Starbucks has changed coffee and business forever! The way we thing about coffee is completely differently than 30 years ago!
Coffee’s greater cachet has had a big effect on the bottom line. Ten years ago, only 3% of all coffee sold in the United States was priced at a premium—at least 25% higher than value brands. Today, 40% of coffee is sold at premium prices.
Did Vancouver or London have great coffee before the arrival of Starbucks? Absolutely! With a strong Italian community located along the Commercial Drive area of Vancouver, Vancouverites had access to quality Italian coffee for years and years before Starbucks. That being said most people did not go to ‘Little Italy’ for their coffee but drank typical American style filtered drip coffee. If coffee was bread then we drank the plain, spongy white variety.
In fact, nobody gave coffee much of a thought. This exactly is the opportunity that Starbucks exploited and chances are your business can do the exact same thing.
Coffee shops before Starbucks were dull, boring and completely uninspired. Starbuck’s Howard Shultz took the best of Italian Coffee bars, Americanized the offering; created a modern, trendy look and friendly efficient service. He then educated the public to appreciate the stronger; more sophisticated flavours and began the process of building an international brand.
How could you do this for your market?
Well, not all markets are boring, sleepy and ripe for the revolution that the traditional coffee shop had been prior to Starbucks but many markets whether B2B or B2C have not changed much in the last forty years.
Over the past decade the cachet of numerous categories of fast-moving consumer goods measured as the percentage of the product category sold at a premium over value brands. When individual companies increase the perceived “premiumness” of a product through innovations in the product itself or the way it’s delivered, the entire category can reap higher prices and profits.
Yogurt is another good example. By the 1980s, yogurt had lost its status as an exotic, healthful product. But between 1991 and 1994, Dannon introduced a spree of innovations, including crunch-top packaging and pop-out spoons, raising both its market share and its average price. General Mills followed with Trix yogurt, Yoplait Adventure Pack, and Go-Gurt yogurt in a tube, aimed at creating a new kids’ yogurt niche. Dannon has recently tested a drinkable yogurt. This burst of creativity, plus a big investment in complementary advertising, has begun to push up the sales of premium brands throughout the category. Dannon, for example, has increased its profit margin by five percentage points between 1990 and 1997.
Take a fresh look at your business and your competition. Could you raise the bar significantly or better yet completely revolutionize the way service is delivered in your market?
Think about Steve Jobs and Apple breaking all of the rules until he redefined the market.
Will the next be newsagents, the British pub, the corner café and the English breakfast, fish & chips, wholesale delivery of hotel table linens, website development, or perhaps bakeries? Professional coaching? Recruiting? Accounting?
The list of opportunities is endless! The only limit is imagination!
