Challenges to iconic brands - Case of Starbucks
It is a widely accepted notion that world is indeed flat. Economic boundaries are being demolished. Companies are no longer constrained to their national markets. Internet has become a great leveler of field between companies and customers. Price has yet again taken central stage. And brands are under increasing threats from private labels.
Given such a connected world, how can companies maintain their underlying brand identity in face of worldwide external shocks such as the current global recession? Should brands practice consistency or continually adapt?
Before answering those questions, take a look at one of the world's iconic brands - Starbucks. Starbucks is almost single handedly responsible for creating the concept of a third place between home and work where people can relax, enjoy a cup of coffee and experience the inviting ambience.
Since its founding days in the early 90s, Starbucks has strived to build its brand identity on offering customers a relaxing and enjoyable experience. In addition, Starbucks has also built its brand on things that tend to be out of the box, by consistently defying the conventional wisdom.
When companies were aggressively advertising, Starbucks decided not to advertise. When cost cutting was the dominant paradigm of the industry, Starbucks chose to emphasize non-routine procedures to create excitement among the baristas instead of streamlining procedures to minimize cost. Unlike most other companies, Starbucks made its employees its partners, by offering them stock options and health insurance.
As against rigorous customer surveys Starbucks chose casual and informal chats with customers to gather their overall mood. All these clever strategies have enabled Starbucks to build one of the most iconic brands that has continued to resonate with customers across the world for more than fifteen years. That was until the economic conditions started worsening.
Since early 2008, Starbucks has been forced to bite the dust and succumb to the aftermaths of the recession. Founder Howard Schultz returned as the CEO. Cost cutting and efficiency was made the guiding strategy. More than 800 Starbucks stores were closed in the US alone. For the first time Starbucks invested more than US$200 million in advertising. And for the first time in its history, Starbucks started price campaigns in select stores to lure customers away from other price competitors such as McDonald's and Dunkin Donuts.
These events beg the obvious question. Given such fundamental changes in the macro environment, should iconic brands like Starbucks stay true to their strategic brand vision or continually adapt to regain competitive advantage?
Regaining lost glory and recapturing global brand leadership should be a two-pronged strategy. Iconic brands should strategically manage the dual process of continuous innovation on the one hand and reinforce their guiding strategic brand vision.
Innovation drives strong brands
Innovation is a fundamental building block of iconic brands. Leading brands create their corporate strategies with an inherent strategic element encompassing innovation. Such innovation is not limited to bringing new products to markets, but is expanded to innovation in communication (with customers and other stakeholders) and innovation in implementing cost-cutting and efficiency enhancing strategies. Such continuous innovation serves dual purposes.
First, innovation enables iconic brands to refine and redefine their cores in line with the changing needs. Second, innovation allows iconic brands to continually adapt to the changing needs of customers, thereby protecting its competitive advantage.
Innovation should be practiced along with an organization wide brand vision, which acts as the strategic blueprint of the brand's path. Such strategic vision should not only delineate the boundaries of the brand but also should chart out the possible strategies of the brand in order to attain and maintain brand leadership. Commitment to such brand vision allows companies in tough situations to chart out different strategies (such as either cost cutting or enhancing value proposition) but will ensure that the brand does not deviate from its strategic charter. As innovation prepares the brand to adapt to changing circumstances, brand vision can guide the brand not to stray away from the core brand promises and dilute the core brand identity.
Iconic brands can effectively regain their brand leadership by implementing this dual strategy. Starbucks has already begun on this path. It is innovating in reaching its customers and enhancing efficiency but maintaining consistency in its core brand promise of providing an enjoyable experience.
The changing global economic environment has challenged many global iconic brands. This dual pronged strategy can not only help these brand protect their brand leadership but can also create a sustainable path to ensuring long term competitive advantage.
Given such a connected world, how can companies maintain their underlying brand identity in face of worldwide external shocks such as the current global recession? Should brands practice consistency or continually adapt?
Before answering those questions, take a look at one of the world's iconic brands - Starbucks. Starbucks is almost single handedly responsible for creating the concept of a third place between home and work where people can relax, enjoy a cup of coffee and experience the inviting ambience.
Since its founding days in the early 90s, Starbucks has strived to build its brand identity on offering customers a relaxing and enjoyable experience. In addition, Starbucks has also built its brand on things that tend to be out of the box, by consistently defying the conventional wisdom.
When companies were aggressively advertising, Starbucks decided not to advertise. When cost cutting was the dominant paradigm of the industry, Starbucks chose to emphasize non-routine procedures to create excitement among the baristas instead of streamlining procedures to minimize cost. Unlike most other companies, Starbucks made its employees its partners, by offering them stock options and health insurance.
As against rigorous customer surveys Starbucks chose casual and informal chats with customers to gather their overall mood. All these clever strategies have enabled Starbucks to build one of the most iconic brands that has continued to resonate with customers across the world for more than fifteen years. That was until the economic conditions started worsening.
Since early 2008, Starbucks has been forced to bite the dust and succumb to the aftermaths of the recession. Founder Howard Schultz returned as the CEO. Cost cutting and efficiency was made the guiding strategy. More than 800 Starbucks stores were closed in the US alone. For the first time Starbucks invested more than US$200 million in advertising. And for the first time in its history, Starbucks started price campaigns in select stores to lure customers away from other price competitors such as McDonald's and Dunkin Donuts.
These events beg the obvious question. Given such fundamental changes in the macro environment, should iconic brands like Starbucks stay true to their strategic brand vision or continually adapt to regain competitive advantage?
Regaining lost glory and recapturing global brand leadership should be a two-pronged strategy. Iconic brands should strategically manage the dual process of continuous innovation on the one hand and reinforce their guiding strategic brand vision.
Innovation drives strong brands
Innovation is a fundamental building block of iconic brands. Leading brands create their corporate strategies with an inherent strategic element encompassing innovation. Such innovation is not limited to bringing new products to markets, but is expanded to innovation in communication (with customers and other stakeholders) and innovation in implementing cost-cutting and efficiency enhancing strategies. Such continuous innovation serves dual purposes.
First, innovation enables iconic brands to refine and redefine their cores in line with the changing needs. Second, innovation allows iconic brands to continually adapt to the changing needs of customers, thereby protecting its competitive advantage.
Innovation should be practiced along with an organization wide brand vision, which acts as the strategic blueprint of the brand's path. Such strategic vision should not only delineate the boundaries of the brand but also should chart out the possible strategies of the brand in order to attain and maintain brand leadership. Commitment to such brand vision allows companies in tough situations to chart out different strategies (such as either cost cutting or enhancing value proposition) but will ensure that the brand does not deviate from its strategic charter. As innovation prepares the brand to adapt to changing circumstances, brand vision can guide the brand not to stray away from the core brand promises and dilute the core brand identity.
Iconic brands can effectively regain their brand leadership by implementing this dual strategy. Starbucks has already begun on this path. It is innovating in reaching its customers and enhancing efficiency but maintaining consistency in its core brand promise of providing an enjoyable experience.
The changing global economic environment has challenged many global iconic brands. This dual pronged strategy can not only help these brand protect their brand leadership but can also create a sustainable path to ensuring long term competitive advantage.
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