Will iPhone apps that help you find local stores or place mobile orders help the struggling Starbucks brand recover?
After 16 years of dominance, and escalating growth, the chain has encountered a drop in sales, a loss of control over brand identity, and been forced to shutter nearly 600 stores. Starbucks dropped five places, to 90, in Interbrand's Best Global Brands 2009 report, losing 16% of Brand Value amidst competition from McDonald's, Dunkin' Donuts and local coffee shops.
Despite these setbacks, the brand isn't throwing in the towel. The retailer has rallied since bottoming out in November 2008 (to their credit, it was a rough month all around), and worked to reposition. Two new iPhone applications are intended to augment the customer experience: The myStarbucks application allows customers to build and share drink recipes, find the nearest Starbucks, and look up nutritional information.
But the real spark of ingenuity comes in the Starbucks Card Mobile application, which lets customers manage their Starbucks gift card, check and refill their balance, and make store purchases. A trial version in 16 locations offers customers the option to pay using their iPhone mobile devices.
Starbucks, as the first major retailer in the US to offer mobile payments, should expect a return in user loyalty. The brilliance behind the app is the integration into customers' lives, helping restore Starbucks as the "third place" to go, after work and home.
The app rollout follows a slew of upgrades to the ailing brand. Closing 600 stores may seem a sign of weakness, but could strengthen the brand in the long run, reducing market oversaturation and cannibalization, and giving employees a better chance to develop relationships that encourage repeat patronage.
But the short run is where the brand gets into trouble. In February, Starbucks closed stores for three hours to re-educate their employees on best practices, and introduced the new Pikes Place Blend. The stunt garnered tremendous press coverage reinforcing the message: "Starbucks is getting better." While the earned media was a coup, the brand was forced to admit that they had fallen down on the job and that their signature product, quality coffee, had diminished.
As purveyors of quality coffee, Starbucks is gearing up to introduce a new instant coffee, Via, at a lower price point to compete with McDonald's and Dunkin' Donuts. The move risks obscuring the idea that Starbucks is where you go to enjoy a fresh cup of the world's best coffee. As Interbrand warns, "while products such as these may help stimulate Starbucks growth in the short-term, they’ve also contributed to a diluted brand image."
The chain has also decided to unbrand existing Starbucks stores in favor of faux-local coffee shops. Starbucks recently opened 15th Avenue Coffee and Tea in Seattle as a trial. The store will focus on community involvement and offer tastings, multiple brewing options, beer, wine and entertainment. Starbucks will serve the same coffee as their regular retail stores, but will sell them under the 15th Avenue name. It's questionable what the brand is trying to achieve, and whether this will confuse or turn off customers.
The brand has to present exclusivity and taste to keep customers purchasing coffee for upwards of $3. While it's smart to latch onto the support-local trend, consumers are savvy enough to see through the pretense in 15th Avenue and similar stores modeled after it. Starbucks needs to find a middle ground, maintaining its name while giving stores leeway to cater to their varying demographics, much like a local coffee shop would. A superior product and experience are the reason Starbucks is the #1 brand on Facebook. But to maintain its status, it must focus on the long run and move past gimmicks.
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