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Customer loyalty forever

Starbucks serves a lesson in brand equity
Thursday, April 4, 2019 - 06:00
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One February morning, the president of a chain of NAPA auto parts stores voiced his concern to me about the over saturation of his competitors in North Carolina where his 26 locations reside. Neither price wars nor comparable brand assortments were mentioned by Dan Walker during our brief phone conversation, but the hint about the consequences inflicted by commoditization was undeniable. As our exchange wound down, Dan contemplated how the aftermarket might prosper with four to six common merchants in every city and town, plus what more can be sourced online. 

Many pundits including me might be tempted to preach the virtues of differentiation, the foundation of value proposition building. But my thoughts wandered to the CEO of Starbucks who recently wrote a book titled From the Ground Up. It is an inspirational primer on renewal and reinvention when conventional wisdom won’t do. 

Understandingly, industry experts rationalize that the retailer’s quest to add more stores where sizeable vehicle populations exist is a workable strategy. For 2018, O’Reilly Auto Parts declared 200 more units. To distinguish themselves from the pack, “Never Say No” became their motto while AutoZone proclaimed, “Yes We Got It”! To regain their foothold, Advance Auto Parts unfurled a three-way plan to streamline operations, simplify the buying experience, and execute better. Soon, customers will see a joint alliance with Walmart, which further crowds the sales space. As far as Wall Street can see in this industry dictated by miles driven, variable weather conditions, and complex vehicle platforms, the outlook appears rosy. Although written in their unique language in their shareholder annual reports, themes about customer satisfaction, expert advice, and same day parts availability are remarkably trite.

How might the coffee king handle this brew? Back in the mid-1980s when Howard Schultz launched Starbucks into the one-dimensional world of donut chains that poured coffee and where distributors bagged the grounds for supermarkets and restaurants, sceptics mocked the concept of an espresso bar. With fortitude however, Schultz upended that stale domain by elevating the green mermaid into a globally recognizable brand. 

From day one, the CEO aspired to cultivate an emotionally connective experience that would over time become bigger than any nondescript coffee vendor. Starbucks came to symbolize a respite where people could find relief from a stressful environment. These coffee shops represented an oasis from home or the workplace where anybody can seek a communal spot to work, think or linger where the baristas would come to know their guests. Nowadays an increasing number of customers will gladly pay more for a Starbucks coffee drink than for something comparably less. 

Schultz’s vision to flip his custom-made beverages into a personal affinity is transferable to how professionals can engage in creative ways. Consider what a professional installer emotionally values. On one research assignment, a marketing firm tasked me to gauge the repairer’s perceptions of varied hard part brands. While competitive pricing, timely delivery and product coverage mattered dearly to repair center owners, they also yearned for peace-of-mind, stability, and consistency from the parts supplier and their manufacturers. Many owners revealed that they would prefer to wait longer for a quality made product than endure the anxiety of what they were about to install could be potentially defective or cheaply made. Other times I learned that when a manufacturer was slow to trouble shoot an issue or that the website gave hazy answers to critical questions, the repairers stress level would rise. In a conversation with a district NAPA manager, he spoke about one installer who did not receive the technical support needed to program an engine control module. These events can hinder a business’s goal to achieve profitable outcomes.    

Upon further investigation with other product managers who service the commercial installer, they said that an inattentive manufacturer can produce a negative ripple effect to the very same customers they are trying to help. Some people called out one parts maker that dominated the industry through the 1990s until the parent manufacturer sold them off. Industry insiders perceived that business as a diluted image of its old self, lacking purpose. Rumors circulated that leadership was not giving their employees the resources to succeed at their jobs. Few were bringing actionable marketing intelligence to their customer accounts to advise them on assorting an economical product mix. Compared with their peer competitors, the tools to help the repair shop run efficiently lacked substance. One manufacturer’s representative agency confided in me that claims and credits were intentionally delayed in order to inflate a healthy income statement.  

Command and control practices are antithetical to Howard Schultz. Without people, a business ceases to function. Schultz always had his employee’s backs because he prized them as the engine of brand equity. Prior to going public in 1994, management heaped on the traditional perks to attract the best employees as well as creating an egalitarian culture where everyone was called partners. About 15 years later when the company lost 80 percent of its share value, the investors pressured Schultz into stripping away health care coverage to offset depressed profits. Schultz pushed back by arguing for the long view. Starbucks begins first with their people who generate value to the customers. Balancing profitability with social decency is tricky business. But Shultz aspired to defend that thin line throughout his tenure as he linked respect toward every employee with engendered loyalty. Had he conceded to rollback health care coverage, it may have created a demoralized or disengaged environment, resulting in turnover, a trigger for higher replacement costs than a lower price tag of employee investment. 

Schultz’s business model is a lesson about going further than marketing vehicle components. To be greater than a “parts person,” ask what more can be done to deliver a psychologically rewarding outcome for somebody looking for a richer partnership. Meaningful change demands creativity, especially as interactive technology continues to rip people apart from their problem-solvers who are the face of your business. Your employees are best positioned to shatter that physical and virtual space. They can play a pivotal role in connecting with your customer and be thinking holistically about what they will respond to for the long haul. For some this role may require an engaged collaborator or an active listener. Others may crave a sharer or an innovator. But making a meaningful impact should be no more of a constraint than for Schultz who had pitched his concept to his peers. No matter what, in the end Schultz generously honored his partners with respect, honesty, and trust — the richest currency that carries more weight than a paycheck.

Adding stores or pouring money into more inventory seems an easy solution, but perhaps a myopic one. By no means should Schutz’s outlook seduce you into a public relations stunt to define your brand. Schultz knew the kind of company Starbucks had to be — a reflection of what customers wanted and where an employee could feel a sense of belonging. How manufacturers and parts suppliers can empower their own workforces who have a direct stake with the DIYer and the commercial installer is an endeavor worth chasing. Make yours a different kind of company. Here’s to you Dan Walker.


 

 

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