BRAND EXPANSION: A GIFT OR A CURSE? A Case study of Starbucks

Many-a-company started small. In fact, most of them knew nothing about image and brand, let alone the strategy and jargons associated with it. Today these companies have grown and as such, have seen a need to have a distinctive and attractive identity capable of attracting and maintaining customers. This identity is made evident in their operations, communications and every aspect of their business.

Hence, the companies which were born when those of the previous generation were identifying a need for branding, adopted it from day one. As such, branding has come to play a major role in every business.

Yet, as these companies grew and evolved, so was the need for their brand to do likewise. Brand identities that were premised on the situation and mentalities of the owners at inception quickly had to be revamped when the values of these parameters changed.

Then came the need to have a global and futuristic view when developing the brand. But, the honest truth is that no one knows tomorrow; therefore, looking at the wrong crystal ball would be detrimental to both business and brand. A brand built on an envisioned future held by its founders will only work if all its employees, partners and most especially the customers saw the same image when they looked into that crystal ball.

This forms the basis of our exploration of one of the biggest brands of all time; Starbucks. How have they coped with ‘the burden of carrying everyone along?’

Let us look carefully at their mission statement

“To establish Starbucks as a premium purveyor of the finest coffee in the world while maintaining our uncompromising principles while we grow

The first part of this mission statement has most definitely been accomplished and they have surpassed all expectations including theirs. The hard part is maintaining the principles you hold dear, in the face of global expansion.

From a single shop in 1971 and going public in 1992 with 165 stores to the now well over 10,000 stores and many more still on the way. Surely there’s no stopping the expansion of this great company.

One amazing point to note is that this is a company that spends less than 1% of its annual revenue on advertising, compared to the 10% spent by most retailing chains. They rely mostly on ‘word of mouth’. It is therefore paramount that the prospective customers meet the store and service exactly as described to him by the existing customer regardless of the branch he decides to try.

Starbucks is undoubtedly the world leader in the art of delivering not only the best coffee, but ‘the total coffee experience. ’ As put by Hayes Roth, VP Marketing at Landor Associates;”The essence of Starbucks is not about the coffee, although it’s great coffee; it’s about the coffee drinking and Coffeehouse experience”

This experience is unique. From the background music, aroma, ambience, menu to the coffee fanatics employed as staff, this is indeed a second -to-none experience!

But not everyone wants the experience, not many are blessed with the time to experience it even if they desired to. Starbucks strives to be the ‘third place’ people spend their time (after home and work) and though many saw it as a welcome refuge from the other two, others saw it as just another place to hang out.

This led to the discovery of another demographic; ‘the grab and go’ i.e. customers who just wanted their coffee and were content with the two places they had to be already.

To satisfy these customers, you have to increase your speed of delivery and just go straight to the point. Where then is the experience? What then is the need for the ambience, aroma or conversation with the staff or baristas? What is the justification for the price?

The already existing and notable demographic ‘the stay and savor’ are all about the experience and require the experience to remain as special as possible.

So how does the company juxtapose these two deliverables?

Indeed, the pursuit of the first is difficult without undermining the second, and that is exactly what has happened. Customizing products and services to the first group of customers, takes away the very foundation on which the Starbucks brand was built; The Starbucks Experience’

The longsuffering customers and fans seem to find themselves in the minority and wonder if they are fast been replaced with the ‘ever in a hurry’ generation which possesses something the internet age seems to have brought along with it; Choice. They too have discovered it and many have moved on.

New products while attracting many, also deter purists with a rigid view of what their favorite product should be, and different options causes a delay in ordering which in turn increases waiting times for others and the speed of delivery as well. This diminishes the brand experience.

More branches means more customers, but scarcity increases value; so with new branches popping up here and there, the value of the experience to the customer is somewhat diminished as well.

The announcement that they will be shutting down 600 branches is therefore not a surprise, as many of the stores have lost ‘the Starbucks soul’

So what then are the advantages of brand expansion beyond increased revenue? None!

But in truth, ‘it’s all about the money’ and they continue to make lots and lots of it. Yet, more money, more problems’, let’s just pray the money continues to outweigh the problems for this great company.

So, is Brand Expansion a gift or a curse? I’ll leave you to be the judge of that.

OAW

(2011)

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