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July 01, 2008

Starbucks Suffering from Brand Amnesia

Those in the medical field understand AMNESIA is a profound memory loss, usually the result of a traumatic event. Patients suffering from Amnesia have severe difficulty learning new information as well as remembering facts, events, and past experiences. Amnesia isn’t fatal. However, memory loss can be severe enough to require daily supervision from a caretaker. Coping rather than healing is the best case scenario for those suffering from Amnesia to live a somewhat productive life.

Marketing practitioners understand businesses can suffer from BRAND AMNESIA. When a business forgets its identity, disregards past learnings, and fails to learn new information … it has contracted BRAND AMNESIA.

I’m reminded of this marketing affliction from reading Janet Adamy’s dissection in the Wall Street Journal of Starbucks attempt to introduce a milder everyday coffee.

Earlier this year, as part of its much-discussed Transformation Agenda, Starbucks revamped its brewed coffee offerings. The Wall Street Journal explains the changes this way

Starbucks used to brew three types of coffee each day: one bold, one mild, and one decaffeinated. Now Starbucks outlets serve Pike Place Roast in regular and decaf versions every day. In the morning, stores also brew of the chain’s six bold flavors … but most Starbucks no longer brew a bold coffee after noon.

Pike Place Roast is a milder coffee compared to the bolder, earthier blends and single-origin coffees Starbucks formed its identity from. Loyal Starbucks customers have voiced their displeasure for the daily coffee that some have called, “… weak, watery, and no substitute for the bold.

While Starbucks doesn’t admit it, the focus on milder everyday coffee is in response to the encroaching competition of Dunkin’ Donuts and McDonald’s. Taste tests show Starbucks bolder flavors are polarizing and McDonald’s coffee has a more appealing taste.

As a marketing practitioner who has kept a detailed “Starbucks Marketing History” folder, this sounds like Déjà-Vu all over again. In the late 90's, Starbucks was hearing the same comments, mainly from the East Coast, that their bolder coffees were too polarizing and to acquire new customers, the company needed to address the “Charbucks” issue.

In response, Starbucks introduced Milder Dimensions in 1998. According to then Sr. Coffee VP, Mary Williams, Starbucks “… created Milder Dimensions(tm) in response to customer requests to experience a lighter Starbucks coffee. The milder flavor profile of this family offers the perfect introduction to Starbucks, as well as providing more coffee options without compromising quality."

Long story made short … despite its heavy in-store and out-of-store marketing attempts, Starbucks Milder Dimensions became a footnote in the company’s history. Customers never truly embraced the softer and simpler taste profile of this lighter-roasted coffee. Worse yet, Starbucks Partners (employees) never fully embraced the Milder Dimensions coffees because they believed the company’s identity is about bolder tastes and not lighter tastes. By 2003, after suffering through years of lethargic sales, the Milder Dimensions category was discontinued.

Ten years later, Starbucks repeats itself by introducing an updated version of its failed Milder Dimensions coffee—Pike Place Roast. As noted in the Wall Street Journal article, Starbucks customers have voiced displeasure with this softer and simpler coffee. And negative comments from Starbucks Partners litter the StarbucksGossip blog.

Marketing and medical practitioners know one’s history foretells one’s future. Milder Dimensions didn’t work in 1998 and Pike Place Roast isn’t going to work in 2008.

With hints of marketing dementia, Starbucks executives are declaring Pike Place Roast a success because drip coffee sales are on the rise. However, my unofficial Marketing Resonance Imaging (MRI) tests reveal fissures in Starbucks thinking.

Since Starbucks rarely promotes brewed coffee with in-store signage and out-of-store advertising, a reasonable assumption is that brewed coffee sales would increase even if it was Sumatra being promoted and not Pike Place Roast. The economic downturn also comes into play. With a sluggish economy, consumers are finding ways to trade down to lesser expensive options. It makes logical sense some Starbucks customers are forgoing their $4.25 Latte for a $1.80 cup of brewed coffee.

Furthermore, if indeed Pike Place Roast was a success, the company wouldn’t be backtracking and re-introducing bolder brewed coffee options in the afternoon.

Let’s circle back to the BRAND AMNESIA affliction. Businesses that suffer from Brand Amnesia experience profound memory loss, most likely from a traumatic event. Its clear Starbucks forgot its past history with the failed Milder Dimensions coffee line-up. Was there a traumatic event that caused Starbucks to begin suffering from Brand Amnesia? Traumatic doesn’t begin to describe how Starbucks has seen its stock price lose more than half its value in the past year, its earnings greatly diminished, and most traumatic … a significant drop in the number of customers visiting Starbucks in 2008 compared to 2007.

Here’s hoping Starbucks finds daily caretakers that are fully aware of the company’s history and can help the company cope with the onset of BRAND AMNESIA.

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Comments

I've been wondering when you were going to break out your marketing medic bag and use some of those tools. Nice post.

Bravo! This is very much a case of brand amnesia.

There are other things that they seem to have forgotten. First, one of the strong benefits of their darker roast, bold coffees is that it actually drove consumers to the higher priced, higher margin sweeter drinks. Starbucks' brand has enough equity to get most people in the door. The bold coffees speak to the identity of gourmet, while the sweet drinks have the mass appeal. There is really no need to manufacture a bland (and off brand) blend to increase sales.

Second, the roll out of Pike Place Roast was one of the very few times that Starbucks practiced couponing. Price has never been part of the equation at Starbucks. They have alwyas enjoyed a premium and couponing like they did with Pike Place erodes at their price premium leadership.

The Doctor is in!! Nice post John. You are right on.

I did miss my afternoon blast of bold, but you revealed the Double Short Latte to me and all is well. Thank you.

the thing that starbucks doens't realize is that people who like coffee drink the bold coffee, the one's who don't like coffee drink the lattes

This is a link to the Starbucks 'idea' site that starbucks uses to obtain ideas from their customers. The funny thing here is that currently a super majority of the top vote getting ideas are not about new products but involve replacing pikes place or bringing back the bold coffees!

here's the link

http://mystarbucksidea.force.com/ideas/ideaList.apexp?ext=0&lsi=0&category=Coffee+%26+Espresso+Drinks

One of the biggest mistakes a lifestyle brand can make is alienating the core consumers that got them where they are today. It's just like when a band gets big, then changes their sound for their second album. The results are the same nearly every time: a miserable flop.

It's a tricky dance in which you have to keep the core happy, yet never make newcomers and casual consumers feel unwelcome.

It seems to me that the best solution is to offer three coffees all day. This way the core coffee crowd is happy (they get their bold), and consumers that prefer mild aren't turned away. Obviously there is some cost involved, but what's the cost of eroding the brand, letting it rot from the inside out? The truth is that maintaining a lifestyle brand is a lot of work, and generally more expensive than maintaining a commodity brand.

By the way, as one insignificant data point, I got to Starbucks pretty much every single day, but I detest bold coffee. House was my favorite, which I believe is the most mild flavor they've had.

How ironic that you wrote about Starbucks brand amnesia just before they made the announcement of 600 store closings!

The other irony is that a lighter blend doesn't necessarily have less caffeine. Mary told me the longer you roast the beans, the more the caffeine is cooked "out." Good thing they take the bold, darker blends off the menu in the afternoon!

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