How does Starbucks win back appeal and get consumers spending again.

To some, Starbucks may represent Americanisation, but despite the negative connotations the terms may have in the East, the brand was managed to deliver on the promise of an ‘experience’ and has to a large degree, successfully expanded throughout the region.

However, recent times have proven to be a little trickier for the brand than before and 2008 began with chairman, Howard Schultz, reclaiming the chief executive chair - booting out former CEO Jim Donald in the process.

The company, which has more than 15,000 stores worldwide, appears to be losing the brand essence that Starbucks was supposed to represent - it’s no longer a cosy coffeehouse. A point not lost on Schultz who, in a leaked memo last year, said that the company’s aggressive growth had led to a watering down of the Starbucks experience.

Closer to Asia, the brand faced an internet-created campaign of hostilities towards the Starbucks chain at the Forbidden City. Perhaps the target of unfair criticisms for its outlet at the historical / tourist attraction, and with China to undoubtedly play a big part in the brand’s future plans, the company wisely gave in to the wave of pressure and shut its store on 13 July 2007.

Named after the first mate in the novel Moby-Dick, Starbucks is the largest coffeehouse company in the world and has expanded into areas far beyond latte brewing. Through its Starbucks Entertainment division and Hear Music brand, the company also markets books, music, and film.

How does the largest coffeehouse brand in the world get consumers to continue to think of Starbucks not as another coffee chain but as a coffee ‘experience’? Our branding experts have their say.

Diagnosis

The recent media buzz about Starbucks decline isn’t new news. Its announcement of founder Howard Schultz being back at helm to manage the turnaround generated mostly negative reactions from industry observers.

Not everyone is convinced Howard can turnaround what is now a commoditised brand on a maturity downtrend of the life cycle curve. Its business model is post-peak and its stock’s too expensive for a slow-growth, commodity pricing play. Worse still, it doesn’t understand the problems confronting it - its phenomenal growth was fuelled by its ability to sell high-margin caffeine related beverages and an appealing brand offer in what was then a sexy ‘third place’. Now that place is everywhere - McDonald’s, Dunkin Donuts or just any retailer who can brew coffee. The company’s revival plan? TV commercials touting its holiday beverage and gift lines, slow opening of new US stores and a promise to introduce fewer new beverages.

My prognosis? Starbucks is missing the whole point. It is adopting the classic short-term, tactical advertising and cross - merchandising solutions - at best a temporary pain relief without curing the root of its problems.

Starbucks needs to uncover its unique and compelling appeal as a brand again.

Cure

• Reinvent the brand experience - forget the ‘more stores’ growth plans and useless cross-merchandising such as music CDs, focus instead on being a premium brand with innovative products and a fresh, unique brand experience that constantly evolve.

• Focus on customer needs - the options are out there: healthier lifestyle trend, concern for the environment, working mums in Asia and emerging markets, and more.
• Global yet local - Focus on Asia and other emerging markets. Also, think tea culture in Asia, explore the melting pot of culture diversity in SE Asia and Latin America.

Jacqueline Thng

CEO, Lexis Branding

This article first appears on Marketing Magazine, 2008.