Stop & Shop and Starbucks - A Not So Perfect Union

Update - April 9, 2010: I posted this blog post in September 2009 not yet having read Kevin Maney's book, Trade-Off: Why Some Things Catch On and Others Don't. It ranks well up there in my personal critique of business books. Most of which I think you can "get-it" in the first chapter. Maney's deserves the full-read. In it, Maney, does a superb job of taking a wonderfully simple concept which I think successful companies execute well intuitively. It has to do with the balance of "fidelity" versus "convenience". In his book, Maney uses Starbucks as an example which to me was a rewarding validation of my blog post below. There is an adaptation of the chapter on Starbucks from Forbes, here. With that, feel free to read my post but without a doubt, pick-up a copy of Maney's book. It's well worth the read.

Around early 2006, Northeast grocer Stop & Shop struck a deal to open full-serve licensed Starbucks in 35-45 Stop & Shop stores over a five year partnership.

Our small suburban town boasts three Starbucks which might be an indication of the demographics. Our Stop & Shop Starbucks opened early in 2007 and would be our fourth.

A short two years later, Starbucks and our Stop & Shop would part ways. I can’t say I’m surprised.

Don’t get me wrong. The idea is nice in theory.

Starbucks is trying to steal market share from Dunkin’ Donuts (a New England institution and a master in convenience) and there are Dunkin’ Donuts in about 100 Stop & Shops.

Stop & Shop is trying to elevate its brand to compete with Whole Foods. By the way, right around the time of the Starbucks addition, a Whole Foods opened in our town. So in addition to Stop & Shop refreshing their image, cleaning up the store and offering an organic food aisle Starbucks should be a perfect fit.

Not so much.

I don’t know if either company did much research to decide if this was a good idea or if they did just didn’t ask the right questions.

My guess is that good research would have identified that while the demographics should indicate that a marriage between these two is a no-brainer, the reality is that the two consumer experiences are at odds with each other and the idea is actually inherently flawed.

My wife and I do our “basic” grocery shopping at Stop & Shop. We do specialty shopping at a local market or at Whole Foods. And we relax at Starbucks, with each other, a good friend or a book and ideally no kids.

Stop & Shop is inherently not relaxing. It’s functional. We don’t go wandering aimlessly through the store taking our time. We go with a list and a job to do and that’s complicated further if there are kids with us. There’s no time for a Non-fat White Chocolate Mocha. We don’t have time to place the order, let alone wait for it.

Stop & Shop is for one thing. Starbucks is for another. It seems like it should have been pretty simple to figure that out.

Funny thing is, Stop & Shop is headquartered a couple of towns away from mine. If they had only asked I might have been able to save them a bit of money.

Consumer Segmentation Flaws

"Often what we buy is not some thing but some idea that is embodied by that thing." New York Times Magazine 7/26/09

It is this sentiment that has allowed companies like Target, Mrs. Meyers, Whole Foods, Apple and a myriad of others to flourish. It also to some degree what anchors my philosophy about consumers today.

We all know that the marketing landscape has changed but instead of talking about tweets and screens and changing business models of network TV, my marketing philosophy is generally driven by the consumer.

Consumers can no longer be defined solely by household income, gender or ethnicity. It’s not that demographics don’t matter it’s that demographics aren’t necessarily the best indicator of a consumer’s personal brand DNA. Consumer brand selection has become intensely personal and is a reflection of the consumer’s sensibilities. It’s their calling card. And consumers I find are less about their say, “blackness” and more about their “me-ness”. Let’s be honest, your race, ethnicity or religion might determine who you marry but it won’t determine what toothpaste you’re going to buy.

Marketing to me as an “African-American” is relatively useless. It's not because I'm not black... I am. It’s not that I’m not proud of my heritage or that I don’t acknowledge my blackness, it’s that you will make assumptions that I can guarantee will be wrong. Yes I listen to hip-hop but I also have Ani Difranco, Dave Matthews Band and the soundtrack to Oklahoma on my iPod (Did I really just admit that?). I’m a member of Yacht Club. I’m into mountain biking and tuned European cars. Connect with me through my lifestyle driven affinity groups, not through my ethnicity.

Take my friend Darin. Darin is a successful attorney, married with two little girls. He’s also a large black guy. Most companies would approach Darin based on his ethnicity, I mean after all, he went to an HBCU but do you know the way to Darin’s heart? Internal combustible engines. Mostly European ones. The guy tracks his Ducati a few times a year and drives a Turner Motorsports tuned BMW 540i. For his birthday one year his wife bought him a shifter kart. This doesn't solely define him but it's guaranteed the best way to get his attention.

Or take Audrey (pictured on my web site). She’s 26, pink and bleach blond hair, heavily tattooed, pierced and listens to hardcore rock music that is likely to make most people cringe. She’s also a stylist with a Roth IRA and is close to opening her own salon… Wouldn’t she be an ideal customer for American Express Open? You wouldn’t know unless you got to know her.

Not too long ago I was approached by the agency for New Era the baseball hat and apparel company. They said that there was a flaw in their segmentation of customers and wanted help understanding what it was and perhaps a better way to segment their customers. They segmented them by “Urban”, “Suburban” and “Fan”. The flaw was simple. You could reside in suburbia, have urban sensibilities and be a fan. Furthermore it didn’t really tell you anything about their customers. We designed a segmentation based on how people wore their hats. The initial breakdown was as follows:

· fabric (cotton vs. wool vs mesh)

· style (flat brim, curved brim, front/back)

· colorway (one color, multi color, custom)

· team/non-team

From here, New Era is able to gain tremendous insight into their consumers and identify what various sub-cultures and affinity groups they belong to and how to better help retailers market products and adjust inventory.

Furthermore, as racial lines blur and intermarriage grows it will ultimately be harder and harder to bucket people into strict ethnic or racial confines. Having a solid understanding of your brand and the types of consumers it appeals to is critical.