assignment 2 starbucks update
TRANSCRIPT
University of Worcester
Starbucks Branding Strategy
BUSM3411 Brand Development and Corporate Identity]
By Alexandra Sanchez-Havard
12/14/2011
Table of Contents
1 Introduction 3
2 Brand Positioning 4
2.1 Target Market............................................................................................................4
2.2 Product...................................................................................................................... 5
2.3 Packaging...................................................................................................................6
2.4 Distribution................................................................................................................7
2.5 Pricing........................................................................................................................7
3 Brand Architecture 8
3.1 Brand-Product Matrix................................................................................................8
3.2 Brand Extension.......................................................................................................10
References 13
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1 Introduction
The Starbucks Corporation has been the most successful coffee chain in the world over the
last three decades. According to Interbrand’s Global Brand Value survey 2011, Starbucks
Brand Value was 3,663 ($m) and is ranked at Number 4 of the best global brands in the
Restaurant Sector worldwide. The Starbucks Brand has gained a strong acceptance and
value in consumer’s perception over 11 years. Starbucks knows that to ensure continued
growth and popularity in the future they must leverage its brand value across all sales
channels. As Brand value is based in part on consumer’s perceptions on a variety of
subjective qualities, the company believes that it is of highest importance to consider every
incident that could damage the company’s reputation when going public and reduce brand
value, even if those are single, detached incidents - for example, contaminated food scare.
Consumer demand could reduce significantly if the company fails to preserve their
reputation for quality products, or if they are perceived to act in an unethical or socially
irresponsible manner. A failure to deliver a consistent, positive consumer experience in each
market segment could be very damaging for the Starbucks brand (Starbucks Annual Report
2011).
Moreover, the company is facing a strong increase in competition and consequently the
challenge is to maintain a sustainable market advantage, to stay on the top! This requires
constantly improvements in the company’s branding strategy and focusing on innovation.
Only recently the company has introduced a new branding strategy, by changing their Logo
and reinforcing its place as a neighbourhood institution, which I am going to explain deeper,
further on in this assignment.
To enable a company to meet its agreed objectives it must have a forward thinking Brand
Strategy, an ongoing, flexible plan for the systematic development of the brand. The
strategy should be rooted in the brand's vision and driven by the principles of differentiation
and sustained consumer appeal. The brand strategy should influence the total operation of
a business to ensure consistent brand behaviours and brand experiences
(Brandchannel.com). The goal of branding strategies is to maximize brand equity across all
the different brands and products. A company’s branding strategy specifies which brand
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elements it can source from to apply across its range of products. Branding strategy is
crucial, it’s the driving force by which the company can help consumers understand its
products and services and organize them in their mind (Keller, p.433).
To examine a company’s branding strategy we need to understand how its brand is
structured within its portfolio by looking at their Brand Architecture. To begin with, we are
going to look at Starbucks current brand positioning, the place in a consumers mind. In
other words, what consumers think when they hear or see the Starbucks brand?
Subsequently I will be able to identify the company’s current Brand Architecture and
possible issues that might arise by implementing a poor branding strategy. Lastly I am going
to look at some of the marketing Strategies Starbuck’s has used to enhance the Value of it’s
brand.
2 Brand Positioning
Brand Positioning is the place in consumers mind that a company wants its brand to be – the
benefit it wants a person to associate with it’s brand. A strong brand position means the
brand has a unique, credible, sustainable and valued place in customers’ mind (Shimp).
Starbucks does not only stands for premium coffee, but also for the place, where people
want to hang out besides their first place (home) and their second place (work). That’s why
Starbucks focus so much on offering its customers a range of entertainment products, like
music, books and wireless internet. All this is part of creating an air of comfort, relaxation,
exclusivity and familiarity which attracts customers to stay longer in their coffee shops.
Starbucks deals with brand positioning by continuously aligning itself to its customers. They
position themselves by appealing to their target markets needs.
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2.1 Target Market
Starbucks’ primary target market is men and women between 25 and 40. They account for
almost half (49 percent) of its total business. Those customers tend to be people with
relatively high income, professional careers and a focus on social welfare. Originally when
Starbucks began they targeted the young college students, with slightly higher than average
income levels. Now that the company has matured and expanded they have realized, that
they are able to target specific neighbourhoods and social classes. Starbucks is among the
highest priced coffee drinks and now considered a "luxury" coffee maker. Different
customers are more willing to pay for luxury good now than ever. Through Starbucks
aggressive expansion techniques they have now begun targeting almost every demographic.
Starbucks specialty coffee drinks make around 75 percent of their sales, but an increasing
amount of its business is centred on selling whole bean coffees and merchandise. This
provides consumers with the opportunity to take the “Starbucks’ experience” home.
Starbucks also offer coffee beans and merchandise via online shopping and through
supermarkets, through the Starbucks’ family of coffee, including Starbucks brand, Seattle’s
Best and Starbucks VIA (Smallbusiness).
2.2 Product
Starbucks has positioned itself as a premium product in the coffee industry. By creating a
high standard, introducing innovative products and providing excellent service they have
successfully achieved this goal. Nevertheless, the company was aware of the fact that coffee
is a perishable product and the risk associated with getting it wrong. That’s why they place a
great emphasis on quality control and monitored each and every step of coffee production.
In their company profile they promise that all of their coffee is grown under the highest
standards of quality, using ethical sourcing practices and sending their own coffee buyers
personally to travel to the coffee farms in Latin America, Africa and Asia to select the highest
quality arabica beans. Nowadays, Starbucks product-mix has expanded from 30 varieties of
whole bean coffees to eco-friendly cappuccino, coffee makers, and other Starbucks
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paraphernalia. To keep up with the competition the company has also extended its product
range beyond coffee and tea to pastries, sandwiches, salads, ice-creams, liquor, water and
more. Starbucks also offers seasonal products, such as strawberry and cream Frappuccino in
the summer and gingerbread latte at Christmas.
Starbucks has a reputation for ground breaking innovative. They are always focusing on new
product development and creativity. However, they have experienced failures in some of
their innovations. For example, several years ago, Starbucks attempted to enter the
magazine business and failed very quickly. Before Starbucks invented Frappuccino, they
introduced a carbonated drink that also failed. Howard Schultz, Starbucks CEO claims that
that innovation and an entrepreneurial spirit still lives in the fabric of the company. While
many of these attempts failed, he credits the spirit of the company to continue to push the
limits and create huge commercial successes.
With its new branding strategy it is clear that the coffeehouse is open to experiment with
new products and in new markets.
Starbucks has realized the importance of going forwards and making innovations in
technology. For example, Starbucks has identified that wireless internet would be a great
asset to its coffee shops. With thousands of locations, Starbucks owns a network that can be
leveraged. Starbucks plans to roll out new internet based products in stores ranging from
online TV to music download services.
2.3 Packaging
Since end of 2010, Starbucks has begun to construct all new company-owned stores
worldwide under the LEED® (Leadership in Energy and Environmental Design) green building
program, reducing the environmental footprint (Starbucks Shared Planet). Starbucks has
been continually making efforts to produce cups that are more eco-friendly. In 2006, they
introduced a paper cup that contained 10 percent post-consumer recycled fiber, and last
year it switched from the standard PET cold cups to polypropylene cold cups, which use
significantly less plastic and reduce greenhouse gas emissions during manufacturing by 45
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percent. Starbucks goal is to have all of its cups 100 percent recyclable by 2012. To help
achieve this goal the company is recruiting the packaging and recycling industries (Sam
Ochs, QSR Magazine).
2.4 Distribution
As part of its international strategy, Starbucks intends to seize opportunities to move
beyond retail stores. Extending its profitable global consumer products group allows them
to reach more customers in more places that will allow them to grow the business at an
accelerated pace around the world. There remains a big opportunity in the evolution of
their distribution structure and with an increasing variety of offerings in the grocery
channel.
Starbucks is adding to the product mix by offering new licensing agreements for its products
with a number of other companies. Generally, the main purpose of creating the licensing
agreements is to improve distribution and production methods of Starbucks products. The
agreement with Pepsi-Cola Company to produce and distribute bottled Starbucks products
in grocery and warehouse club stores is an excellent example of this type of licensing
agreement.
2.5 Pricing
Starbucks has succeeded in perusing its customers to buy pricey espresso drinks. As a high-
end spectrum among retail chains, they are able to offer expensive premium coffee.
However since the start of the recession, its pricing strategy has been questioned recently.
With Seattle’s Best Coffee, the company is offering a more value coffee. Nevertheless
Starbucks had to announce a price raise due to the increasing price of coffee beans, dairy
and other raw material. Coffee is sold in different sizes so that the customer can choose
according to their budget. Unlike the coffee, tea prices aren’t based on the size, instead it’s
based on the number of tea bags, since water is pretty cheap in non-bottle form.
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3 Brand Architecture
The Architecture of a brand shows how an organization structures and names the brands
within its portfolio. It helps minimize customer confusion by laying out the product structure
in a way that makes it easy for customers to find what they are looking for and to
understand what the company has to offer (Prophet). As with the recession, consumers
spending behaviour has changed and customers have become more opinionated, savvy and
connected. In particular, the internet has made it possible for customers to access
information about any products they are interested in. Therefore, it is of great importance
to develop an accurate brand architecture and portfolio management system. A well
managed portfolio represents the interrelation of the brands within an organisation. Getting
it right or wrong affects the financial value of customer relationships. A company will
benefit, on a number of levels, by fully understanding brand architecture, identifying the
best and most valuable arrangement for products and services, and making demonstrable
progress towards it (Interbrand 2011). Those brands that demonstrate transparency,
integrity and authenticity are most likely to build successful long-term relationships with
their customers.
The following strategic tool brand-product matrix (brand portfolio) will help to characterize
and formulate branding strategies by defining the relationship among brands and products.
3.1 Brand-Product Matrix
The brand-product matrix is a graphical representation of all the brands and products sold
by a firm (Keller). The rows of the matrix demonstrate the relationships between the
company’s brands and products (brand-product relationship), and thus the extension
strategy of the firm. The columns represent the relationships between the products and the
brands (product-brand relationships) of the company, and form the brand portfolio (the set
of all Brands and Brand Lines that an organisation offers for sale to buyers in a particular
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category) strategy of the firm (Keller). The aim is to maximize market coverage and minimize
brand overlap through the effective creation, implementation, and management of multiple
brands within a company. It serves as an inward-facing tool for the organization to ensure
that their brands are effectively targeting all key segments within the marketplace, working
together to maximize sales rather than competing against one another for their customers’
attention (Prophet). Starbucks is using a portfolio of brands to reach a more diverse set of
consumer without sacrificing the integrity of their core brand (Ben Wise). In addition to its
flagship Starbucks brand, its current Brand Portfolio consists of Tazo® Tea, Seattle’s Best
Coffee®, and Starbucks VIA® Ready Brew (Starbucks Annual Report).
Brand Product Matrix (Starbucks)
Starbucks Coffee Whole Bean CoffeeBoldExtra BoldMedium
Espresso BeveragesCafé LatteCappuccinoAmericano
Frappuccino BeveragesCaramel FrappuccinoCafé Vanilla FrappucinoCinnamon Dolce Creme
Tazo® Tea Tea LattesChai Tea LatteAwake Tea LatteEarl Grey Tea Latte
Brewed TeasEarl Grey Brewed TeaPassion Brewed TeaRefresh Brewed Tea
Iced TeasIced Awake Tea Latte Iced Chai Tea LatteIced Green Tea Latte
Starbucks VIA® Ready Brew
Ready Brewed CoffeeBreakfast Blend (mild)House Blend (medium)Italian Roast (extra Bold)
Flavoured CoffeeIced CaramelVanilla Mocha
Seattles’s Best Coffee
Espresso BeveragesClassic LatteClassic MochaCaramel Mocha
Iced Lattes (in a can)Iced LatteIced Vanilla LatteIced Mocha
Tea BeveragesIced TeaChai Tea
With Seattle’s Best Coffee brand, the company wants to target a different segment of the
market place. This action is designed to protect the position of Starbuck’s brand ‘home away
from home’, the coffee giant is selling Seattle’s Best coffee through fast food chains like
Burger King and others. Seattle's Best Coffee is generally cheaper than that of its parent
brand, and is marketed as more of a working class coffee compared to the premium
Starbucks coffee. Starbucks hopes to grow Seattle’s Best into a billion-dollar business by
expanding it to fast-food channels, convenience stores, drive-through restaurants and even
vending machines (Adweek). “Our endgame is to bring our great coffee everywhere," says
Michelle Gass, president of Seattle’s Best Coffee in the TIME Business Magazine.
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Nevertheless, there is the risk of cannibalization. The risk that Seattle’s Best Brand could
take over and Starbucks would lose its main position to be seen as a premium Coffee retailer
that offers its customers a third place away from home. Further on, associating Starbucks
with a product sold from vending machines could also damage the brand's upscale image.
Coffee sold from Vending-machines are most found in factories and cantinas, they have
been regarded as a last resort. Starbucks has to be extremely careful with the brand
extension of Seattle’s Best Coffee.
3.2 Brand Extension
Since the nineties the Starbucks has been constantly extending its product and brand lines.
Recently the company has made some significant changes to its Brand identity. They have
changed their Logo by removing the word Starbucks and simplifying the Logo. This obviously
will have an impact on its brand portfolio which we can already see with Starbucks decision
in experimenting with Alcohol products. The company wants to “think beyond coffee” says
Howard Schultz in its Starbucks Website. He also explains that the new brand identity is
supposed to give Starbucks the freedom and flexibility to explore innovations and new
channels of distribution that will keep them in step with their current customers and build
strong connections with new customers (Starbucks). Starbucks is planning to manage its
expansion into new product categories and business models. They want to diversify and
therefore they need a mark that doesn’t tie it to just coffee shops. The company has already
tried its hand at the music distribution, ice creams, and sandwiches and now it wants to try
entering into a new market by selling beer and wine. I think it’s pretty clear that it wants to
explore other business models. Removing the coffee anchor from the mark allows them to
do that.
On the other hand, this might not have been necessary to be done because Starbucks could
have created this new logo for its corporate entity – the overarching, umbrella Starbucks
brand – and kept the name Starbucks without the logo. This would have given them the
freedom to apply the new mark to non-coffee business concepts without having to worry
about associating itself solely with coffee. This doesn’t take in to consideration the savings
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to be made from not having to redo every sign in the world, reprint every menu and every
cup, change all of the websites and collateral, etc.
Before making the decision to extend a brand into a new product or service category,
Starbuck has bear in mind what the brand stands for, what people associate it with and
what its personality is. Then it has to identify if these qualities will be beneficial or
problematic in the new product. They need to determine what the new product or service
category will do for the brands identity. The ideal picture would be to draw in wider
consumer group, enhancing its perception and broadening its appeal. However the opposite
could also happen. This decision could over broaden Starbucks appeal making them into a
brand for all but losing them their title as the leaders of coffee shop experiences.
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REFERENCES
Brandchannel.com. Brandcarriers-glossery [online]. Available from:
http://www.brandchannel.com/education_glossary.asp [Accessed 22nd November 2011]
Ben Wise on Branding (19th February 2010). Starbucks Benefits From a Portfolio of Brands. [online] Available from: http://www.benwise.ca/starbucks-benefits-from-a-portfolio-of-brands/ [Accessed 24th November]
Gregory, Sean (25th May 2010). Starbucks Hits McDonalds with Seattle’s Best [online]. Time Business.
Available from:
http://www.time.com/time/business/article/0,8599,1990813,00.html#ixzz1g8pBB7Pz
[Accessed 24th November 2011]
Interbrand. Best Global Brands 2011.[online] Available from:
http://www.interbrand.com/en/best-global- brands/BGB-Interactive-Charts.aspx [Accessed
22nd November 2011]
Nasdaq Stock Market. United States Securities and exchange commission (Form 10-K).
[online] Available from: http://secfilings.nasdaq.com/edgar_conv_html
%2f2011%2f11%2f18%2f0001193125-11-317175.html#D232803D10K_HTM_TOC [Accessed
22nd November 2011]
Ochs, Sam (2011) How Starbucks is changing packaging [Online]. Available from:
http://www2.qsrmagazine.com/articles/features/134/starbucks-1.phtml [Accessed 6th
December 2011]
O‘Farrell, Rene (2011) Who is Starbucks target audience [online]. Chrone. Available from:
http://smallbusiness.chron.com/starbucks-target-audience-10553.html [Accessed 24th
November 2011]
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Prophet (2011). Brand Portfolio and Brand Architecture in Single Brand Companies.[Online]
Available from: http://www.prophet.com/thinking/view/196-brand-portfolio-and-brand-
architecture-in-single-brand-companies [Accessed 22nd November 2011]
Starbucks Corporation. (2011c) Company Profile [Online]. Available from:
http://globalassets.starbucks.com/assets/aboutus-companyprofile-q1-2011-final-3-8-11.pdf
Starbucks Shared Planet (2008). Our Responsability [Online]. Available from:
http://www.starbucks.com/assets/fy08-gr-report.pdf [Accessed 6th December 2011]
[Accessed 6th December 2011]
Schultz, Howard. (5th January 2011). Looking forward to Starbucks next chapter [online].
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starbucks-next-chapter [Accessed 24th November 2011]
Wong, Elaine (h May 2010). Why Starbucks Rebranded Seattle’s Best Coffee [online].
Adweek. Available from: http://www.adweek.com/news/advertising-branding/why-
starbucks-rebranded-seattles-best-coffee-107377?pn=1 [Accessed 24th November 2010)
Textbooks
Keller, K.L. (2008) Strategic Brand Management: Building, Measuring, and Managing Brand
Equity. 3rd edition. Upper Saddle River, New Jersey, Pearson Education
Kotler, P. and Bliemel, F. (1999) Marketing Management. 9th edition. Schaeffer-Poeschel
Verlag Stuttgart
Shimp, A.T. (2007) Integrated Marketing Communications in Advertising and Promotion. 8th
edition. South-Western, Cengage Learning
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