Though I often like to riff on smart or silly marketing decisions, I'm more interested in the business strategy behind brands. In considering Dell and Starbucks, I'd have to say that both companies are utterly and somewhat similarly lost.
Low-priced beige boxes delivered to your door. By 2006 this simple equation built Dell into one of the most profitable and admired companies in the US, after which its founder retook the leadership reins and put the company on a slow slide to irrelevance:
- The company pushed its way into retail so it could compete with identical-looking computers from other manufacturers (and lose most of its profitability for doing so
- It spent oodles developing inanely clunky products, many of which never even made it to market (or did, sadly...can you say Axim?)
- Putting a red cover on a laptop meant it could compete with Apple on fashion, and lots of ad dollars were wasted failing to make the case for the case
Dell announced late last month that it's going to retreat from expanding any more and focus on finding profits. How does it intend to make more money selling computers? By cutting costs, according to this story in The Wall Street Journal.
Tasty pick-me-up in a home-away-from-home retail setting. By 2008 this proposition had fueled a zillion store openings and the writing of books on why Starbucks was so successful, after which sales started to falter as its inspired chairman returned to lead the company further afield from what once made it great:
- It started debranding some of its stores (assuming faux local coffee shop monikers)
- The company doubled down on the large variety and volume of food and accessories it tries to sell as impulse items at checkout
- One day of retraining its employees at its crowded and noisy stores was intended to offer experiences distinctive from the crowded and noisy experiences available at McDonald’s, Dunkin Donuts, et al
Also last month, Starbucks announced perhaps its grandest strategy: to sell its instant Via in tens of thousands of grocery and other retail locations. How does this improve its stores? It doesn't, or at least isn't supposed to do so according to this story (which appeared a week after Dell's announcement).
I don't know how Dell and Starbucks both got so lost. Perhaps its partially the fault of brilliant founder-leaders who aren't as smart as they think they are, or who are so used to seeing the world the way it should be that they just can't come to terms with the way it is. Maybe the branding gurus have gotten too caught up in their glorious PowerPoints and mistaken a buzz phrase like "brand extension" for a synonym for "business strategy." There's probably a heavy dose of sycophancy going on at both companies, so no adult is saying no to the nonsense.
But these brands have run into walls and don't seem to know it.
The world has changed, for sure, and computers and retail coffee have been all but commodified, leaving Dell and Starbucks with the same choice: get better at what you do, or do something different. Both brands are pursuing the latter. Dell isn't coming up with ways to make its direct delivery system more reliable, beneficial, or valuable to its customers, and Starbucks hasn’t appreciably innovated or improved its in-store experience.
There's arguably a host of meaningful and unique things both businesses could do to reaffirm and deliver on their core propositions. Low-priced beige boxes delivered to your door. Tasty pick-me-up in a home-away-from-home retail setting. These founding propositions fueled Dell and Starbucks’ successes, both in terms of the financials and branding, and they're still what the companies are best at (and what we consumers expect from them). Only these core strengths are simply no longer applicable, according to what the companies have announced.
Not even the smartest marketing can make up for this paucity of intelligent strategy.
Welcome to the Land of Lost Brands. Am I right, or just dim? Do you have other candidates to recommend?
Image source: pierofix