Brand Management (MKT-456)Section-5Group- A

Date of Submission:12th April 2010

Group Case Assignment

“We aren’t in the coffee business, serving people. We are in the people business, serving coffee”

Howard Schultz, Starbucks Chairman and Chief Global StrategistFortune Magazine, Vol. 149 No. 2

Title: Starbucks Corporation: Managing a High Growth Brand

Submitted to: Abdullah Al Faruq

Completed by:GGROUPROUP-A-A

Porshaia Sharmin Oishi(071 406 030)

Mahmuda Islam Saki(071 417 030)

A.H.M. Nasimul BakrSection -4

(073 414 030)

Sinthila Azim

(073 441 030)Nirjona Wahed Zara

(073 456 030)Md. Golam Azam

(081 039 030)

Question-1: What were the key factors of success for Starbucks in building the brand? Justify your answer.

Answer:

Key factors for building brand equity of Starbucks: .

First Movers’ Advantage:

American coffee consumption had been on the decline for more than a decade

when Starbucks was first opened in Seattle’s Pike Place Market in 1971. To

exploit the potential of the gourmet coffee trend, Starbucks experimented with

the new concept of a store dedicated to selling only the finest whole-bean coffee

and coffee brewing equipment. This emphasis on quality whole-bean coffee

retail was fairly unique. Starbuck satisfied the demand of gourmet coffee

enthusiasts for high-quality coffee products that was previously being given only

through catalogs from companies in Europe. So the first movers’ advantage was

a key success factor.

Development of New Products and Quality Control:

Since Starbucks regarded quality as their priority, they invented “Flavor Lock” to

maintain its quality during shipment of coffee from one place to another. They

also came up with new products like Frappuccino and ice creams. Providing

customers with quality and variety gave them edge over their competitors.

Employee knowledge and Super Service:

Starbucks realized that if they wanted to gain loyal customers by delivering

highest quality service, they needed the strongest team possible in all levels of

organization. So, Starbucks spent more money on training than marketing. They

treated their employees as “Partners” and the organization offered its partners

with compensation and benefits to make them more competent.

Smart marketing strategy:

a. Acquisition: To gain maximum share across the globe, Starbucks took help of acquisitions.

They acquired Pasqua Coffee Company in 1998 in order to spread their name

in North America. For expanding business in Europe Starbucks acquired London

based Seattle Coffee Company. To extend their product line they acquired Tazo Tea.

b. Partnerships: Starbucks made partnership only with those companies which focused on quality

just like them and had a positive brand equity, so that brand image of the

company could be enhanced. From the evaluation of the partnership given later

we can see how they helped in success of the brand. They helped in every

aspect from targeting to green marketing, from CSR to distribution network and

from internet development to brand image creation.

Question-2: According to your group what were the brand values of Starbucks and what were their sources of brand equity that contributed significantly towards their growth? Justify your answer.

Answer:

Brand Values of Starbucks:

Brand values capture the important dimensions of the brand meaning and what

the brand represents. The brand values of Starbucks according to the case can

be described as follows:

Quality placed as Top Priority: To enhance customer’s appreciation for

“premium coffee experience”, Starbucks had to regard “quality as 1st

priority”. So they ensured the use of best ingredients and brewing

equipments. They built strong relationship with coffee growers to get the

best coffee beans (Arabica beans) and “valued simplicity over advanced

technology” since traditional brewing equipments deliver richest flavors.

Continuous Investment on Innovation: For providing richest coffee,

Starbucks invested continuously on innovation. They invested on roasting

and packaging plants and since they were geographically expanding their

business, they developed a vacuum packaging system “Flavorlock” to

retain the flavor of the beans even with the entire journey for deliveries to

all stores. They developed new products too- for example Frappuccino

and 6 flavors of Starbucks coffee ice creams in a joint venture with

PepsiCo. & Dryer’s, etc. All these provided consumers with variety and

quality simultaneously. Thus it is a constituent of Starbucks’ brand value.

Employees treated as “Partners”: To give the premium coffee

experience to customers, Starbucks needed to provide customers with

excellent service. So they also invested on employees. They were

considered as “partners”. To develop a strong team of partners, they

spent more money on training than on marketing. It also helped in

creating positive word of mouth effect and educating customers about

coffee.

Sources of Brand Equity that Contributed towards Growth:

Brand awareness:

Starbucks established brand awareness from its brand elements and effective

marketing programs. In context of the case, Schultz concentrated on the

retailored business plan with primary focus on coffee house model. He kept the

name Starbucks because it had been essential to the brands success and it was

more recognizable and memorable than the unclear II Giornale name. The logo was restructured to give a more modern look. In addition Starbucks designed

their store in a manner that provide highest quality of everything, from coffee

making equipment to the fixture, furnishings, music and art works. The

awareness also came from effective word of mouth publicity. For that they

recruited and retained talented individual to lead the company in the market and

communicate with communities. All these helped in establishing brand

awareness, which is a source of brand equity.

Brand Image/ Association:

Brand image is the abstract association made by customers in their minds.

Starbucks established brand image by positive word of mouth especially by

their employees. The atmosphere created in the stores also made people

create association between Starbucks and premium coffee experience. Through

their decoration they wanted to make it a third place for the customers away

from home and work. Their acquisition of Tazo tea added a new dimension to

their brand image since Tazo tea possessed the quirky image of “the mumbled chantings of certified tea shaman.” The deliberate saturation strategy by

introduction of near-by stores during expansion enhanced image of convenience.

Through partnerships with company of positive brand image they created some

secondary associations. This significantly helped in the growth of the brand.

The following flowchart shows how the sources of brand equity are established:

Brand Elements

Brand Name Starbucks

Brand Logo

Marketing Program

Product: Premium coffee

Brand Awareness

Distribution channels: Starbucks distribute their product through own retail store and partnerships. They use hub system to support their store.

Communication: They recruit and retain talented individual to lead the company in the market and communicate with the communities.

Secondary Association

Other product: Starbucks Barista Home Espresso Machine, Starbucks Commuter Mugs and Starbucks T-shirt.

Other brand: café Starbucks.

Partnerships: well recognized company such as Host Marriott, ITT Sheraton and United Airlines. Moreover, joint venture with Pepsi, Kraft and Dryer’s.

Question -3: How would your group evaluate Starbucks’ partnership with other brand- marketers? Are there things your group would have done differently if your group were in charge of making “Starbucks” a global brand? Justify your answer.

Answer:

Evaluation of Partnerships:

Partnerships Evaluations

PepsiCo. & Dryer’sHelped in developing new products like Starbucks Coffee Ice-creams and Frappuccino. Introduced bottled form of Starbucks coffee.

United Airlines Strengthen association with global customer.

Brand Association

Sources of Brand EquityTools for Building Brand Equity

Kraft Fortified distribution network.

Oxygen Media &Williams-Sonoma

Helped in Starbucks’ internet developments and in targeting women customers.

Host MarriottCaptured the potential customers of airports, hotel lobbies, malls and convention centers. Faced problem in quality control.

Alliance, Conservation International, Garry

Trudeau, Mark McGwire, Salvation Army and UPS

Promoted green marketing and handled CSR.

Johnson Development Corporation

Brought Starbucks to inner city America. Leveraged secondary association grouping with NBA star Magic Johnson.

Nordstrom, IIT/Sheraton, Westin, Holland America Cruise lines, Barnes & Nobles and Albertson’s

Increased brand awareness and encouraged consumer to regard Starbucks as a world class brand.

Time Inc. Tightened relationship with consumers by sharing similar values and enhancing customers’ life.

Recommendations:

Starbucks did everything possible thing to be the best in their industry. Their

strategies were perfect. But if we were given the opportunity to recommend

something different, we would have suggested the following:

Ingredient Marketing:

Starbucks have done all sorts of partnership, licensing and innovations. But

ingredient marketing is something they haven’t done. They could have used

sugar substitutes from companies like NutraSweet or Equal or use skim milk

from Kemp or Lactaid for health conscious consumers. They could have done

ingredient marketing by using organic milk in their products.

Entering into the subcontinent:

Starbucks have expanded all over geographically but they left out the

subcontinent i.e. India, Bangladesh, etc. These countries are developing and are

not familiar to premium coffee house trends. Starbucks could enter these

lucrative markets and rip off profit, just like fast food franchisees in these region

did.

Avoid over saturation of the market:

They could have avoided excessive saturation of the market, not only because of

cannibalism of profit but also to remain premium. A premium product should be

exclusive and unique. Making Starbucks too available makes it a convenient and

regular product. So to remain premium, over saturation should have been

avoided.