25 September 2008

Starbucks Case Analysis

Starbucks is one of the most ubiquitous brands of contemporary America. When we hear "Starbucks", we think quality, classy, expensive cup of coffee. And people want this. People buy. Starbucks has been successful over the past ten-plus years because it developed its own niche and filled it fully. To do this, Starbucks must have paid a lot of attention to their marketing strategy process, and made a cohesive effort to be profitable while progressively building its brand image.
 The overall marketing strategy of Starbucks has been excellent throughout the life of the company. Starbucks shows having completed an honest assessment of the external environment by making a strong commitment to customers and by designing its business system to match up with and compete with other manufacturers and retailers of coffee goods. Howard Schultz, CEO, stated in a 1996 strategy letter that "we are creating opportunities every day for millions of customers around the world to enjoy the Starbucks experience...it is our goal to offer more than just a great cup of coffee--we want to offer a memorable experience." The kind of coffee bar experience Schultz refers to is an idea he brought home from the European coffee industry--something that didn't really exist in mainstream America. In terms of its business system, Starbucks knew that to compete with other private roasters, it had to focus on its roasting program, "because how a coffee was roasted could change its entire taste." By trial and error, Starbucks developed signature roasting curves with specific roasting time and temperatures and built the formulas into proprietary computer software to safeguard against transmission via future defecting employees.
Starbucks' target market was nine-to-five workers across America, especially in urban centers and surrounding suburbs. The value proposition was clear to these customers, and was best communicated simply when some person had made the decision to drop into a retail store, stay awhile, and then share with co-workers the next day the experience had there. Howard Schultz said in his vision of Starbucks that "you get more than the finest coffee when you visit...you get great people, first-rate music, a comfortable and upbeat meeting place, and sound advice on brewing excellent coffee at home." In positioning itself as a unique entity in a land with nothing similar, a Starbucks store was promoted to be "a place where you can sit back and be yourself." The company vision included that "at home you're part of a family...at work you're part of a company...and somewhere in between..." there is a Starbucks! So the Starbucks product, while ingrained in its coffee, is really the overall experience. The price of an actual brewed cup of coffee was consistent with the image of being "a notch above" or a "worthwhile experience"--higher than most competitors. And the place where Starbucks offered its product was primarily its retail outlets. To experience Starbucks fully, one must go to an actual Starbucks location. In this respect, the location of a Starbucks relative to customer convenience was important, and Starbucks developed a "real estate opportunistic" attitude to address this--that is it did not necessarily wait for the ideal building or lot to become available, Starbucks was flexible in terms of retail space layout and design to fit the location convenience of its target market.

The Starbucks brand itself would receive a high rating using Kevin Lane Keller's Brand Report Card system. He uses ten attributes shared by the world's strongest brands, a few having already been touched on here including "delivering the benefits customers truly desire", "pricing strategy based on consumers' perceptions of value", and "brand is properly positioned". Starbucks has also worked to stay relevant in a constantly evolving market by pursuing new product ventures. For example, Starbucks has a contract with Dreyers' Ice Cream which opens the company to a new customer base with the intent to maintain its premium brand image. Bottled Frappucino is a joint project with PepsiCo, and testing shows that seventy percent of testers became repeat purchasers. Implementing this sort of market testing as well as extensive analysis of possible new markets is also proof that Starbucks is paying close attention to its sustained success over the long-run and that it maintains its most valuable asset--brand equity.

Starbucks must be wary of risks it will face into the future. A rapidly growing brand always is faced with being blindsided by a sense of failure-immunity. Starbucks biggest risk within the company is taking action which contradicts its brand. As Starbucks is transitioning from a very U.S. retail centric strategy toward brand extension into global markets, the company must remain aware of the dangers of going beyond coffee. Senior Veep of Marketing realizes that changing the vision of Starbucks to "provide uplifting moments to people every day"--transcending coffee--could also "become a license to dilute the brand".

So long as Starbucks higher-ups are determined to extend the company, they need to be very careful. The internal risk of degrading / altering the existing brand image goes hand in hand with the external risk of the modified perception of the brand by consumers. If Starbucks no longer can be strongly associated with a good tasting coffee, in a comfortable chair across from a socially adept chess opponent, away from the commitments of the home and the stresses of the workplace, then the branding of the past few decades will have been for nought. A suggestion from this writer is to explore using Starbucks as an umbrella brand, maintaining the coffee bar experience as "Starbucks" while bringing out its music, literature ideas, and more into being using separate branding. To ease Director of Special Projects Liz Sickler's concern that the company doesn't "leverage our size well enough" or "compete on our brand recognition", save the national advertising campaigns for the sub-brands so as not to tarnish the word-of-mouth power of Starbucks. In those campaigns, feel free to use a tagline like "as seen in Starbucks" for leverage.


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