Marketing Weblog: Is the Queen of Starbucks betrayed by her overstreched Empire?

March 10, 2007

Is the Queen of Starbucks betrayed by her overstreched Empire?

José Ignacio Gafo Gómez-Zamalloa

Everybody that has studied the business case of Starbucks raises these questions: Have they gone too far? If the haven’t, how far can they go? Is the international expansion hurting its essence? When will we see the decay of Starbucks? And last but not least, how healthy is its brand?

The other day I read an article in the Economist about Starbucks that pushed to me to write this article. It was basically explaining that its decay was beginning, and a big change in its management required.

Is this an exaggeration? Based on the figures published, it might not be the case:

- In ten years they have expanded from 1.000 to 13.000 shops.
- Research shows that some people find the stores sterile and cookie-cutter, no longer reflecting the passion for coffee it should have.
- Consumer Reports rated Mc Donald’s coffee more highly than the one sold in Starbucks!
- Brand Key’s annual study of consumer loyalty in the coffee- and-doughnuts category placed Dunkin´Donuts in the first place.

Is this the beginning of its decay? What have they done wrong? Is there a solution?

I have to admit that I am fan of Starbucks. I started my romance with the Queen in California where I loved the charm of the baristas + the experience I got while enjoying those wonderful café lattes. I feel terrible writing this blog, but something is needed and therefore my comments.

I have therefore looked for a Starbucks in every place I’ve been and have to admit that it is not definitively the same. The service + coffee are not that good and therefore can understand what is going on.

The two main assets that Starbucks provide are its branding + experience. The first is basically achieved in this case through a word of mouth process + the personal experience that everybody enjoys when having a coffee. And the second, the mentioned Experience, is given combining great and friendly baristas + outstanding coffee + quiet and comfortable place to relax.

As I have already commented the brand is a living being that is developed (or destroyed) on a daily basis, specially if you speak about services. Something that you cannot lose out of sight are the KSFs (key success factors) that have given you a premium positioning, and strive to be up to them.

I don´t think that Starbucks has lost sight out of them, but their ambition for creating an Empire in a record time, has made it impossible to find the right balance. Overexpansion has meant not being able to maintain the high quality standard of the services + being too slow when coming up with new products.

The result? You go to a Starbucks and the baristas are not so charming, coffees are not prepared manually but through vending machines, no new temptations are available, and you do not feel at your place any more. So you end up finding no point in paying 5 US$ for a coffee.

Is this the end? Hopefully not. Mr Schultz, its President and Founder, speaks about going back to its roots. Could be. One hour ago I went to a Starbucks close by, and the barista proposed me a new cinnamon drink, asked me twice if I liked it, and did not feel I was overpaying for a coffee. Actually, I felt close to the old times in the USA.

Is this the end or a new beginning? We will see. Mr Schultz, be sure that going back to your roots is the only way for not exiliating the queen of Starbucks!

Prof. Ignacio Gafo

Posted on 10 March 2007 in International Marketing

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