Starbucks“The only thing that we learn from history is that we do not learn from

history.” -Hegel

Starbucks expands…

• Starbucks expands stores rapidly

• Expanded offerings

…and fails

• Finds itself on the brink of failure

• Stock price is down• Brand value

declining

Why did it happen?• Expansion, in store numbers and

offerings, did not match with starbucks based on brand management principles– Brand Identity & Personality– CVP– Brand Equity

Brand Identity• Product– High quality coffee for the individual

who has the time and money to pay a high price for a cup of coffee they can enjoy.

• Organization– Socially responsible with highly-paid and

happy workers. Had a strong position in the premium coffee market that was hard to replicate or top.

Brand Identity• Person– Jennifer Aaker would say starbucks brand

personality can be found in Sophistication (upper class coffee), Competence (reliable, intelligent baristas), and Sincerity (like your neighborhood café).

– It represent camaraderie, community, bringing people together.

– It represents stopping to smell the roses, or in their case, the coffee beans.

Brand Identity-symbol

CVP-Functional• Starbucks produced a cup of coffee that

was at least perceived as high quality/premium.

• The customer service was excellent.

• Drinks were very customizable

• The environment had couches, wi-fi, etc.

CVP-Emotional

For this section, we decided to do some qualitative research using social media, what follows are some of the responses we received:

CVP-Emotional

 ”I Iike how you can hear the hustle and bustle of men and women in business getting

their morning coffees and see some of them sitting there doing work.” – Phung Pham

CVP-Emotional

 ” You can relax and its more of the coffee house feel. you can enjoy your coffee.” – Phung Pham

CVP-Emotional

 ”  And most starbucks have this kind of loungey feel to

them.”– Danielle Sandahl

CVP-Emotional

 ”  Starbucks is the absolute BEST!!! My husband and I could be broke, but we'll scrounge up a couple of

bucks just to buy a drink...even if we have to split it. We like to call it "Christmas

in a Cup". – Corie

CVP-Emotional

 ”  Its very "cozy" and you feel like at home. I could stay there for hours just talking,

reading or on my PC ". – Corie

CVP-Emotional

Emotionally, Starbucks provides this luxury feel. You feel like you’re treating yourself when you go to Starbucks. It’s what they build with the environment, the couches, the lounge music, the coffee mugs, the smells, the people, all of it boils down to selling luxury.

CVP-EmotionalTo echo Minoli of Ducati, Starbucks is not in the coffee business, they are in the experience business. That experience is vital.

CVP - Self-Expressive

Starbucks also allows people to express themselves through consuming their service. For this I also went to qualitative research in addition to stuff we learned in class.

CVP – Self-Expressive

 ” I like pretending I have a busy life and somewhere to

go and am European ” – Emma Pedersen

CVP - Self-Expressive

Starbucks operates as a luxury for the masses. It’s more expensive than most other coffees but as a portion of income it’s relatively small. It allows people to telegraph to the world that they are high-class, that they will not sacrifice on their coffee nor their enjoyment.

So What Went Wrong?

• We believe Starbucks began a downward spiral because it ineffectively pursued an Aaker expansion strategy.

• It violated it’s core, CVP, and brand personality on many levels through its actions during the expansion process.

Commoditization

• Rapid expansion of the number of stores, first and foremost, began the process of failure. When there’s a “starbucks on every corner”, it’s hard to imagine Starbucks as the neighborhood café as opposed to a chain.

Commoditization

• Further, the rapid expansion created a need for efficiencies. There’s few reasons to expand if you cannot reach economies of scale and greater efficiencies.

The movement from Marzocco manual machines to automatic espresso machines “removed much of the romance and theatre that was in play with the use of the La Marzocca machines” as Howard Schultz says.

He further explained “This specific decision became even more damaging when the height of the machines, which are now in thousands of stores, blocked the visual sight line the customer previously had to watch the drink being made, and for the intimate experience with the barista”

“Clearly we have had to streamline store design to gain efficiencies of scale and to make sure we had the ROI on sales to investment ratios that would satisfy the financial side of our business. However, one of the results has been stores that no longer have the soul of the past and reflect a chain of stores vs. the warm feeling of a neighborhood store.”

Their Failures

•Starbucks ice cream–In Grocery Stores, not experiential

•Breakfast Sandwiches–Instead of coffee, you smelt sausage

•Seating–Some have little to no seating

Starbucks

Starbucks failed because they left their identity and they lost

touch of the starbucks experience, the very soul of the brand. Their CVP was entirely

out-of-whack and they paid the price

Howard Schultz came in on his majestic steed, sword pointed forth, proclaiming to the heavens:

“Huzzah! Back to the core we

must go! Charge!”

Yup.

• He removed the coffee from the logo...revolutionary…brilliant– Ahem, sarcasm intended

Why?

We believe it came from the questions “Is Coffee in our core? Are we too strongly associated with coffee? Are we in the product attribute and product image traps?”

Yup.• We believe the answer to those

questions is “Yup.” • “But, isn’t that good? Doesn’t that

mean he recognizes that they are not in the coffee biz, but in the experience biz? Can’t they fix things now with that knowledge?”

Nope.

The jury is still out, but their actions have not been

indicative of a movement to the soul of the brand.

Trenta

The first factor is the introduction of the Trenta size. Intrinsically, the Trenta just felt “wrong”. Something about it

just struck a bad chord. So we took it to Facebook.

What customer do you think they are targeting with the new Trenta sizes at

Starbucks?

  “addicts

”-Sharon Tam

 “People see the bigger size and think

its a better value ($/oz) and they are

getting more for their money.”

-Jill Montane

  “People who are addicted to the coffee, and therefore need a big cup and get it to go. They don't care

about the experience at all.”

-Mike Gray

“People that have places to go in the morning and dont want a pussy cup of coffee or to sit around a god damn coffee shop (but are too good for dunkin coffee)-Emma

Pedersen

“Also, what Emma said.” –

Mike Gray

Value?

They are targeting a value customer with the Trenta size.

They are targeting addicts, people on-the-go, people who drink coffee for coffee and not

coffee for Starbucks.

Instant.

Instant.Instant. Instant Coffee. Instant coffee that can be made at home, out of a condiment package. Does that sound like a failure to you?

Not yet?Let me rephrase:

“Oh glorious consumer who perceives that our in-store coffee is superior to others’

coffee and will pay higher prices, little did you know that our

coffee tastes like instant coffee.”

Still nothing?Let me rephrase:

“Here, buy this coffee for a fraction of the price, we promise

it tastes just like our in-store coffee. While you’re at it,

purchase one of the same mugs we serve you with in store.”

A little more?Let me rephrase:

“Please, by all means consume our coffee in a cold kitchen with

appliances for company and zero of the comforts of Starbucks restaurants”

Not quite?One last rephrase:

“Experience? I thought you just wanted a cheap, pretty

okay tasting coffee that could be made quick and easy.”

 ”It just doesn't taste the same when you make it yourself at home.” –RubyMae

from Flickr

There we go.Starbucks clearly has not learned it’s lesson. Trenta sizes, instant coffee, drive-thrus, no

seating, higher emphasis on grocery sales. I can’t wait until they introduce “artisan”

burgers and donuts, maybe a nice chicken sandwich and a Super Big Gulp. You know what would be awesome? A little in-store coffee machine where I can just pour my

coffee and pay without ever speaking with a barista!

Oh, wait.“Starbucks is testing letting its

customers pour their own coffee at some stores.

Customers can pay before or after getting their own drip coffee from a brewer near the condiment bar,

the company said on its new customer-feedback website.”

Starbucks“The only thing that we learn from history is that we do not learn from

history.” -Hegel