1. Starbucks
“The only thing that we learn from history is
that we do not learn from history.” -Hegel

2. Starbucks expands…
• Starbucks expands
stores rapidly
• Expanded offerings

3. …and fails
• Finds itself on the brink
of failure
• Stock price is down
• Brand value declining

4. Why did it happen?
• Expansion, in store numbers and offerings, did
not match with starbucks based on brand
management principles
– Brand Identity & Personality
– CVP
– Brand Equity

5. Brand Identity
• Product
– High quality coffee for the individual who has the
time and money to pay a high price for a cup of
coffee they can enjoy.
• Organization
– Socially responsible with highly-paid and happy
workers. Had a strong position in the premium
coffee market that was hard to replicate or top.

6. Brand Identity
• Person
– Jennifer Aaker would say starbucks brand
personality can be found in Sophistication (upper
class coffee), Competence (reliable, intelligent
baristas), and Sincerity (like your neighborhood
café).
– It represent camaraderie, community, bringing
people together.
– It represents stopping to smell the roses, or in their
case, the coffee beans.

7. Brand Identity-symbol

8. CVP-Functional
• Starbucks produced a cup of coffee that was
at least perceived as high quality/premium.
• The customer service was excellent.
• Drinks were very customizable
• The environment had couches, wi-fi, etc.

9. CVP-Emotional
For this section, we decided to do some
qualitative research using social media, what
follows are some of the responses we received:

10. CVP-Emotional
”I Iike how you can hear the hustle
and bustle of men and women in
business getting their morning
coffees and see some of them sitting
there doing work.” – Phung Pham

11. CVP-Emotional
” You can relax and its more of
the coffee house feel. you can
enjoy your coffee.” – Phung
Pham

12. CVP-Emotional
” And most starbucks have this
kind of loungey feel to them.”
– Danielle Sandahl

13. CVP-Emotional
” Starbucks is the absolute BEST!!!
My husband and I could be
broke, but we'll scrounge up a
couple of bucks just to buy a
drink...even if we have to split it. We
like to call it "Christmas in a Cup". –
Corie

14. CVP-Emotional
” Its very "cozy" and you feel like at
home. I could stay there for hours
just talking, reading or on my PC ". –
Corie

15. CVP-Emotional
Emotionally, Starbucks provides this luxury feel.
You feel like you’re treating yourself when you
go to Starbucks. It’s what they build with the
environment, the couches, the lounge music, the
coffee mugs, the smells, the people, all of it boils
down to selling luxury.

16. CVP-Emotional
To echo Minoli of Ducati, Starbucks is not in the
coffee business, they are in the experience
business. That experience is vital.

17. CVP - Self-Expressive
Starbucks also allows people to express
themselves through consuming their service. For
this I also went to qualitative research in
addition to stuff we learned in class.

18. CVP – Self-Expressive
” I like pretending I have a busy life
and somewhere to go and am
European ” – Emma Pedersen

19. CVP - Self-Expressive
Starbucks operates as a luxury for the masses.
It’s more expensive than most other coffees but
as a portion of income it’s relatively small. It
allows people to telegraph to the world that
they are high-class, that they will not sacrifice
on their coffee nor their enjoyment.

20. So What Went Wrong?
• We believe Starbucks began a
downward spiral because it ineffectively
pursued an Aaker expansion strategy.
• It violated it’s core, CVP, and brand
personality on many levels through its
actions during the expansion process.

21. Commoditization
• Rapid expansion of the number of stores, first
and foremost, began the process of failure.
When there’s a “starbucks on every
corner”, it’s hard to imagine Starbucks as the
neighborhood café as opposed to a chain.

22. Commoditization
• Further, the rapid expansion created a need
for efficiencies. There’s few reasons to expand
if you cannot reach economies of scale and
greater efficiencies.

23. The movement from Marzocco manual machines to
automatic espresso machines “removed much of the
romance and theatre that was in play with the use of
the La Marzocca machines” as Howard Schultz says.

24. He further explained “This specific
decision became even more damaging
when the height of the machines, which
are now in thousands of stores, blocked
the visual sight line the customer
previously had to watch the drink being
made, and for the intimate experience
with the barista”

25. “Clearly we have had to streamline store
design to gain efficiencies of scale and to
make sure we had the ROI on sales to
investment ratios that would satisfy the
financial side of our business.
However, one of the results has been
stores that no longer have the soul of the
past and reflect a chain of stores vs. the
warm feeling of a neighborhood store.”

26. Their Failures
• Starbucks ice
cream
–In Grocery
Stores, not
experiential

27. • Breakfast
Sandwiches
–Instead of
coffee, you smelt
sausage

28. • Seating
–Some have little
to no seating

29. Starbucks
Starbucks failed because they left their
identity and they lost touch of the
starbucks experience, the very soul of
the brand. Their CVP was entirely out-
of-whack and they paid the price

30. Howard Schultz came in on his majestic
steed, sword pointed forth, proclaiming to the
heavens:
“Huzzah! Back to
the core we must
go! Charge!”

32. Yup.
• He removed the coffee from the
logo...revolutionary…brilliant
– Ahem, sarcasm intended

33. Why?
We believe it came from the
questions “Is Coffee in our core? Are
we too strongly associated with
coffee? Are we in the product
attribute and product image traps?”

34. Yup.
• We believe the answer to those
questions is “Yup.”
• “But, isn’t that good? Doesn’t that
mean he recognizes that they are not
in the coffee biz, but in the
experience biz? Can’t they fix things
now with that knowledge?”

35. Nope.
The jury is still out, but their actions
have not been indicative of a
movement to the soul of the brand.

37. Trenta
The first factor is the introduction of
the Trenta size. Intrinsically, the
Trenta just felt “wrong”. Something
about it just struck a bad chord. So
we took it to Facebook.

38. What customer do you
think they are targeting
with the new Trenta
sizes at Starbucks?

39. “addicts”
-Sharon Tam

40. “People see the bigger size
and think its a better value
($/oz) and they are getting
more for their money.”
-Jill Montane

41. “People who are addicted
to the coffee, and therefore
need a big cup and get it to
go. They don't care about
the experience at all.”
-Mike Gray

42. “People that have places to go
in the morning and dont want
a pussy cup of coffee or to sit
around a god damn coffee
shop (but are too good for
dunkin coffee)-Emma
Pedersen

43. “Also, what Emma
said.” –Mike Gray

44. Value?
They are targeting a value customer
with the Trenta size. They are
targeting addicts, people on-the-
go, people who drink coffee for
coffee and not coffee for Starbucks.

45. Instant.

46. Instant.
Instant. Instant Coffee. Instant coffee that
can be made at home, out of a condiment
package. Does that sound like a failure to
you?

47. Not yet?
Let me rephrase:
“Oh glorious consumer who
perceives that our in-store coffee is
superior to others’ coffee and will
pay higher prices, little did you
know that our coffee tastes like
instant coffee.”

48. Still nothing?
Let me rephrase:
“Here, buy this coffee for a fraction
of the price, we promise it tastes just
like our in-store coffee. While you’re
at it, purchase one of the same
mugs we serve you with in store.”

49. A little more?
Let me rephrase:
“Please, by all means consume our
coffee in a cold kitchen with appliances
for company and zero of the comforts
of Starbucks restaurants”

50. Not quite?
One last rephrase:
“Experience? I thought you just
wanted a cheap, pretty okay
tasting coffee that could be made
quick and easy.”

52. ”It just doesn't taste the
same when you make it
yourself at home.” –
RubyMae from Flickr

53. There we go.
Starbucks clearly has not learned it’s lesson.
Trenta sizes, instant coffee, drive-thrus, no
seating, higher emphasis on grocery sales. I can’t
wait until they introduce “artisan” burgers and
donuts, maybe a nice chicken sandwich and a
Super Big Gulp. You know what would be
awesome? A little in-store coffee machine where
I can just pour my coffee and pay without ever
speaking with a barista!

54. Oh, wait.
“Starbucks is testing letting its customers
pour their own coffee at some stores.
Customers can pay before or after getting
their own drip coffee from a brewer near
the condiment bar, the company said on
its new customer-feedback website.”

56. Starbucks
“The only thing that we learn from history is
that we do not learn from history.” -Hegel