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    « A Blueprinter or a Technology Provider? | Main | To be Blue or Not to be Blue »

    April 17, 2006

    Is Your Shop a Destination?

    In 2003 I had a unique opportunity to participate in a week long charter program between Young Entrepreneurs Organization and Stanford University.  It was similar to an executive education program, but targeted at entrepreneurs.  We participated in intense sessions with professors that taught technology luminaries such as Steve Ballmer (Microsoft CEO), Jerry Yang (Yahoo! Cofounder), and Sergey Brin (Google cofounder).  One professor told me over dinner that Steve Ballmer came to him with a difficult dilemma.  “Do I finish my education at Stamford, or go join this start up company with this guy Bill Gates?”.  He didn’t finish his education, and it seems to have been the right decision.  It was a fascinating experience for both the entrepreneurs and the professors.  The entrepreneurs had an opportunity to take a step back from their day to day businesses and analyze some of the most successful companies and how they became successful, or in some cases how they failed.  It was a good experience for the professors because they had a different audience than they were accustomed to.  Even though these are some of the most respected professors in the world, none of the entrepreneurs took what they said as the gospel.  The student entrepreneurs constantly challenged everything they said.  Some of the professors professed that they were used to students that took notes and listened.  They weren’t accustomed to that much debate.  In this intense week-lone program, I learned many interesting things that I believe apply to the AEC commercial reprographics market.  I will be writing about several “lessons learned” in this blog.

    One of the most interesting case studies we reviewed was Starbucks.  The case study was specifically focused on Starbucks globalization strategy, but we learned about every aspect of the company.  It was fascinating to take a deeper look at the company and its strategy.  I was most interested the fact that Starbucks’ strategy does not center on coffee.  It centers on creating a “destination”.  Coffee is a means to that end.  Their internal strategy focuses on making Starbucks the “Third Place”.  It is not your home, and not your office, but that other place you visit and spend time at.  Coffee is their primary method of luring you there.  They actually don’t make that much money on their specialty drinks.  How could that be?  A friend of mine who refers to Starbucks as “Fourbucks” – can’t believe this analysis.  My wife’s grandfather several weeks before his death told me.  “I’ve come to understand a lot of things in my life, but I will never understand why somebody would pay four dollars for a cup of coffee”.  When everyone coming in your store typically orders one cup of coffee and there are 19,000 variations of specialty coffees and you need two to three people to serve this coffee your profits get eaten quickly.  Where does Starbucks make their profit?  In everything else!  They accessorize.  The after coffee breath mints, the sandwiches, the T-Mobile internet connection, the little bears my 3 year old daughter talks me into buying, the special edition music the sell – the list goes on.  That is all very profitable for them.  By making it a destination, people build habits around their visits.  When I am in town, I stop by the same Starbucks religiously.  It is part of my daily routine.  Even though the profits may be slim on the coffee, they get me there every day.  When I need to pick up some ground coffee or pastries for a meeting, I buy them at that store.  When I want to get away from the house or the office to get some work done or just read the paper on a Sunday.  I go to Starbucks.  You can debate the profitability of the coffee, but the main point here is that Starbucks strategy is around creating a destination where people want to go.  They then use that destination to identify other profitable revenue streams. Many of the reprographers that I visit have many people sitting in their lobby.  Some have added vending machines.  Many people sell architecture or drafting supplies.  Most people offer complimentary coffee. 

    If you were take a step back and look at your business is there a way to emphasize your shop as a destination.  Can you make it more pleasant of a place for your customers to visit?  Can you get more people to visit?  Are there other ways you can sell them things to increase you profits?  Can you do things with your destination to increase their loyalty?  Can you make stopping by your office a habit in their workday?  Do you have enough destinations to meet demands of your customers or potential customers?  Is your competitors office a more desirable destination than yours?

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