Brand Positioning Strategy -Starbucks, An Example

The first step for any new business is to ponder how to occupy space inside a target consumer’s mind, which is called ‘Brand Positioning’. It can also be termed as a consumer’s perception of a brand with respect to competing brands.

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Why does your brand need to enter his or her mind? If you ask a consumer to name a cola drink, ‘Coke’ name will spurt out. If you ask the consumer to name a toothpaste that comes immediately to the mind, most probably, Colgate name would pop out. If you ask about a photocopying brand, ‘Xerox’ name will spurt out. If you ask them the name of an energy drink, the red bull name will rush out. If you ask an Indian to name a noodles brand, most of the time ‘Maggi’ name would jet out.

Why do these brand names stay at the top of the consumer’s mind so that it can be recalled immediately?

Coke is the first cooldrink to enter the consumer’s mind under Cola category. Seven-up is the first cooldrink under the Un-cola category. Redbull is the first cooldrink under ‘energy drink’ category. Xerox is the first brand under the ‘photocopying’ category.

Being №1 in a consumer’s mind will help a business to grab a major market share and have a sustainable business. The above brands show that the easiest way to get into a person’s mind is to be first.

So, how can a business enter a consumer’s mind by being first? The business has to create a new category that doesn’t exist in a consumer’s mind.

What is the need for categories? Our human brains are wired for categorisation to help us remember things. Without that, we would be quickly overwhelmed by the vast amount of information.

Nicole Branan writes in ‘Scientific American’, Picture a living thing — say, a dog. Now imagine a hammer. Thinking of a dog activates an area that deals with animate objects, whereas a hammer excites one that processes inanimate things even if you had never seen a dog or a hammer before.

Whenever we come across new things, subconsciously, we would file them under different known categories in our memories. If a consumer sees your product, he would automatically file the product under a known existing category. The problem with this filing under the existing category is — your product would be filed several layers below the other products and the consumer would fail to recollect your brand name at the top of the mind. Example -Coke is the first product under the cola category. Pepsi is the second brand. Do you remember the third brand? Fourth brand? If you ask people, they may not recollect beyond two names. How many energy drinks can you name other than Redbull?

How To Create A New Category? -The new category should be based on the value offerings a brand can offer to the customer. For that, the company has to observe customers’ needs, desires, pains and choose value propositions that will solve customer’s pains and also match the business’ core strengths and core values. This is also called ‘Brand Differentiation’.

Michael Porter writes, “A company can outperform rivals only if it can establish a difference that it can preserve. It must offer greater value to customers or create comparable value at a lower cost, or do both”

We build a sustainable business by widening this differentiation and evolving the value propositions based on the changing needs and attitudes of customers.

BRAND POSITIONING OF STARBUCKS

As we saw earlier that to create a category, we need to first freeze the target customer segment(Niche Market) and understand their requirements.

Focusing On a Niche Market. The general rule is to start small. Smaller the segment, it is easier for the entire company to focus and meet the customer needs, wants and desires. Once you become a leader in the niche market, you could grow your market.

How to find a niche market? A market exists when a customer has a problem that needs to be solved -Find and Focus on a particular need, work on it, make your product distinctive and dominate the niche market.

Starbucks’ Niche and Customer’s Pains -By 1970s, three trends emerged -
1. Most of the Americans were unhappy with the coffee experience as it is mostly made from cheaper Robusta beans. Particularly, the younger generation disliked the coffee taste. Robusta beans are of very inferior quality compared to Arabica beans.
2. Coffee beans packed in the cans and sold in the supermarket shelves were also going stale, affecting the tastes.
3. In the same period, people were becoming health conscious and began to cook their own food at home.

Starbucks’ original founders Jerry Baldwin, Zev Siegel and Gordon Bowker saw that there was a considerable number of coffee lovers who were tired of all the available options and also looking for a naturally processed, authentic coffee beverage & was willing to grind the beans in their home. Unfortunately, they were struggling to find authentic coffee beans. The founders, themselves being passionate about coffee, could understand the problems faced by those people. They felt that it was wise to meet the needs of this target segment. So they opened the first store in Seattle to sell authentic coffee beans to this tiny niche of gourmet coffee lovers. The brand’s quality spread by word of mouth.

Starbucks’ initial positioning strategy was ‘Authentic Coffee Beans’.

EVOLUTION OF POSITIONING STRATEGY BY HOWARD SCHULTZ

When Howard Schultz joined Starbucks, he wanted to grow the Starbucks’ market. He felt that the brand has to evolve and target additional customer segments. In that scenario, the positioning strategy will also undergo evolution.

Brand evolution means adding new value propositions to the proposed new customer segments. To achieve that, the brand has to observe customer’s changing attitudes, their hidden needs and their contexts of product use.

Howard initiated the market and user research process.

SELL EXPERIENCE AND BUILD RELATIONSHIPS

The Research-In the 1980s, Howard Schultz, visited Milan, Italy. He was surprised to see that every street in the city had a little espresso bar. He visited many stores and studied them. He saw that the Barista working behind the counter, greeted every customer cheerfully and many of them by their names. After taking the order, that guy moved gracefully, grinding coffee beans, pulling shots of espresso, and steaming milk, and at the same time, he was conversing happily with his customers. The Baristas talked, laughed and enjoyed the moment with their customers. Customers too enjoyed. Howard could see that the Baristas had established personal relationships with their customers.

Howard also observed that there was a wonderful camaraderie between the customers even though they didn’t know each other well except in the context of that coffee bar.

Howard continued to observe more coffee bars. He listened to the type of music being played. He saw that the coffee bar was visited by a different crowd at various timings. In the morning, the Coffee bar was frequented by typical office goers. In the early afternoon, mothers with children and retired folks lingered around. In the evenings, it was a neighbourhood’s gathering place.

Howard realized that these places offered comfort, community and a sense of extended family to the customers. Italians considered coffee shop as an extension of their porch, an extension of their home-A home away from home.

“Everyone is interested in themselves, every customer needs special attention. They need preference — They need a special assurance that they are also one of the preferred customers. Preference brings loyalty. Preference makes the sale” -Marc Gobe

The Insights-Based on those observations, Howard perceived that the Starbuck’s connection to the people who loved coffee did not have to take place only in their homes, where they ground and brewed whole-bean coffee. For sustainable growth, the connection had to happen in the Starbucks’ stores. That was the most powerful, missing link Howard had been searching for. In Italy, drinking coffee was a social aspect. Howard felt that though Starbucks was in the coffee business, it was overlooking the social aspect of it.

Starbucks had been treating coffee as produce, something to be bagged and sent home like groceries. It had stayed one big step away from the heart and soul of what coffee has meant throughout the centuries-Howard Schultz.

The Solution-Howard felt that to grow the Starbucks coffee market, he had to sell an experience in his stores similar to Italian coffee bars and ‘espresso’ had to be at the heart and soul of the coffee experience. He began to serve espresso drinks the Italian way.

Experience is in ‘Attention To Details’-Howard carefully designed every store to enhance the quality of everything the customers see, touch, hear, smell and taste. He gave particular attention to ‘Aroma’ as it plays a vital role in the Store experience. He made sure that the smell of brewing coffee alone would linger around to welcome consumers. He didn’t allow his associates to use perfumes as the beans would absorb any order. He had banned smoking. Also, he didn’t allow many food varieties and was choosy about cooking methods in order to maintain the coffee aroma. He trained Baristas about the art of having happy conversations with the customers so that they could build personal relationships with them.

SPEED OF SERVICE

As customers gained more knowledge about coffee, the interest in high-quality coffee grew and potential customers multiplied. One particular segment of customers among the new growing breed of coffee lovers got Howard’s attention-The office going customers. These customers worked in the nearby office buildings and they were always in a hurry. They had little or no opportunity to experience good coffee in the workplace. No one offered high-quality, quick service espresso for these office-goers. A different context and the same customer wants a different job to be done.

Howard Schultz sensed a potential opportunity.

Howard and his employees began to work on improving the speed of delivery. They found ways to reduce time and improve efficiency in every step. One of the engineers Hap Hewitt invented a proprietary system for serving three kinds of drip coffee simultaneously, modelled after a beer tap. Baristas were given the training to improve the speed. Slowly, the ‘speed of service’ pulled more people into the stores and became one of the reasons for building a massive competitive advantage for Starbucks.

So, Starbucks’ positioning strategy was ‘Authentic Coffee, Great Experience and Quicker Delivery’.

Note:

The above content is part of the following book.

How Brands Built Its Sustainable Competitive Advantage? by Shah Mohammed M On Amazon.com.

AVAILABLE ON AMAZON -

21 Essential BUSINESS LESSONS From The World’s BEST BRANDS: -A Guide for Every ASPIRING ENTREPRENEUR by Shah Mohammed M.

References: Positioning: The Battle Of Mind by Al Ries-Jack Trout, Pour Your Heart Into It by Howard Schultz.

Written by

Secular Humanist, Business Growth Consultant, Design Thinker, India. Reach me at mmshah8@gmail.com. or https://www.shahmohammed.com

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