Analysts and customers alike were stunned by a leaked internal memo from Starbucks CEO and founder Howard Schultz. In a letter to members of his senior staff, he at once praised the incredible pace of expansion within the company and decried the dilution of key elements of the brand — old-fashioned espresso machines, the smell of coffee in the store, the connection of the brand to the community. In a refreshing moment of candor from an executive, he lamented that Starbucks “stores…no longer have the soul of the past.”
It’s a typical story in modern business: The unrelenting focus on growth and shareholder value is driven by Wall Street. Achieving both is the ultimate benchmark for success inside every major company. A company like Krispy Kreme or Gap moves from beloved local icon to national brand to over-saturated chain. When the stock falters, knowing business pundits pile on about how “the brand has lost its way.” New entrants and niche competitors also have a part to play. In Gap’s case, firms like Abercrombie & Fitch have swiped their younger customers, while the Forth & Towne concept was unable to gain traction against established brands for professional women like Ann Taylor.
The pace of innovation is another factor that is often cited when a big brand is struggling. In order to break into a new category, a small company must be an innovator. Their game-changing idea starts a cycle of growth that ultimately turns the innovator part of the status quo. The only way for innovators to avoid becoming stale is to commit as much energy to the brand’s relevance and desirability as they do to profitability. For many large companies, this means spinning off smaller divisions that perpetuate a pioneer spirit. Hallmark Cards, for example, created the Shoebox division to add some sass to the syrupy. Toyota spun-off its Scion division when it needed to inject more youth into the brand.
But you already know this. Now I want to add another explanation into the mix — The Underdog Theory of Marketing. When you’re an underdog, a scrappy new company, your core customers can identify with you. When you get big, your earliest customers have trouble identifying with you anymore, and they drift away to find another brand can be meaningful to them again. Granted, the underdog has to provide functionality that is as good as or better than what they left behind. By talking to customers, I have come to see how much supporting the little guy — and sticking it to the man — can play a part in brand switching.
Google is a great example. Once a lovable upstart and a genuine counter-cultural force, its founders were profiled as Prius-driving nice guys who famously defined the corporate mission as “Don’t be evil.” But as the dominant force in search, Google is the underdog no more. We recently pitched a Google competitor that has set itself the unenviable task of taking on the giant. They have a comparable search algorithm and boast a better interface and feature set. (In fact, a number of companies are proclaiming that they have built a better a mousetrap. Quigo offers a more transparent version of keyword contextual advertising. Powerset is the latest in a long line of companies pursuing natural language search.)
But what really helped us win us the business was our suggestion to stay away from feature comparisons and position the challenger as edgier and hipper than Google. A few years ago, that would have been an impossible. But Google just isn’t as cool as it used to be. As Organic Founder and Chairman Jonathan Nelson is known to say, “There are two fundamental truths in the tech business: younger people get older, and the avant-garde become mainstream.” It seems obvious, but it’s hard to refute.