"Celebrate what you want to see more of." Tom Peters
For the past decade, John Moore has made his mark in the world of marketing by designing and implementing branding ideas for Whole Foods Market and Starbucks Coffee. Today, he operates the Brand Autopsy Marketing Practice, a consultancy that helps companies get bigger by acting smaller. He has been recognized by Fast Company magazine as a "leading practitioner of the arts of customer service and marketing" and serves as a Standards Council Advisory Board Member with the Word of Mouth Marketing Association. John is also the writer of the Brand Autopsy blog and the author of Tribal Knowledge: Business Wisdom Brewed from the Grounds of Starbucks Corporate Culture.
[Bio adapted from his website: www.brandautopsy.com.]
tompeters.com asks ...
John, why have you written this book now?
JM: For a couple of reasons. One is that I have, for years and years read tons of books. I have aspired to write a book myself. Because I'm such a big fan of business books, I hoped at some point in my life to have a story to share in a business book.
The second is that it's my way of showing love for a company that has meant so much to me. Starbucks took a chance on hiring an inexperienced but passionate young marketer, took the time to teach me things that I would have never have learned elsewhere. They really helped to give me a perspective on how a business should act, grow, and become meaningful to customers. I feel as though I owe it to them to share that story with more people.
I think a lot of people will say this reads like a long glorification of Starbucks. Have you gotten any feedback like that yet?
JM: Oh, yes. There is no doubt that it is a pro-Starbucks story. That's because it is basically my love story of how they've built an endearing and enduring business. To that end, it is sort of an old-school Starbucks book, because it highlights some of the classic principles that the company used to become the company it is today.
We're obviously not going to cover all the principles. A lot of them, I think we as customers—because I don't know anybody who isn't a customer of Starbucks—intuit about them. But what is the most counter-intuitive point that you make in the book about Starbucks' marketing?
JM: "Building the business creates your brand." We talk so much about building a brand, creating this company that exudes so much personality. But in reality, all the most endearing brands that we know are really good businesses at heart. So many of them were built first as a business, which then evolved into being so successful, or having such a connection with consumers, that they then attained a grand, brand status.
In your book, you discuss genuine and authentic marketing. To me, as soon as somebody starts talking about these things, they're no longer genuine and authentic. Do you ever have an issue with that?
JM: Yes, I think it all goes back to "what gets measured gets manufactured." Once you identify it, then you automatically try to find ways to manufacture it. That's the way it is. By the time you say, "Wait a minute! The business has turned into a brand, now what do we do?" that's when you start managing the brand as opposed to managing the business. I think that might be the point where some businesses go from being true, being genuine, to starting to act more like a brand than like a business.
I think one thing that we all had to learn the last five, ten years, through the dot-com explosion, is that so many of those businesses were out there trying to build the brand before the business. But if you work passionately in and on your business, the by-product is going to be a brand that connects on so many levels with consumers.
That's an interesting point. Why do you think we've ended up with such a focus on brand? Is it just that brand is "sexier" to talk about, or is it easier to understand than business?
JM: I think it's a combination of all that. I think that we business folks see a brand as something we can seemingly control, more so than the business. When you're talking about building a business, you're talking about really having to build it from the inside out. That's a much more time consuming process than on the branding side, which is seemingly built outside-in.
Starbucks is not a marketing-driven company. They are driven by operations at the store level. It is not as sexy to develop a compelling HR program, but when companies realize that it is the employees that touch customers, they can have an impact on customers in a much more meaningful, longer-lasting way than, say, a billboard or a commercial could.
Did the Starbucks legal department review your manuscript?
JM: No, this is just me.
I like the mention of screw-ups in your book because it's so pro-Starbucks that I began to dislike them. I thought, nobody can be this good! [Laughter] You mentioned "a perfect pair" promotion, an offer that put a scone and a cup of coffee together. Apparently Howard Schultz came into a store one morning, saw this, thought it reeked of low-end fast food promotion and said, "Get these out of here!" I think that's great, but I'm just wondering, what happened to the person who put that promotion together?
JM: So much of the stuff that is done there is done as a team, so it's hard to place blame on one person. It has to go through many checks and balances. But the culture of that company is one that encourages you to try a whole bunch of things. They understand that you're going to make mistakes, but just don't make that mistake again.
On that end, we quickly learned that using the combo-meal, fast-food mentality was something that we should never, ever try to do again. Clearly, that was not a part of what some folks felt the brand should convey, and I think rightfully so.
My big Aha! moment was when you mentioned that Starbucks likes to locate itself near dry cleaners and video stores, so it catches people dropping off dry cleaning in the morning, and then catches them picking up movies in the evening, counting on impulse buys from these people. I had never noticed this, but the two Starbucks that are more or less within walking distance of where I live are in those exact kinds of locations. They're tucked right between video stores and dry cleaners. I was a bit amazed; on the one hand, that I had never noticed that, and on the other at how often they seem to be able to do that. I'm guessing it's not just dry cleaners and video stores.
JM: No, but those would probably be the two most common places where you will typically find a Starbucks. You will also find a Starbucks close to grocery stores, because that's where you can count on there being a constant flow of afternoon and weekend traffic. It makes sense to put a store where people are.
You talk about the stores being their own marketing centers: the stores are about their location, they're about the people in them. But is Starbucks still charging for Wi-Fi access?
JM: Yes, they are. To me, that has quickly become a cost of doing business. It clearly does tell folks who they would like to have as consumers; typically, you're going to find professionals there. When I say that, I mean you'll find people who are charging the Wi-Fi to their employers as opposed to individuals hanging out, like you would typically find at coffeehouses that don't charge for Wi-Fi use.
That's a conscious decision. You think they're going to continue to operate that way, even though everyone else in the world is supplying free Wi-Fi at this point?
JM: I don't know. Starbucks has never released what level of revenue they derive from Wi-Fi; that's never been talked about. What's talked about is how they can enhance the in-store experience. They have a great pipeline that they could use to do some other things besides Wi-Fi. At some point in time, I would imagine they'll feel the pressure to offer that as a complimentary service and then find some way to potentially charge customers for specific content that's delivered in stores. Who knows?
Right. But you think they could handle it, since you mention at some point that there's a 90 percent margin on a lot of these coffee drinks.
That kills me; that's a huge margin.
JM: What I find fascinating is that Starbucks has never really lowered prices, despite the fact that they have gained economies of scale out the wazoo. They have built something that people will gladly pay more for. That's why you'll see they up the price by a nickel to a dime, every couple of years. We as consumers are going down the path and saying, "Yes, I still value that; that's still not too much to pay for the comfort that I feel in buying that type of coffee."
As far as I'm concerned, all the last raise did was cut into the employee's tip. Because if I go in and buy a cup of coffee that used to be $1.68 and is now $1.79, I give them 2 bucks and say, "Keep the change." So Starbucks is making more money, and the employees are taking a hit on the tips. Is there a policy about tip jars at Starbucks?
JM: The policy is that there is not supposed to be a sign that says "tips."
A clear plastic container that's full of money doesn't seem to need a sign, does it?
JM: No, but if you take a look at so many other places, they feel that they have to say, "Tips, please!" or something to that effect. At Starbucks, they feel that's crossing a line.
What really reduces tips on a per-employee level is the Starbucks card. Twelve percent of all purchases are on that card. People don't tip because they just swipe the card. From what I've seen, that has actually had a bigger impact on reducing store partner tips, as opposed to the price increase.
Yes, very good point. In fact, somebody gave me a Starbucks card and after the first few transactions, I thought about that. But the fact is, I'm not going to reach into my pocket for change, because I've already done one transaction and you only allow yourself so much hand motion per time at the cash register. Now does that have some effect on morale?
JM: I think it could, but keep in mind, Starbucks is now bringing more customers in every day. That is more opportunity for partners to make money from tips. While they might make less per customer, there are more customers to make little tips from. So in the end, it evens out.
Right, it's the volume.
JM: Volume solves everything, doesn't it?
You talk about marketing teams working on partnerships with Yahoo!, Lions Gate Films, Jim Beam, and so on. What is Starbucks doing with Jim Beam?
JM: They have put out a Starbucks Coffee branded liqueur. I would imagine that it tastes very much like Kahlua.
And you can buy this in liquor stores?
You can't buy it at Starbucks?
JM: No, you cannot. I think Starbucks had been approached countless times, for years and years, and they had politely said no. But I think now they are probably at a size where they feel that it would do very little damage to the brand to be seen as supporting liqueur. It is just one more way that they can reach consumers in an environment outside the four walls of a Starbucks store.
Apparently Starbucks stores were also promoting the film Akeelah and the Bee, which was a relationship Starbucks had with Lions Gate Films. You say in your book that you think Starbucks might be wise to heed its own "tribal knowledge" advice, and focus more on coffee and less on music and movies to grow the business. Can you talk about that?
JM: Yes. I think that we as consumers see that. Starbucks keeps telling us that they have gained permission from us as consumers to extend into books, movies, and music. But you can go too far and end up with a disconnect. I think that movie was a case of that. Starbucks tried to do the movie tie-in in a Starbuckian manner, but the in-store signage was confusing. The signage seemed to almost intrude upon a customer's expected experience; they saw something that's so atypical that it made them pause and think, "What's Starbucks doing now?"
Yes, plus the audience for the movie is kids; they're too young to be drinking coffee. It's going to stunt their growth, right?
JM: Potentially so, right. [Laughter]
Starbucks has become very successful, but they're always looking to grow the company. I've interviewed a few authors recently who are saying, "bigger isn't necessarily better." I'm wondering if Starbucks is becoming a victim of its own success.
JM: I do think so, because I think that movie promotion was more dominated by being able to drive dollars to the bottom line. Starbucks was going to get a percentage of the box office receipts, DVD sales, and soundtracks sold, all for spending some marketing dollars in-store.
It's a phenomenal model, because you spend very little and have the potential to make a whole bunch. But to me, that was dominated by trying to appeal to those folks working on Wall Street, as opposed to customers living on Main Street. That's why I think that crossed the line.
Good point. Thousand dollar tip in the tip jar in Utah: true or apocryphal?
A thousand dollar bill?
JM: A thousand dollar tip. It is one of those amazing stories that happen in so many places besides Salt Lake, but that's one that I am very knowledgeable about. Those partners got so jazzed when they saw that tip. And then they saw it the following year, and the following year. They don't really know who that customer was, or is. It shows you that for some folks, that daily connection means so much to them. I have a hard time seeing someone doing the same thing at McDonald's or Einstein Bros.
Tom blogged about Starbucks, about the fact that the people working at Starbucks are always smiling. Sure, some people don't like Starbucks because it's a huge corporation, but I think the reason people do like it and do return is because of the attitude. You were in the marketing department, so I'm guessing you never had anything to do with hiring. How did that show up on your radar screen, working at Starbucks?
JM: It showed up on mine because I began in a store behind the counter.
JM: I was a barista behind the counter.
JM: In Dallas.
JM: Back in '94. My career began behind the counter. What I think helped me is that I understood, from the store level, how marketing programs impact partners, and thus impact customers. I had experience doing some of the programs in the past as a store partner. But as far as how hiring plays a role, one thing that we always tried to do was to put on the store manager's hat. We always knew that if we could get store managers' support of a campaign, they would get their partners behind it.
Many times we would go out and talk to store managers, share ideas, and see what worked and what didn't work, bring those back and then tweak programs accordingly.
You allude to the fact that Starbucks has clearly raised the expectations of anyone in the United States and other places, as far as what to expect from a cup of coffee. There is a plateauing; Starbucks has become the norm. When I find myself in a strange city, the first question is always, "Where's the nearest Starbucks?"
And yet, we're on the verge of the commodification of Starbucks. You mention that it seems there is room for some young, rebel, upstart coffee company to come along and define the "new experience." Now the Starbucks experience is not an "experience" anymore, it's the norm.
JM: Yes, they have been so successful that they've become an expectation. For years, Starbucks was a destination. You had to go out of your way to find one. As they grew, they became easier to find. And thus, it became more of an expectation than a destination. They've almost, in many ways, accomplished their goal: to change the way the world thinks about coffee.
I think that's why we see them dabbling in so many new places, because they have basically accomplished that goal. When Starbucks talks about the company now, they use the words "Starbucks Experience" more than "Starbucks Coffee."
JM: I see that as trying to acknowledge that they've reached their goal. I think now they're trying to find what's next.
In a way, the company has achieved its mission as stated in the mission statement. So now, it has no mission; because it has achieved its mission, there's no new mission.
JM: I don't think we know what it is, and I don't think they've clearly been able to articulate it, beyond trying to be a company that inspires and rewards the human spirit. They say that, and that's really what guides them now, but that encompasses so much. It does allow them to dabble, and to believe they've been given permission from consumers to go into many places besides coffee.
But maybe we haven't given them permission beyond coffee.
JM: Maybe we haven't.
Is Starbucks convinced that since they're accepted, they're an expectation, they're a norm, that gives them permission to reach out to other areas?
JM: I think so, yes. When they see comparable store sales that are so successful, so strong, so long-lasting and vibrant, they then take that as, "People are voting with their wallets; we must be doing something right. If so, let's continue to do things that might be different. If we take a hit on comparable store sales, then that might tell us that we might be going too far. But let's certainly not lose that mentality of wanting to experiment, wanting to challenge ourselves, so that we don't become complacent or conservative." They know that if they did become complacent or conservative, it would potentially derail the company from achieving more success.
You write about internal marketing to the employees. Since they are the face of the company to the customer, the more they know, the more enthusiastic they are, the more effective the campaign. Rather than market to the world, Starbucks markets to the employees. They understand that the message is then passed from the baristas to the customers.
There's a story about an earthquake in Seattle, and communications go all wonky. Headquarters in Seattle seems to be surprised that, guess what? All the stores managed just fine when the earthquake disrupted communications.
It sounds as if there's something a little askew there, because you say you've got a culture where you hire top-notch people and all that. So why would the corporates be surprised that the stores managed so well? With all these first-rate hires wouldn't you expect that things would all run normally?
JM: Yes and no. No on the end that Starbucks has built up so many systems, so many processes that have been top-down direction as opposed to bottom-up creation. So much communication is top-down, coming from headquarters, that I think they lost trust in some of the decision-making at the store level. Once the communication snapped, they realized that, "Wait a minute, we actually have hired smart people who know how to run their business. We don't have to be so hands-on all the time."
I think as time went on, they began to want to control more of that conversation. But that instance helped them understand that, "Wait a minute, we can let go a little bit here, and trust the people that we've hired, both in the field, at the store level, and in the field within the corporate management level. They actually are probably in a better space to be able to handle some of the day-to-day operational concerns."
But did that realization have any impact on the organizational chart? That would seem to be an opportunity to lose a bunch of people in corporate, and leave more oversight to the store managers.
JM: What I think it did was let people know that maybe the time they previously spent trying to control that conversation could be spent exploring new opportunities. I think that's really when people started to concentrate on doing things besides, let's say, coffee, or besides trying to control the in-store experience.
Near the end of the book you talk about bringing new people into the company, at the corporate offices. You mention the Six-Week Rule, an unwritten rule, which is probably even harsher than a written rule. [Laughter] New people are supposed to sit and listen for six weeks, before they start offering up their own ideas about how things ought to run. I thought, "Six weeks!" I can understand saying, "Okay, hold your horses." But it seemed to me, by saying six weeks, you're basically making sure that these people "get in line" with the current corporate culture, learn how the bureaucracy works, and how to operate within it. It seems to me that it goes against innovation.
I have evidence for this. One of our Cool Friends, Bob Sutton has a book called Weird Ideas That Work. He says, "Hire people who don't learn the company code quickly." Meaning, you want people who are going to come in and who are going to be a little disruptive. I just see that six-week rule as antithetical to the idea of really letting people bring their new ideas to a position.
JM: Yes. Well, I can say that from Starbucks' end, they're a very consensus-driven company. Folks that are lone wolf, challenger, idea people, they have to, of course, get buy-in from other folks so that they can build consensus. One way to do that is to take time to listen as opposed to expressing your gut reaction, having been in that job for two weeks and not clearly understanding all the context behind why some of the decisions were made, or without having the knowledge as to some of the culture of the company.
You could potentially risk being able to build trust or gain consensus for some of the ideas that you have. All they're asking is for someone to spend a month and a half to learn the foundations of the company, to learn more about the people and the processes. You still have plenty of time to challenge, to ask those hard questions, to propose ideas that are going to potentially change how the company does business.
It was found that those folks who come in like a bull and charge, ultimately turn people off. Folks that come in, exhale, take things in, balance things out, and then offer up their perspectives, usually are folks that are going to find it easier to gain consensus, and thus make change happen.
I hear what you're saying, particularly given the consensus-driven culture, which I think is healthy. And yet, I would chafe under that kind of a rule. I think it says, "Get with the corporate culture," which is a Big Brother kind of attitude.
JM: Starbucks would rather have passionate followers than a whole slew of passionate leaders. They feel that once calls are made, it's time for you to make them happen as opposed to being a person that is going to fight and fight and fight. There are plenty of companies where that mentality would work well, just not at Starbucks.
One last question: Aren't you the guy who posted links to all the separate pieces from our Project04 book at your blog?
JM: I might have done that, yes. [Laughter]
Why did you do that? [Laughter]
JM: Why'd I do that? You see, this is where the Web comes back to bite you.
JM: What you put online remains online, and you get caught online. Why? Because as I was going through those things, I thought, "Wait a minute!"
I've heard this before!
JM: Yes, it has to be here somewhere.
Actually, I thought that was great. Well, at first I thought, "Oh Christ, we're trying to sell this!" And then here's this guy who's pointing at all these places. It was no secret that these things had been posted before. That's just the way that Tom works. If you read something, you can probably find some version of it somewhere else. I missed an opportunity to engage your blog at that moment, and get everybody in on that. Because it wasn't like we were really trying to hide anything. We did a booklet project; we do projects. And we don't do these things to make a lot of money, or to make any money. [Laughter] But anyway, I was impressed that somebody had gone around and found all those pieces.
JM: I've been a big fan of Tom Peters, I share lots of his ideas. He truly is someone that has helped me to think better about business, and he challenges me never to become complacent, to always get out there, try to push ahead, do different things.
That's a great compliment. Thank you for your time today, John. And good luck with the book.
JM: I appreciate it.