Monday, March 17, 2008
Starbucks' Musical Inconsistency
So, what happens if a brand is inconsistent, even in a way that seems small? An article from the New York Times provides a case study about Starbucks and its CD program.
You might think that music has little to do with a coffee brand, but the sound of Starbucks and the CDs offered by the chain have been a big part of their success. Several years ago, Starbucks was making headlines by carrying eclectic CDs by largely unknown artists; many saw a new music paradigm in the making, where brands with strong loyalty could begin to promote new artists that fit into their brand (and thus add a whole new revenue stream). Even record companies--who are notoriously reticent to embrace alternative distribution methods--were excited, as they saw Starbucks starting a trend that could keep the CD alive in an age of digital downloads.
But Starbucks managed to fumble the ball. Today, record company execs are saying the coffee chain squandered its opportunity, and consumers are asking why the chain's music selection is beginning to look as generic and mainstream as everywhere else. The chain claims CD sales are strong, having grown 22% last year, but with the number of stores increasing 18% in the same period, it doesn't appear CD sales are climbing the way they once did. Starbucks reportedly is selling only two CDs per store each day.
One talent manager summed up the promise and failure of Starbuck's music strategy: Starbucks initially conveyed “a promise that ‘we’re going to be bringing you something special, unique', (but) I don’t have the sense that there is any longer a culture and purpose to their musical endeavors.”
What happened? The article suggest several causes, including mismanagement, but it appears to be one of the classic evils of branding: Greed. Those with strong brands are understandably eager to have them generate more revenue and profit, and with Wall Street watching every quarterly result, the pressure to extend brands is great.
Starbucks wanted more, so they brought in an exec in 2004 with the goal of expanding the music selection. Before he took charge, their stores offered 5 to 20 CDs over the course of a year, but now Starbucks displays as many as 20 CDs at a time, adding six to eight new ones each month or so.
And instead of seeing emerging artists as being key to building their brand (and selling more coffee), they instead started twisting arms of their music partners to make more from emerging artists. When Starbucks merely stocks an album by an emerging artist, it routinely seeks up to 50 percent of the total profit, including sales at retailers. “What they were asking was not commensurate with what they were giving,” says a talent manager.
The NY Times article doesn't say Starbuck's music biz is failing, but it paints a pretty sad picture of a once promising strategy--one that supported Starbuck's unique brand--being undermined by a desire for quicker growth and a loss of the exclusivity that is so key to creating a brand.