Wednesday, January 10, 2007

Do New Locations Dilute the Starbucks Brand?

I am not a big fan of Starbucks: the lines are too long, the made-up names are pretentious, and waiting to pick up your coffee from that little table is stressful (when will it come? which one is mine?). But Starbucks was on my mind yesterday as I was thinking about brands and customer experience. In particular, I was wondering whether the Starbucks brand can be meaningfully extended outside of Starbucks stores. Sure I can buy Starbucks-brand coffee at the grocery for home-brewing, at outside locations such as airports or hotels, or in offices through catering. But am I getting the Starbucks brand experience?

These extensions would make sense if the basis of the brand were the superior taste of the coffee itself. Some people would argue it is. But I think the foundation of the Starbucks brand is the in-store experience—a comfortable, civilized atmosphere vaguely similar to a European café (or to Americans’ idealized image of a European café). Maybe drinking a cup of Starbucks while anticipating the misery of today’s air travel will trigger a pleasant memory of more congenial circumstances. But it’s more likely to dilute Starbucks’ brand by associating it with something very ugly. It’s easy to understand why Starbucks would want the incremental revenue of such sales. But you have to wonder whether they’re harming themselves in the long run.

The Starbucks situation also illustrates yesterday’s point about the difference between customers of a brand and customers of a company. People buying at a Starbucks store are both. But someone pulling coffee from a Starbucks-labeled urn during a break at a conference is a customer of the Starbucks brand only. The company they have purchased from is the conference organizer.

Several brands are involved in that simple caffeine injection: Starbucks itself; the conference center that chose Starbucks; and the organizer that chose the conference center. Each picks its suppliers with an eye to associating the experience the supplier provides (i.e., its brand) with their own. This means that every participant is to some degree at the mercy of the others: a bad experience with the coffee will harm all their brands regardless of who is at fault. Thus each participant needs to pay attention to how the others can be expected to perform before agreeing to do business.

As it happens, this morning’s (The New York Times had an article on Starbucks competing with McDonald’s for breakfast customers. (“The Breakfast Wars”, Dining Out, The New York Times, January 10, 2007). It’s an interesting pairing: like Starbucks, McDonalds is really more about a branded experience than the food itself. McDonalds is also a good example of yesterday’s comment about offering different brand faces to different customer segments. Their ads aimed at kids, teens, and adults show very different approaches to the same general theme of McDonalds as a fun place to visit.

But most of the article is about Starbucks. It is focused primarily on the inconsistencies that Starbucks has traditionally tolerated in its food offerings. (The premise of the article—that Starbucks is trying to reach the quality of McDonalds food—is a brutal indication of just how bad Starbucks’ current food must be.) Of course, consistency is the literal definition of quality, and inconsistencies abound: in food from store to store, between the coffee and the food, and between the food and the store ambiance. Clearly Starbucks needs to improve its food to protect its brand. And, once it improves the food in its own stores, it needs to find a way to ensure that food at external locations is consistent with its new in-house standards. Good luck with that.


Jeff said...

Hi, David --

I read the same Times article, and was fascinated with the research that the average American takes 3 minutes to buy his or her breakfast -- definitely not enough time for two stops (one to Starbucks and one to McDonald's).

As for the dilution of the Starbucks brand, I think you have a point. You may also find the book by economist Tim Harford interesting. In his book The Undercover Economist, he explains that it's not the brand strength of Starbucks that has it on every street corner, but its brand weakness, if you will.

Starbucks knows that if it is not located in a super-convenient spot (even one across the street from another Starbucks location), we'll simply go elsewhere for our caffiene fix.

I wrote about what this may mean once mobile marketing becomes more available in my August 9, 2006 blog entry.

Good thoughts, David!


David Raab said...

Jeff's very interesting post on mobile marketing is available here. I do wonder whether convenience is really the key to Starbucks' success, though. On any given stroll, people probably pass several places where they could buy coffee, and Starbucks isn't designed for the quickest possible purchase. So it's something about the brand that makes people choose Starbucks over faster, cheaper alternatives. In fact, I think Starbucks will benefit from mobile marketing if it can develop a little 'Starbucks finder' icon that I can click on my phone and have it show me the nearest location when I'm in an unfamiliar area.