Home > Unstructured thoughts > Grow your business but don’t grow too much or too fast? Huh?

Grow your business but don’t grow too much or too fast? Huh?

Starbucks’ Lessons for Premium Brands by John Quelch makes some interesting points. In particular for me, the point of premium branding and mass marketing appears to be an incompatible strategy. This has one severe consequence, namely that premiumness and growth will at some point be destructive to the company’s health and possibly survival. Quite a paradox!

In the context of the retail/FMCG industry I am in, it appears to be axiomatic. Off the top of my head, I can’t think of any mass marketer/retailer that is in a premium segment. This presents an interesting conundrum – which is that growth is a must to drive profitability or survivability. No growth means slow death in the marketplace. Yet, by the same token, product premiumness is a key focus area for many business because of higher margins and perceived quality by consumers. Starbucks did have a unique selling quality that it made coffee, a commodity, into a premium experience/service. Seemed that all systems were a go… and go it went.

How then can a business craft a strategy that follows a growth model but yet avoids the tipping point in which Starbucks finds itself in? Starbucks pursued growth from a position of strength in their industry which on its face doesn’t seem wrong at all. Growth strategies is nearly mandated by shareholders (have we ever seen shareholders NOT want growth in their companies and by extension share prices?) and so along went Starbucks and now it flies off the cliff and its shareholders like lemmings trailing behind it.

Hindsight is a 20-20 science and many like Quelch are busy doing post-mortem analysis…but who could forget the Starbucks story ?
The Starbucks Experience

What seems to me to be the key learnings out of the Starbucks experience is that Growth is not a strategy by itself. It must be tied to market realities – knowing not just your customer, but what it is that you’re selling (Starbucks wasn’t selling coffee, it was selling an experience), and then not compromising on your product/service. It appears that one can overdose on a service offering or experience. “Freshness” of the experience must be preserved or at least not diluted because the inherent qualities of premiumness would then be lost. The McDonald-ification would be the natural result of crossing this tipping point.

The next chapter of the Starbucks story is then, how does a company/product/service then regain it’s premiumness after it’s become mass market? Scratching my head, I can’t seem to come up with any obvious examples…. Maybe Starbucks is now McStarbucks?

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