by: Jonathan Salem Baskin

Ouch.

As of last week, Starbucks is closing 600 stores (100 pre-announced and 500 announced, in the convoluted chronology of corporate disclosure), firing thousands of baristas, and slashing expansion plans. Its stock continues to crap out faster and worse than the crappy stock market overall. The mediasphere has been abuzz with causes and suspects for the malaise...

...citing everything from the challenges of executing a "transformation" built on the company's "legacy of innovation" (more corporate blather from the company issued around the return of CEO Howard Schultz to active duty)...

...to mistakes in a highly-contentious real estate strategy, or the existence of a natural operational wall, or ceiling, that knocks silly the inspired entrepreneurs of all great retail concepts and, like a cosmological paradox, proves insolvable to their every theorem.

I think the riff at Just B Major makes a lot of sense, too, in that the business got more than a little distracted with its aspirations of becoming a movie studio, recording label, sandwich maker, and...oh yes...remembering to sell coffee. 

But I wonder if Starbucks has a much bigger problem: its most important brand attribute was a flush economy. 

Maybe the strength it most relied upon might have been actualized within the four walls of its stores, but it drew on a quality that was outside the stores, and beyond every definition of its brand.

Disposable income.

Lots was written and blathered about the brilliance of the Starbucks concept. Old rules of marketing no longer applied, not to mention hundreds of years of economics. It was a unique, wonderful experience, defined not just by input from the senses, but changes in the very lifestyles of consumers. 

There was this absolute valuation of brand that made $4 cups of coffee seem worth it. That’s why there’s an effort underway to fix it.

But what if it was a problem, only not the problem? What if the context of the value proposition around the brand has changed, perhaps for the foreseeable future? 

Short of handing its customers money, there's no way Starbucks can orchestrate a brand experience that enables people to buy $4 cups of coffee, no matter how brilliantly mixed or creatively presented, if they don’t have the money in their wallets.

Perhaps the value of the Starbucks brand was determined less by what it was worth to buy, and more by how much "extra" money consumers felt they had to spend.

$4 coffee might not ever make sense again unless there's no better way available to waste $4...now that the economy has turned South and all of the old rules of economics seem relevant again. Humm ...maybe they never disappeared in the first place (we just lost sight of them?).

Becoming the fad of choice is no small accomplishment, and Starbucks continues to do a masterful job of marketing. I drink the stuff quite often. But I don't drink as much as I used to, and there’s little that a return of the old Starbucks logo will to toward changing the amount of money I have in my pocket for incidentals like cups of coffee.

You can't separate the concept of brands from the contexts in which they arise.

So the elastic goes snap.

Original Post: http://dimbulb.typepad.com/my_weblog/2008/07/ouch-the-elasti.html

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