Having a large customer the size of an 800-pound gorilla drives rapid revenue growth, but it also carries hidden dangers for your business.
Learn how to tame it.
What Business Can Learn from Donuts: The Blue Star Story
If you’ve ever visited Portland, your tourist to-do list probably included VooDoo Doughnuts – the funky, eclectic Portland staple which serves unconventional ingredient varieties like Cap’n Crunch and grape-flavored Tang. If you live in Portland, however, you’re probably more likely to frequent Blue Star Donuts – a local gourmet favorite with slightly different (although no more conventional) donut fare.
“I remember the first time I heard that reputation!” says Jessica, laughing. Jessica Kulp is the Director of Marketing for Blue Star and has been with the company since its inception. “That’s the beauty of Portland – so many people embraced it. Even early on we had our core, passionate customers.”
That’s saying something – because in the beginning, running this kind of business was no cakewalk (or, if I may, donut-walk). Blue Star had to learn a number of lessons Kinesis holds dear.
“It was rough in the beginning. There have been so many disasters – yes, I would say disasters, that’s an appropriate word.”
- Jessica Kulp, Blue Star Director of Marketing
Jessica relayed a story early on about the power going out on one of the refrigerators overnight. “The dough got warm and expanded so much that it pushed the refrigerator doors open. We came in in the morning with shelves and shelves of brioche dough spilling onto the ground.” With this kind of from-scratch product, if something goes wrong, you’re out of business for a day. “We didn’t have any donuts that day. As a small business, you can’t afford that.”
But aside from investing in a backup generator, that was far from the first obstacle Blue Star would face. Kinesis’ business philosophy, Marketing From the Inside Out®, was built for our clients in the B2B space, but we love hearing when similar methodologies are proven across other industries and use cases. We sat down with Jessica and Blue Star founder Katie Poppe to discuss some of these lessons learned against the backdrop of our inside-out process.
Company Identity The Power of Purpose
The biggest lesson Blue Star has learned over the years has been one of identity: Blue Star Donuts has a set of core values which articulate exactly what the business stands for and is trying to accomplish. While there have been opportunities (and lucrative ones, at that) to stray from these values, the company has held firm to its original purpose.
“The lesson for us has been to be the caretakers of who we are and who we set out to be. We started out with this very passionate mission, and it’s easy as time goes on to get caught up in ‘maybe we should be doing this thing, changing that.’ Because you think if you’re not growing, you’re dying.”
- Katie Poppe, Blue Star Founder
“We’re not opposed to expansion and growth, but we have to be careful about how we do that – because the quality of the product is the first thing that will suffer, and that’s something we’re absolutely not okay with. It’s written all over the wall of every Blue Star: quality over quantity.”
The commitment to these values has been put to the test often – especially when it comes to profitability. “There’s always a temptation to make things cheaper and faster and cut corners. That’s a hard decision to make, especially in the food industry. The biggest thing is the food cost, which for us is really high. So, it’s very tempting to figure out a way to cut those costs. That temptation has absolutely been there for us throughout the years, but we have a really intuitive team – and we’re good at saying, ‘What we’re talking about is getting into a different territory, we don’t want to change who we are.’”
Blue Star has even turned down collaborations with large brands – which would be big exposure opportunities – because the message of the company inquiring wasn’t consistent with Blue Star’s core values, or their goal of keeping things local and organic. “That’s hard to do!” Jessica recalls. “People say, ‘You don’t ever say no to that kind of thing,’ but we have. And we’re always nervous about it, but it’s always been the right decision. To be able to look back and know that we’ve stayed true to ourselves is such a source of pride.”
Step 2: Disengaged Staff Tribe of Brand Ambassadors
A strong set of brand foundations has helped Blue Star attract candidates inspired by the company mission – elevating them beyond employees and empowering them to become passionate brand advocates.
“One of our values is je ne sais quoi,” says Jessica – which translates from French to ‘a pleasant quality that is difficult to describe.’
“It’s magic. It comes across to our customers and people who want to work for us. People take a lot of pride – I know I do. We talk about it all the time, that’s why it’s one of our values. We know what it means to us.”
- Jessica Kulp, Blue Star Director of Marketing
Everyone – from the upper management team, to the bakers, to store employees – all get to be proud of the product they’re selling. “That affects everything!” says Jessica. “It affects the way we talk to customers, the time and care we take with everything we’re working on, our team’s skill development… it even affects our employee retention – people want to stick around. We have people who have been around since day one, and it’s because they believe in it so much.”
Step 3: Ordinary Product Remarkable Delivery
One of the first challenges the team had to overcome was getting to know the donuts themselves. “The first day we were open we were glazing donuts to order. We thought it sounded really cool – you’re getting this great fresh product. All our spaces are open, and we like to put our process on display a lot. So that was just another part of the process: ‘I watched them dip the donut and they handed it to me!’”
But no one – not even the pastry chef – had enough experience with donuts to predict how this would impact the customer experience: people walked away with wet gooey donuts, and it ended up smudged all over their hands, face, and clothes.
Over time, the Blue Star team became more acquainted with the product and invested in ways to serve it more effectively. And, of course, having a passionate team means delivering more than just a product. It means creating an experience and a memory – turning your customers into raving fans, eager to share your story to the world.
“Our staff gets a lot of joy out of promoting our more adventurous side. Our passionfruit donut has cayenne in it, it’s spicy. We’ve put basil and blueberries together. So, a lot of that conversion happens through our own excitement, getting people to try something that they’ve never tried before,” Katie reflects. “People say, ‘That sounds terrible, I’m not sure.’ But our crew is so good at guiding them through that process.”
“Once they try it and like it you have a fan for life. Because not only have they tasted something really unique, they’ve also successfully stepped outside of their comfort zone – which would give anyone a sense of pride. It becomes an experience and a memory.”
- Katie Poppe, Blue Star Founder
Step 4: Customer Base Raving Fans
Blue Star was inspired by French patisseries – and a customer experience that resembled a jewelry store as much as a bakery. “You walk in and see this beautiful case with gold plates, everything is neat and tidy, and you get this amazing customer service,” Jessica explains. “We wanted to bring that experience to the states, using something more familiar here – donuts rather than pastries.”
This was easier said than done – since as much as donuts are part of American culture, gourmet donuts were not. “If we had decided to open a fancy pastry shop, a $3.50 price point would make sense. But it’s interesting that as soon as it’s in that round shape with a hole in the middle, it turns into, ‘Well this should be cheap.’”
But cheap they were not – a far cry from the manufactured, “just-add-water” donut mix we’ve come to expect from Dunkin’ Donuts and Krispy Kreme, Blue Star employed rich, local ingredients and a painstaking baking process. “The French brioche dough recipe takes 18 hours to make. It was hard for people to make that transition from their perceived value of a donut for $0.90 at their local donut shop. Some people saw it as exciting and fun, while others thought, ‘What are you trying to get away with here?’ Those are the people who need that explanation. We put a lot of time and effort into making sure we explain that.”
Marketing From the Inside Out: The Results
And this hard work and commitment to purpose has paid off: Blue Star now has eight stores in Portland, three in Los Angeles, and is the recipient of a number of press accolades – including a feature on the cover of Bon Appetit magazine.
More recently, Blue Star is taking their slogan, “Donuts for Grownups” to a whole new level with their first-ever CBD donut. In celebration of their work on the recently passed Farm Bill, Oregon Senator Ron Wyden and Congressman Earl Blumenauer were the first to take a ceremonial bite. The passing of the historic Farm Bill has legalized hemp production across the U.S. To quote Blue Star, “As a member of the restaurant community, we are so proud to participate in supporting our local farmers and agricultural industry in this new frontier!”
One thing’s for sure: the rising “star” in Portland’s donut landscape is a blue one. And as for the perceived rivalry with VooDoo? “We’re just doing totally different things, exploring two sides of the same coin. The cool thing about Portland is that there’s room for everyone, especially where food is concerned. There are so many donut shops here now – Pip’s, Coco, Delicious Donuts. Everybody’s doing something a little bit different, and they each have their own audience that keeps them alive and thriving,” says Jessica. “We’ve always been really careful about focusing on what makes us special, rather than looking at what our competition is doing. If customers come in and say, ‘You’re so much better than VooDoo,’ we just say, ‘Yeah, we’re just different, isn’t that cool?’”