Subject & Code Essay Example

Starbucks Brand Equity Analysis

Table of Contents

1. Executive Summary

Starbucks has established a strong geographical presence globally and maintained a market share of more than 36.7 percent in the U.S. market. CBBE model can be applied to assess the progress that Starbucks has achieved in building its brand and examine whether the company has achieved success regarding efforts to build a strong brand. It is established that Starbucks has managed to maintain a competitive advantage through successful brand equity. While brand salience is a significant initial step in the construction of brand equity, it is not particularly adequate. Starbucks has leveraged secondary associations to achieve brand salience or awareness. However, it should improve brand performance to improve consumers’ experiences when consuming a brand. This will ensure that they do not consider the price, yet also provide the company with an opportunity to achieve product diversification away from the advantages of aesthetic and locations appeal. Starbucks should also introduce new product portfolio that can be targeted for developing and emerging markets, where premium prices have not been very effective. Additionally, it should also execute corporate social responsibility as part of its tactic in building its reputation in developing countries.

2. Introduction

Starbucks Corporation is a leading American company that markets and retails of specialty coffee. Established in 1971 in Seattle, the company currently operates in more than 75 countries globally, where it operates more than 25,000 shops (Hoovers 2017). The key product mix comprises handcrafted and roasted premium priced coffees along with other beverages. In the third quarter of 2013, the company’s total estimated revenue amounted to $14.89 billion. Starbucks is usually considered a go-to place when people can socialize and work while drinking coffee. This concept is consistent with Starbuck’s marketing approach, as the company seeks to create a relaxing atmosphere where consumers can stop between work and home. The concept has been greatly successful and is attributed to a rise in revenue to $18.5 billion in 2015 from that of 2013 (Hawley 2015). Apart from coffee products, the company also sells a range of tea products. It has also licensed their trademarks using other channels like grocery, licensed stores, along with many other foodservice accounts. The company has also vigorously marketed its products mix in combination with other brand names found in its range of enterprises like Teavana, La Boulangem Starbucks VIA, Tazo, Starbucks Refreshers, Verismo, and Evolution Fresh. The key competitors include McDonald’s Corporation, Nestlé, and Dunkin’ Brands Group (Hoovers 2017).

It mainly operates in the retail coffee industry, which has been experiencing significant retardation since 2009 as a result of the 2009-2010 economic crisis and a gradual shift in consumer tastes, as consumers are today spending less on luxuries like eating out and choose to buy low-priced items rather than high-priced coffee drinks because of an attenuation of budgets following an economic slump. Currently, the company has established a strong geographical presence globally and maintained a market share of more than 36.7 percent in the U.S. market. It is also one of the most recognized brands globally and has served to leverage its brand equity through franchising and licensing its brand logo and merchandising flagship products (Hawley 2015; Saad, 2015).

Starbucks mission statement is: “to inspire and nurture the human spirit – one person, one cup and one neighborhood at a time” (Starbucks 2017).

3. Brand Analysis Using the CBBE Model

In brand marketing, two main questions always arise. These include what constitutes a strong band and how to make a strong brand. The customer-based brand equity (CBBE) model was conceived to answer the two questions. (Keller 2013). The model views brand equity from the consumer point of view, whereby consumers are approached individuals, organizations or even current and prospective customers. An underlying principle of the model is that the supremacy of a brand is based on what customers learn, see, hear, and feel about the brand in consequence of the experiences they have with the brand in the fullness of time (Keller 2013). Based on this background, CBBE model can be applied to assess the progress that Starbucks has achieved in building its brand and examine whether the company has achieved success regarding efforts to build a strong brand.

The CBBE model suggests six key blocks that make up a pyramid, where ultimate brand equity results once a brand reaches the top of the pyramid. Starbucks brand has followed the same blocks to attain brand resonance by ascending through the two sides of the pyramid (Keller 2013).

Brand Salience/awareness

Brand awareness refers to customers’ ability to recognize and recall a brand, associate the name, logo, and symbol of the brand to their memories (Keller 2013). A significant element in Starbucks’ brand awareness is enshrined in two components. The first component consists of brand recognition, which relates to the ability of a customer to identify the company’s logo, tastes of coffee, and coffee shop experiences. The second component consists of brand recall, which refers to customer’s ability to recall Starbucks’ logo easily, think about the logo and think about the taste when making a purchase decision. Therefore, as customers easily recollect Starbucks brand, it could be reasoned that, has a high level of brand awareness in terms of depth. It also has a high level of brand awareness in terms of breadth, as consumers easily have a memory of the logo, location, and taste of coffee. At this level, it is easy to recognize that Starbucks is a highly salient brand, as it has both breadth and depth of breadth of brand awareness. This has influenced coffee consumers globally to often consider making adequate purchases besides thinking of the brand in varied settings where coffee is consumed. Starbucks has leveraged secondary associations to achieve brand salience or awareness. In the 1970s when the company was founded, its primary, secondary brand association was rooted in one geographic area, which is Italy.

Hence, the company built on Italian’s love for coffee and socialization, which were intrinsically European models. Today, the company has newly branded coffees depending on sections of the world it sources coffee beans from. This has created secondary brand associations with such regions of the world that coffee beans are grown. It carries out brand associations using stamps that provide visual appeal to consumers. This enables the company to attain brand equity using an image transfer process (Cretu 2012). In effect, Starbucks has also managed to create brand meaning of by constructing brand image resulting from their experience, such as the European social model of assembling in cafes to socialize after work, which has had significant brand association in the minds of consumers, whereby they would think of visiting a Starbucks coffee shop to socialize after work while taking coffee. While brand salience is a significant initial step in the construction of brand equity, it is not particularly adequate, as much of its model fits in with American and European lifestyles other than that of developing markets in Asia and Africa where it expands to (Saad, 2015).

Brand Performance:

By nature, a product is at the centre of brand equity, as it consists of what basically influences consumers’ experience when consuming a brand, things they tend to hear regarding the brand based on word-of-mouth modes of communication, in addition to what the company should inform current and prospective customers about their brand while communicating with them (Keller 2013). In the hope of creating brand resonance and loyalty, Starbucks has ensured that what its customers experience with its coffee products exceeds their expectations by meeting their functional needs. For instance, it offers free Wi-Fi and workspace, so that consumers may consider working outside their office space. This has facilitated significant Starbucks brand performance. Essentially, brand performance is associated in a direct manner with the attributes of a product that set it apart from competitors’. In essence, Starbuck’s brand positioning has depended significantly on its brand’s performance advantages. These include the styles and designs of its coffee shops, and the unique ingredients of its coffee and the emblematic efficiency and effectiveness of its customer service.

Brand Imagery

Brand imagery forms an emotional component of brand meaning hence relies on intrinsic attributes of the product, including the degree to which a brand succeeds in meeting the social and psychological needs of customers. They are, therefore, concerned with the intangible dimensions of a brand, which customer construct as a consequence of direct associations from previous experiences they have had with a brand, or even through advertising. Examples include purchase and consumption situations, where consumers associated Starbucks with a place to socialize or work remotely from work while taking coffee.

In effect, Starbucks has relied on brand experience to achieve brand imagery. Starbucks has succeeded in creating a global brand experience across its 25,000 coffee shops globally. From Starbucks’ prime locations, the company has made its washrooms easy to locate. It also provides free Wi-Fi to make it convenient for people to work remotely from the office. It has also designed its mugs with the company logo, including it espresso machines. It has also managed to transfer cultures across its stores. For instance, in Europe, there is a tendency for people to visits coffee shops during lunch hours and in the evening after work, where they can relax, meet friends, read or work remotely. The company has managed to import the social model from Europe to Australia, North America, Asia and Africa (Vincent, 2017.

The company also integrates its corporate brand with the concept of global meets locally. Regarding its corporate image, the company comes out a large multinational company which also embraces a local touch. As a consequence, it provides similar product experiences across its stores globally, yet with some twist to what people would prefer locally. Hence, the consumer can find a few dissimilar product ranges in stores in Europe from the stores in North America, even as a majority of the products offered tend to be similar. Regarding the edgy side, customers are bound to find tattooed baristas, which is a form of activism (Vincent 2017). Therefore, Starbucks has made significant milestones in creating an exceptional experience in terms of exporting European social model and global meets local model.

Brand Judgments

Brand judgments consist of the personal opinions that consumers, both individually and collectively, make of a brand after evaluating it. Consumers form brand judgments after considering brand imagery and brand performance. In respect to Starbucks, customers may come up with four categories of judgments. The first is the quality of the brand. Starbucks has built a brand reputation for offering quality specialty coffee. Hence, customers judge Starbucks for quality. The second category is brand credibility, which refers to judgments that consumers make regarding the company that retails a product. Starbucks is considered to be a market leader in roasting and retailing specialty coffee. The third element entails brand consideration, which refers to what customers think of the brand when they make purchase decisions. Starbucks has made significant milestones in creating an exceptional customer experience in terms of exporting its global meets local model. While making purchases, customers believe that Starbucks can offer them European and American taste of coffee, yet also serve them their local taste.

Brand Feelings

Brand feelings refer to the emotional responses that customers elicit about a brand. The emotions that Starbucks brand evokes have a potential to be strongly associated with the coffee shops while consuming coffee. Starbucks has managed to achieve ‘brand feelings’ through its unique design. One particular feeling is that of warmth. The company intends to make its stores inviting and welcoming, and has a result designed them to reflect the distinctive attribute of neighborhoods they directly serve (Starbucks 2017). In 1995, the company wanted to achieve total homogeneity of its store by adopting similar designs across its thousands of stores. It considered integrating some aesthetics to bring about a theme of air, water, fire and earth. It also sought to integrate strong coffee aroma (Wilson 2014). This did achieve efficient customization, although it failed to appeal to certain local cultures. However, it decided to change and began incorporating a theme that reflects an immediate neighbourhood it serves. The coffee shops evoke a strong emotion of warmth. In fact, the design of the coffee shops makes consumers feel calm and peaceful, which relaxes them while having a relaxing conversation inside Starbucks coffee shops. Additionally, the specialty coffee is associated with a feeling of excitement, which makes consumers feel energized. The brand also evokes a sense of self-assurance, comfort, and safety. The premier design of the coffee shops provides consumers with a sense of comfort. Starbucks brand also evokes a sense of social approval to customers, as it offers premier socializing space, which provides them with a feeling that they are looked favorably by the society around them.

Brand Resonance

Brand resonance is concerned with the ultimate step of building lasting relationships with a brand and persistent identification with a brand. In other words, it relates to the character of the relationship and degree to which a customer feels that he is accustomed, used to or identified with a brand. It can be seen in the level of psychological bond that customers have developed with a brand, leading to behavior loyalty and attitudinal attachment. Starbucks has achieved to establish these relationships through its cause related-marketing strategy called “Raise a cup to a good cause,” whereby it donates 5 pence for each new specialty to charities.

The company has a robust email channel designing for updating Rewards members on its latest specialties. It has enabled the company to improve product perception and build long-term brand loyalty and attachment. In 2015, it donated $29 million to give to charities, as an outcome of cause-related marketing (Davis 2016). Respecting behavior loyalty, Starbucks does experience repeat customer purchases by its patrons on its email list, who look forward to new specialty and to donate to charity across its more than 25,000 coffee shops globally. In regards to attitudinal attachment, it seems reasonable to argue that coffee consumers have gone beyond just developing a positive attitude toward considering Starbucks as a brand that is special to one that has a social cause. Starbucks provides customer in its email list with an opportunity to affiliate with other people who are also attached to the brand yet are on the email list.

4. Identification of key Issues/Challenges/Opportunities

Overall, Starbucks benefits significantly from aesthetic and locations appeal of its major stores. The company operates more than 25,000 stores globally, which markets the brand in the countries it operates, hence ensuring association with the Starbuck logo. This also provides the company with a definite visibility and has, in turn, enabled the company to benefit from competence. The stores are highly ambient and have an apparent cool factor that invites customers. The company also provides free wi-fi, which appeals to people who may need to work from offices. In brief, Starbucks aesthetic and locations appear to be even more appealing than the coffee it sells. The company should focus on making the stores more appealing.

However, the company is associated with premium prices, which may not appeal to a general demography. Although the company tends to differentiate its products with high quality, which has enabled it to achieve positive “brand judgment,” the entire ‘Starbucks Experience’ is at risk of not appealing to customers in times of economic slump. This implies that consumers may be forced to switch competitor’s products, which may be relatively inexpensive. The premium price, which may have brought a sense of quality, may be detrimental in emerging and developing markets like Africa or Asia, which could undermine the company’s strategy of developing a global footprint.

At any rate, Starbucks benefits from the brand extension and currently has a powerful brand image, which it has an opportunity to leverage to expand into its business’s horizontal lines. This also provides it with an opportunity to achieve product diversification.

Being a large brand with a global image, Starbucks if often closely monitored by the media, particularly regarding how it responds to a call for sustainability. However, its brand equity is not associated with caring for nature (Geereddy n.d.).

5. Recommendations and Conclusion

i. Strategic Recommendations

Starbucks should improve brand performance to improve consumers’ experiences when consuming a brand. This will ensure that they do not consider the price, yet also provide the company with an opportunity to achieve product diversification away from the advantages of aesthetic and locations appeal. Accordingly, Starbucks will need to intensify customization of its products and places (location). In respect to coffee, the company should allow users to create new coffee flavors themselves outside the options the company can secure. As coffee is consumed international and nearly each culture has its favorite flavor, it is possible that allowing customers the luxury of creating their flavours inside the coffee shops would create an added appeal. Alternatively, it should allow users to go on its website and access total control by suggesting a mix of ingredients to add to their coffee, which they can then order online. Similarly, users should be allowed to post a combination of their favorite drinks, where others could try and vote for it. This will serve to increase user experience. Another creative strategy is that Starbucks should develop a mobile app that allows customers to make a combination of ingredients to make a perfect coffee and order online. This is particularly relevant in the digital era, where the company looks forward to taking advantage of technology to improve customer experience.

ii. Tactical Recommendations

Starbucks should introduce new product portfolio that can be targeted for developing and emerging markets, where premium prices have not been very effective. It should also consider intensifying its corporate social responsibility to build a lasting brand imagery that it cares about people and nature other than making profits. As Starbucks current focuses on gaining entry into developing countries to tap their market potential, it is under deep scrutiny by the international media. Indeed, it has suffered significant criticism for attempting to change local cultures by bringing in Americanisation.

Starbucks should, therefore, expand its product portfolio to cater to tastes of local developing countries’ tastes. This will ensure that increases its customer base. At the same time, by providing more products that can be sold at low prices, it can still attract customers in events of the economic slump. It should also execute corporate social responsibility as part of its tactic in building its reputation in developing countries (Haskova 2015). It could consider taking part in improving the lives of coffee farmers in Africa, particularly Rwanda, where it sources its coffee beans. It should also use the social media to keep its global customers informed of its activities, including CSR activities yet also invite them to take part in these activities (Lee n.d).

Overall, Starbucks has managed to maintain a competitive advantage through successful brand equity. While brand salience is a significant initial step in the construction of brand equity, it is not particularly adequate. Starbucks has leveraged secondary associations to achieve brand salience or awareness. Starbucks should improve brand performance to improve consumers’ experiences when consuming a brand. This will ensure that they do not consider the price, yet also provide the company with an opportunity to achieve product diversification away from the advantages of aesthetic and locations appeal. Starbucks should introduce new product portfolio that can be targeted for developing and emerging markets, where premium prices have not been very effective. It should also execute corporate social responsibility as part of its tactic in building its reputation in developing countries.

6. Reference List

Bouzidi, I 2013, Starbuck´s brand effects — distinguishing unconscious ´wanting` and conscious liking in consumers’ choice of coffee brand (Master´s thesis, Copenhargen Business School)

Cretu, S 2012, Brand building- Starbucks and Intel, viewed 24 May 2017, https://stacicretu.wordpress.com/2012/04/03/brandbuildingstarbucks-and-intel/

Davis, B 2016, «Cause marketing: Examples from Uber, Starbucks & JetBlue,» Econsultancy, viewed 24 May 2017, https://econsultancy.com/blog/68452-cause-marketing-examples-from-uber-starbucks-jetblue/

Geereddy, N n.d., Strategic analysis of Starbucks Corporation, viewed 24 May 2017, https://scholar.harvard.edu/files/nithingeereddy/files/starbucks_case_analysis.pdf

Haskova, K 2015, “Starbucks marketing analysis,» De Gruyter Open, https://www.degruyter.com/downloadpdf/j/cris.2015.2015.issue-1/cris-2015-0002/cris-2015-0002.pdf

Hawley, J 2015, Who are Starbucks’ main competitors? viewed 23 May 2017, <http://www.investopedia.com/articles/markets/101315/who-are-starbucks-main-competitors.asp>

Hoovers 2017, Starbucks Corporation competition, viewed 24 MAy 2017, <http://www.hoovers.com/company-information/cs/competition.starbucks_corporation.824509ef484db9e9.html>

Keller, K 2013, Strategic brand management: building, measuring, and managing brand equity, Pearson Education Limited, Essex

Lee, K n.d., Case study: Starbucks coffee, http://www.uhu.es/45122/temas/P&SC/Theme1_StarbucksCoffe_CaseStudy.pdf

Mulder, P 2016, Brand equity, viewed 24 May 2017, https://www.toolshero.com/marketing/brand-equity/

Perera, L, Kerr, R, Kimura, H and Lima, F 2009, «240 Marketing procedures,» Journal of Academy of Business and Economics, vol 9 no 4, viewed 24 May 2017, http://www.freepatentsonline.com/article/Journal-Academy-Business-Economics/260874440.html

Saad, L. (2015). Americans’ Coffee Consumption Is Steady, Few Want to Cut Back. Gallup Research. Retrieved: <http://www.gallup.com/poll/184388/americans-coffee-consumption-steady-few-cut-back.aspx>

Starbucks 2017, Store Design: Sustainable design is part of who we are and what we do, viewed 23 May 2017, https://www.starbucks.com/coffeehouse/store-design

Vincent, S 2017, «Starbucks: the brand experience more than the coffee,» Innovation Excellence, viewed 24 May 2017, <http://innovationexcellence.com/blog/2014/08/24/starbucks-the-brand-experience-more-than-the-coffee/>

Wilson, M 2014, Starbucks secrets to make every store feel unique, viewed 23 May 2017, https://www.fastcodesign.com/3034441/starbucks-secrets-to-make-every-store-feel-unique