Brands function at multiple levels in a consumer’s mind and in diverse market segments in the present day. Companies, today wish to build relationships with their customers and to create a brand bond. The brand experience has become a critical factor in establishing brand strategy – and this is achieved by pursuing experiential branding, which means to approach a brand as a user experience. This would entail creating a relationship of trust and belief with the consumer. Belief drives behavior and by influencing behavior, brands create relationships. Experiential branding requires new tools and methods. A product needs to connect with qualities that people value, appealing to a customer’s sense of value. A competitive price point alone will not motivate today’s intelligent customer to purchase any product.
Schultz’s vision was that drinking coffee should be part of ‘an experience’ that could be weaved into the fabric of the consumers’ everyday lives. He wanted the customer’s experience to be wonderful from the moment he or she walked in the door of a Starbucks. The Barista should recognize the customer and greet him or her by name. The Barista should also know the customer's regular order and start preparing it right away.
But maintaining that vision is hard, so to be able to maintain it, employees of Starbucks are trained. The employees learn about making coffee, they learn how to remember customer names. They are motivated to do this by giving both full-time and part-time employees great benefits and full or limited stock options.
In order to sustain the company's growth and make Starbucks a strong global brand, Schultz believed that the company had to challenge the status quo, be innovative, take risks, and alter its vision of who it was, what it did, and where it was headed. Under his guidance, management was posing a number of fundamental strategic questions: What could Starbucks do to make its stores an even more elegant "third place" that welcomed, rewarded, and surprised customers? What new products and new experiences could the company provide that would uniquely belong to or be associated with Starbucks?
What could coffee be—besides being hot or liquid? How could Starbucks reach people who were not coffee drinkers? What strategic paths should Starbucks pursue to achieve its objective of becoming the most recognized and respected brand of coffee in the world?
Starbucks’ sales have kept on increasing up to 20% a year ever since they went public in 1992. Their success has depended on create superb experiential branding that can be seen in the following brand tests:
1. Brand Awareness. The Starbucks brand embodies the spirit of the company and is a lifestyle brand. The Starbucks logo— the Mermaid— creates immediate recall and recognition. The store design, logo and trendy settings appeal to professionals, youth, and families. The phenomenal brand awareness is a result of word of mouth and not advertising. Starbucks spends not more than $20 million in advertising. The user experience is particularly emphasized upon.
2. Brand Personality. The Starbucks brand is perceived as outgoing, hip, friendly and warm. The space is designed to make one feel comfortable and relaxed. This greatly enhances the user experience.
3. Brand Loyalty. Why do people pay 3 dollars for a Starbucks coffee? Because Starbucks provides more than just coffee it provides an experience. It’s the design of the customer experience and interaction with the brand that people pay for. The quality and quick service, a place to unwind and enjoy the atmosphere makes it attractive to people. The people who work at Starbucks are the brand’s ambassadors and ensure customers get excellent service. This has led to strong brand loyalty.
4. Perceived Quality/Value. The hot, aromatic coffee and a variety of other confectionaries have added to the perceived value of Starbucks brand. Customers receive value for their money. Furthermore, all stores carrying the Starbucks name across the world deliver consistent quality and value. It also promotes cultural events and community activities.
5. Brand Associations. Starbucks is associated with environmentally friendly products and social contributions to the neighborhoods it exists in.
5 Marketing P’s
1) Product: From latte to espresso, Starbucks purchases, roasts and sells high quality whole bean coffees. They also produce rich-brewed coffees, Italian-style espresso beverages, cold blended beverages, a variety of pastries, and coffee related equipment along with accessories in their retail stores. They buy only the finest Arabica coffee beans that meet their rigorous standards for high quality. These specialty beans are grown at an altitude above 3500 feet in the shade. Customers are willing to pay high prices for their coffee based on Starbucks promise to deliver exceptional quality. Starbucks corporate level strategy has been their ability to form strategic alliances. Alliances with Colombian farmers have been helpful to promote their product uniqueness as well as a good relationship with their suppliers.
2) Promotion: Product promotion is focal point for Starbucks, the company has taken a three tier stance on it. The first tier is selling the “Starbucks coffeehouse experience” which is “making connections with the people and things that are important to us over a cup of coffee” (Schultz, Howard). Starbucks promotes a different type of atmosphere depending on the season. Summer is the time to advertise the iced drinks like Frappuccino® while the winter is for coffee, espresso, and teas. The second part of its promotion plan is the community. Starbucks advertises that it is part of the community. With community programs, environmental seminars, local artist shows, and the like, Starbucks tries to sale itself as an integral part of the community in which it resides. The third tier is Starbucks’ attempt to differentiate itself from its competitors. The basis of this is termed “specialty blend”. Starbucks offers “specialty blend” coffees, teas, iced drinks, and ice cream. Whether in the coffee shop or grocery store, Starbucks’ brands are specialized. Starbucks emphasizes this promotion plan through coffee testing, global coffee competitions, and the Coffee Olympics.
3) Place: Starbucks have their own stores they also have agreements to serve Starbucks coffee in Barnes and Noble, Nordstrom’s, office coffee suppliers, hotels and airlines. Starbucks has also created partnerships with Pepsi Co, Inc., together they developed a bottled Starbuck’s bottled Frappuccino® coffee drink. In a 50/50 partnership, Dreyers’ Grand Ice Cream, Inc. will distribute five flavors of Starbuck’s coffee ice cream. Starbucks also has added tea, utensils, pastries, lunch meal, chocolate, to its stores in order to attract a wider variety of clients. Starbucks has targeted non-coffee drinkers can also to go to the coffee bar and enjoy a hot cup of tea, chocolate and a pastry in a trendy atmosphere.
4) Price: Starbucks redefined what affordability means when it comes to coffee consumption. It shifted the paradigm of coffee consumption pattern and raised the value element in the price-value equation by delivering a much higher value than regular coffee shops did. Consumers are willing to pay premium prices for the experience, service and premium quality they are getting.
5) People: Starbucks’ employees (also known as partners) are required to undergo two types of training; first focuses on the hard skills like learning how to mix drinks, and second focuses on soft skills like connecting with customers, greeting and welcoming them, eye contact etc. Every 6 months, the employees undergo training programs and tests. Starbucks’ ensures employee satisfaction and loyalty, which is clear from the fact that the turnover rate at the company is very low, just about 70% as compared to the industry average of 300%.
Target Market in the 90's: Starbucks’ customers were well-educated, sophisticated coffee-lovers, who were looking to indulge themselves for a premium coffee experience by paying a higher price. Thus, they quickly became the part of the company’s “live-coffee mantra.”
This is probably why Starbucks became so popular and famous with an unbelievably high average visit rate of 18 times a month by a typical consumer (growing 6-8% a year) and a minimum cost of advertising (only 1% of their annual revenues).
{Analysis of Harvard Case study: Starbucks - Delivering Customer Satisfaction}
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