Starbuck’s New Brew lacks Bite

Posted on | April 22, 2008 |

by Robert Passikoff

Two weeks ago, in the hope that a new “signature” blend would help revive coffee sales and consumption, Starbucks served up a new “everyday” java called Pike Place Roast. To promote the launch, Starbucks gave away coupons for free coffee and hosted free tastings, hoping that a new product formulation would reinvigorate its U.S. business.

The brand has suffered in the past 18 months due to some brand equity deterioration on the part of Starbucks’ service and surroundings, and growing competition from rivals ranging from McDonald’s, Dunkin’ Donuts to independent coffee shops.

Starbucks was rated #3 in the Coffee category of our 2008 Brand Keys Customer Loyalty Engagement Survey, having lost its brand equity over recent years in the “Service & Surroundings” loyalty driver. In assessing Starbucks among consumers who had tried the new blend, here at Brand Keys we found that Pikes Place Roast didn’t give much support to the brand.

The introduction of the new blend quite logically made itself felt on the “Variety and Selection” driver. All increases in brand loyalty are welcome but “Variety and Selection” is the least important driver and it is where Starbucks is already strong.

Benchmarked against 100, the Category Ideal is rated 125. Starbucks, pre- Pike Place Introduction was rated at 112. After the introduction it was rated a 113.5, and that’s by people who actually tried the new blend.

The increase in strength on that driver did not move the Starbucks brand out of 3rd place (behind 1st place Dunkin Donuts, and 2nd place McDonald’s), and these metrics correlate highly with consumer behavior.

This is a good example of a brand mistaking a marketing opportunity for a brand strategy. While a marketing opportunity exists to sell an ‘everyday’ coffee to compete with Dunkin’s and McDonald’s, this is not a strategy for a brand built on the customized cool of the Starbucks’ experience. While adding another variety is not damaging, triage for the brand will come from finding new ways to connect back to the service and surroundings that consumers want, a consumer who is five times more driven today by customized experience than ten years ago.

Starbucks has admitted consumers are interested in a coffee they ‘can count on every day, all day, all week’. That’s the marketing opportunity. Get the consumers who weren’t interested in the stronger varieties Starbucks is known for and have them come in and buy something closer to the traditional cup of coffee they’re buying elsewhere. But if consumers don’t believe the new offering is going to meet or exceed their expectations, they’re not going to change their current loyalties. Virtually nobody turns down anything that’s free!

Robert Passikoff is founder of Brand Keys Inc. (New York), a brand and customer loyalty consultancy.