their house--they think "Hazlett roofing & Renovation Ltd"?----nah----I don't think so
the more I thought about it--the seminar was sponsored by the local newspaper-----their interest was in selling us ADV. contracts
and the more I thought about it It would be a bad move for me, generally. I was interested in primarily a 12 block radius neighborhood-----------Newspaper ads would have me advertising in a larger area than I wanted to cover---if the advertising actually worked-- I would be running myself ragged just running around giving estimates- with no time to do the work----------the whole concept was maybe more appropriate for a bigger company-- but extremely expensive to implement
but -- by concentrating on my core 12 block market-- I was able to do much the same thingWAAAAAY cheaper.-----My signs are always here, my truck(s) is(are) always here, my jobs are always here---- during the working season-the majority of my customer base is going to see me,or my sign or my job every day-sometimes several times a day.- when the right house became available- i bought it--because it sat at one of the 2 busiest interesections in the neighborhood-- greatly increasing the chance that customers see my sign Dailey-and of course we sponsored local hot stove league teams, coached basketball, bought ads in the neighborhood charity fundraisers etc.-----------it was all actually pretty inexpensive to do--and sort of low key saturates the neighborhood
Now- I apologize- typing all that out makes things seem more grandiose than they really are. We are really a mom&pop operation-- it took 20 years to get that kind of saturation( ten of those years concentrating on it)--and it meant spending money on ideas-where there was not going to be an immediate pay-off if ever.
It's never really been a thing where we ran an ad Saturday and it generated a sale on tuesday
but Iknow for a fact( the customer told me so) that we did a job in 2006 becaus i had coached the customers sons in 2 different sports for years-and my wife had taught one of the sons in 2 different grade levels-----and that job lead to doing the neighbors project in 2007-which generated another referall and so on.- the payoffs are often far down the road and somewhat distantly removed from the time of the marketing
I guess what i am saying-is what works for coke- might not be applicable to the little guy-- but what works for Starbucks might- because Starbucks worked on developing what the little guy is good at--and became better at it than the little guy.
"super cinamon frapahomo."That was the line of the year for me Haz! Thanks for the laff! My daughter was researching fast foods and read the story about Starbucks a few years ago and told me lots about it and the culture they cultivated for their employees. She was impressed and decided to adapt their mentality on her own store(s). I use the Starbucks as a meeting place for people. They are easy to find, lots of them, safe to meet at, and predictable. I buy a small black coffee and can use their tables and plugs for my laptop for hours without anyone squawking. My wife loves their foo foo drinks. I did hear today that they are laying off a couple hundred people at the corporate headquarters and not filling another 300 positions. They are still opening new stores but at a reduced rate. A lot of competition had cut into their sales (McDonalds). Bob's next test date: 12/10/07
This book talks about publicity vs advertising.An example in construction would be a company doing something new and different such as "green" practices.The local news hears about this "cutting edge" business and wants to cover the story in the paper, television news, radio, etc. They want a personal interview with the owner. This is publicity rather than advertising.People take notice of these types of things.
I noticed you were talking about using your lap top at places like Starbucks.My son is ordering a cell phone today that will connect to the internet.We're with Sprint and but he is not going to sign up for internet service for his phone through Sprint.Instead he says he will be able to use the internet free at places like Starbucks, or even here at home since we are wireless with our computers.We'll find out more about how it works in the next week or so.He says there are many businesses, restaurants, coffee shops, hotels, etc which offer free wireless internet service.Maybe I'll get flamed for this for stealing internet signal but hey we're just figuring this stuff out.
Edited 2/25/2008 6:13 pm by mrfixitusa
It's not stealing, it's called WIFI and it's intended to draw clients to sit and spend money and use their computer or PDAs. Starbucks only allows TMobile to log onto the net. That's fine with me because when I have a meeting, I usually am pulling up pics or docs on my computer and I don't need the net for anything. Verizon offers internet service to a laptop anyplace, anywhere. Frank has one like that. That type of service will render WIFI useless. It's not stealing. Most places use a password that you have to get from the counter. Bob's next test date: 12/10/07
Interesting... I never consider my trips to Starbucks as wasting my money. In fact, I almost certainly think of my coffee purchases from donut places, gas stations, etc who are selling "cheaper" coffee as a complete and total waste of my money.
I talked to a guy today who used to work as an assistant manager at Starbucks in Wichita.We have several Starbucks here and he said the top Starbucks in Wichita grosses $40,000 per week.That's about 2 million dollars per year. Wow I had no idea they brought in that kind of $$$I wonder how much the net profit is?
I would assume that the big difference between Starbucks and the others is branding and marketshare.
Starbucks is the largest and single most recpgnizable coffee chain in the US.
McDonalds is one of many fast food joints in big competiton woth Burger King, Wendys, etc.
Strabucks also has a strong presence in the media being mentioned in various shows as a point of discussion or a joke on late night TV..... they have become the standard example for high-priced foo-foo yuppie coffee houses. This goes a long way toward their name recognition and marketshare.
Take another example.... Pepsi. Pepsi spends AMAZING amounts of money on adverstising in a non-conventional way. They focus heavily on the wooing of sales-point operators .... such as the supermarket owners. They shower them with gifts and trips to keep their product in favor and more visible in the marketplace. The advertising becomes their presence in that marketplace as much if not more so than their presence in media advertising.
It also helps that Pepsi had a quality product that is in demand due to that quality.... the same goes for any of the above advertisers.
I refuse to accept that there are limitations to what we can accomplish. Pete Draganic
I just read where Starbucks is closing stores, and pulling back on there point of purchase sales. Seems they got away from there basic item and were losing big bucks as a result. Want to read a success story on how to put together and run a business? http://www.amazon.com/Schwab-Pride-Performance-Keep-Going/dp/0892881518
They can't get your Goat if you don't tell them where it is hidden.
dovetail- the book I listed is a couple years old-- but in the book the author kind of implys that might be the problem( point of sale) locations.
which makes sense-------- Starbucks put a lot of thought into this----and has tried to be what they call"the third place"---- home#1, work #2, and Starbucks #3
they actually WANT you to use it Just like blue describes.
the point of sale locations( Kiosks or whatever)--can't deliver that kind of experience.
I think Krispy Kreme donuts made the same mistake-- turning an "experience"---kind of an "Outing" or a fun event---into a trip to the gas station.
Starbucks is in trouble.They built the business on providing a particular experience than went generic and mass market. Stock price is tanking and they've brought back an the founder to get it back on it's feet. Lots of ideas, but will they do the trick?http://www.guardian.co.uk/business/2008/feb/26/starbucks
to me, an interesting thing about starbucks is that i was scarcely aware of their existence untill a few years ago---------- the year the "fest" was at Calvins-- I hit calvins for a few hours the first evening-- then drove home picked up my family-and drove to Boston.
In Boston- there is a Starbucks on every corner it seems( but not in my neighborhood back home!)
reading the book- got me to thinking about WHY starbucks locates where they do.
Walmart- or home depot comes to town-----and puts the little guy out of business
Starbucks claims THEIR theory is--- they absolutely do not what the little guy out of business--far from it. they locate in an area where there are already other coffee houses, bagel shops, restraunts etc.- they CLAIM their research shows that business actually INCREASES in those other restraunts---like 40%. the reasoning is-- that the area becomes a destination, its a walkable scale- customers have choices--it accentuates a culture of dropping in for coffee and talk, taking a stroll--- " hey--lets have coffee at 11:00 sunday-see ya at Starbucks---no lets try Susans Coffee & Tea on sunday--see ya then"-- that sort of thing
anyhow- that's their theory- I have no way of knowing if it's true---but in my limmited experience i have never seen a starbucks in an area with empty storefronts.
"Starbucks claims THEIR theory is...they locate in an area where there are already other coffee houses, bagel shops, restraunts etc.- they CLAIM their research shows that business actually INCREASES in those other restraunts-"
Years ago, when I was a Domino's Pizza franchisee, someone at Domino's Pizza, Inc. pushed the theory that competition increased the pie that was divvied up between the competitors.Domino's had just gone through a years long lawsuit by the makers of Domino's sugar over the name. For awhile, Domino's was prohibited from opening new stores under the Domino's Pizza name. So a new name and identity was put together: Pizza Dispatch.Once Domino's Pizza finally won the last round of the lawsuit, it was contemplated to continue the Pizza Dispatch name and have two chains "competing" with each other on the theory that a competitor would come along sooner or later, why not ourselves. And that the pie would increase and Domino's would get all of it.The idea didn't go very far. I always suspected that the cannibalization was greater than anticipated.
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i don't see a lot of movies-maybe 3-4 a year
but i think out of the last 7 movies i have seen-----5 of them where at one theater( the Cedar -Lee theater for anyone in NE Ohio)
Now Rich, that theater is about a 50 minute drive from my house----there are a ZILLION other theaters much closer--some within 8 minutes or so
but my wife and i like to go to THAT theater
Because once we get there---we can park the car--there is the theater-- a nice little coffee house a few dors away-several bars nearby-------- probably 5 restraunts nearby---------so--when we come out of the theater-we have choices-------- wine and a beer--or coffee and Tea----drive up early and go to dinner ahead of time--Steak?, curry?--bear/burger/fries----choices--all in an easily walkable radius
Frankly i wish my neighborhood was more like this
but I think THAT's what starbucks is saying--they want an enviornment with that kind of LIFE----the whole district becomes a destination---going to the movies becomes an EVENT.
"but I think THAT's what starbucks is saying--they want an enviornment with that kind of LIFE----the whole district becomes a destination"I agree. And I wouldn't be surprised at all if that actually works for them.It just made me think of when Domino's maybe misapplied a similar theory.
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Starbucks claims THEIR theory is...they locate in an area where there are already other coffee houses, bagel shops, restraunts etc.- they CLAIM their research shows that business actually INCREASES in those other restraunts-"
That "might" work in some districts. But the 2nd closets SB to me is right on a main highway. Strip mall thingy. And when i go by in the am the drive through line is back up at least 15 deep.
If the movie rental store was open the line would be blocking thier entrance. I don't get that. The line for the drive through has to be at least 20-25 minutes. They can't park and go in? What do you do for 25 mins at the DT?
I think SB is following the 7-11 theory. Be on the right hand side for inbound rush hour for morning commutes. There are 4 (if you count the Safeway Starbucks) on the inbound commtes on the right side.
This is nothing new but the book talks about selling water and the success of Evian bottled waterhttp://www.evian.com/Part of the success is the packaging.If it was just in a plain bottle with plain label saying "WATER" it wouldn't be as successful.My kids drink bottled water and don't like tap water in a glass or cup.
bottled water is one of my major regrets in life- that i didn't think of that and get in on it 20 years ago( not that I would have had the savvy anyhow- but it still frys me)
I know exactly when this occured to me-- i was at a highschool Basketball game. Lebron James was a highschool junior-------at least 2/3 of the fans walking past me were carrying bottles of water.- i got up and went to the concession stand---a bottle of water was selling for MORE than a bottle of COKE
I still can't believe it--- it's absolutely insane---it comes free right out of the tap!
I am really too old for the times i am living in,
And water is more expensive than gas! Bob's next test date: 12/10/07
The book talks about "trying to beat Walmart"As an example, when the book was written, Toys R Us was selling more toys than anyone, even Walmart.They oofer more toys than any other retailer and so people can walk into their building and see thousands of toys.So they have a bigger selection than walmart.This system works and they also credit part of the success to the catchy name "toys r us"The book gives other examples of businesses focusing on just one type of product.Office Max does this and has been successful and they offer more office supplies than Walmart. It's a lot different from the old days when you went to a small retail store that had one small section with a few pencils, a couple of boxes of envelopes, school supplies, crayons, glue, etc.It takes quite a bit of space just for all the ink cartridges for the variety of printers out there.
that's an interesting point--- it kind of reminds me of a medieval market town------------------ the poulterers are in this street, the butchers over there, the glovers over here, the drapers around the corner and so on
you can't beat walmart on price-----but what CAN you beat them on??????
One of the things the book says is to do something to try to take away from the competition, even if you only break even or barely make any money.The example they gave is Dr. Pepper. Their competitor developed Mr. Pibb just to try to take away a portion of their sales.It's been done with several other soft drinks. I remember Tab as an alternative to diet coke or pepsi.The book says the way to compete is to put your business right next door or within a block or so of your competition.People want to be able to compare.I do see some Lowes and Home Depot fairly close to each other geographically.