Brand evolution based on innovation: Starbucks Coffee Company case study
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Аннотация
INTRODUCTION 6
1. THEORETICAL BACKGROUND 10
1.1 Evolution of the Brand as the Core of Marketing 10
1.2 Existing Brand Positioning Strategies 13
1.3 New Trends and Market Requirements for Brands 17
1.4 The Concept of the Brand at the Coffee Shop Industry 21
1.5 The Theoretical Basis of Innovation and its Role in the Branding 26
1.6 Summary of the chapter 30
2. RESEARCH METHODOLOGY 33
2.1 Plan of Empirical Study of the Theory 33
2.2 Rationale for Choosing Starbucks Coffee Company for the Study 35
2.3 A Retrospective Analysis of Starbucks Brand Positioning 36
2.4 Methodology and Process of Creating the Research Frameworks 43
2.5 Numerical Data Analysis 47
2.6 Summary of the Analysis 49
3. RESEARCH FINDINGS’ DISCUSSION AND CONCLUSION 53
3.1 Empirical Findings Discussion 53
3.2 Theoretical Contribution and Managerial Implications 57
3.3 Limitations and Opportunities for Further Research 58
LIST OF REFERENCES 59
Appendix 1. Email correspondence with Starbucks to set up an interview 64
Appendix 2. Characteristics of current positioning strategies 65
Appendix 3. Key findings from the In-depth Interviews 71
Appendix 4. List of proposed elements for inclusion in the developed system 72
Appendix 5. Questions for the main body of the questioner 73
Appendix 6. Regression Models for Dependent Variables №2-20 74
INTRODUCTION 6
1. THEORETICAL BACKGROUND 10
1.1 Evolution of the Brand as the Core of Marketing 10
1.2 Existing Brand Positioning Strategies 13
1.3 New Trends and Market Requirements for Brands 17
1.4 The Concept of the Brand at the Coffee Shop Industry 21
1.5 The Theoretical Basis of Innovation and its Role in the Branding 26
1.6 Summary of the chapter 30
2. RESEARCH METHODOLOGY 33
2.1 Plan of Empirical Study of the Theory 33
2.2 Rationale for Choosing Starbucks Coffee Company for the Study 35
2.3 A Retrospective Analysis of Starbucks Brand Positioning 36
2.4 Methodology and Process of Creating the Research Frameworks 43
2.5 Numerical Data Analysis 47
2.6 Summary of the Analysis 49
3. RESEARCH FINDINGS’ DISCUSSION AND CONCLUSION 53
3.1 Empirical Findings Discussion 53
3.2 Theoretical Contribution and Managerial Implications 57
3.3 Limitations and Opportunities for Further Research 58
LIST OF REFERENCES 59
Appendix 1. Email correspondence with Starbucks to set up an interview 64
Appendix 2. Characteristics of current positioning strategies 65
Appendix 3. Key findings from the In-depth Interviews 71
Appendix 4. List of proposed elements for inclusion in the developed system 72
Appendix 5. Questions for the main body of the questioner 73
Appendix 6. Regression Models for Dependent Variables №2-20 74
Even about 10 years ago, it was clear that the world of business environment had become a world of prominence and excellence. The time when consumers were satisfied with the semblance of goods is over. It has been replaced by such characteristics as creativity, innovation, and brand awareness, having mastered which, brands manage to take a leading position in the markets. (Ghofrani, 2013). When we shop for groceries, clothes, electronic devices, subscriptions or services, our preference is always given to the goods that "hook" us in some way. For instance, it can be a minimalistic package that reflects the naturalness of milk and the guarantee of its quality. Even better, if this particular brand has recently moved away from using plastic bottles for milk packaging and switched to biodegradable bags, and you have recently started sorting garbage. In this case, it is most likely that your choice will be made in favor of buying this package of milk, since you are close to the values that the brand skillfully conveys.
Perception of the brand as a "name, term, design, symbol, or any other feature that identifies one seller's good or service as distinct from those of other sellers" forces people to make conscious choices (American Marketing Association, 2014). It turns out that, in a broad sense, a Brand is a promise that a company can keep. Even if it is not the tastiest milk a customer has ever had, there is a good chance he will keep coming back for that particular milk because the brand makes and keeps a promise that is close to the customer's values in every product, experience, and marketing activity.
Modern realities dictate the condition that with high market competition, a brand can be competitive only if innovations are introduced in a timely manner. This explains the need to use innovative approaches in the branding of all companies, including recognized industry leaders. In the history of branding, there are many examples of once legendary brands that were considered as leaders in their industry, became nothing and lost to the newly emerging brands that blew up the entire industry with their innovations. One of the loudest examples of this phenomenon can be considered the history of the Nokia brand, which was the leader in the mobile industry in 2000. In 2002, Nokia released another bestseller, the 1100 series. It had a more understated design but performed as well as its legendary predecessor and was cheaper. Not surprisingly, given the low price, the model has become incredibly popular. But the company's success did not last long, the problems began in 2007, when the first iPhone appeared on the market. The novelty was much inferior in functionality, but it had an undeniable plus - a touch screen.
Nokia made a strategic mistake, they refused to simplify the design for a long time. The company believed that a user-friendly interface is not the main thing, users need functionality. But, as it turned out, people are ready to sacrifice complex functionality in favor of a simple interface on a smartphone that is just comfortable to hold in their hands. In 2010, when Apple began to break sales records with their iPhone 4, and Samsung began to enter the market in time with the Galaxy S, Nokia introduced a device that was outdated in all respects, except for the camera. This is how the company set off its own bankruptcy process by refusing to enter the era of new changing values of its customers and continue to insist on its old competitive advantages.
There are similar cases in every industry, such as the story of Eastman Kodak, which occupied 80% of the photography industry at the best of times, according to Forbes (Peter Cohan, 2011). Upon its inception, the company immediately became an innovator in photography by creating a consumer market for amateur photography. Kodak's business strategy followed the model of founder Gillette, who practically gave away razors to cash in on blades. Kodak cameras were sold at a low price to increase sales of an additional product - photographic film. But soon digitalization occurred in the photography market, under which Kodak's main competitor, Fujifilm, skillfully adjusted.
Fujifilm's strategy vowed to be flexible and responsive to change by switching between a pool of scenarios. This is how masters win in a competitive game when the rules change. What exactly prevented Kodak from rebuilding as well? Commitment to their idea: we are about film, this is the value of our business, and the production of new equipment is a risk. Kodak's inflexible strategy has led to compression instead of maintaining the status quo. Kodak did not introduce innovations in time and then could no longer hold its position, irreparably lagged behind competitors and went bankrupt.
With regard to recent global shocks such as the Covid-19 pandemic, the British Arcadia Group (brands Topshop, Burton, Evans and others) has filed for bankruptcy (Bloomberg, 2020). While other retailers were developing the online segment, Arcadia Group owner Philip Green was skeptical about the possibilities of the Internet, which led to irreversible consequences. The Financial Times called the bankruptcy of Arcadia Group the biggest "pandemic casualty" in retail, which has been too slow to respond to market changes for e-commerce investment.
A large number of similar cases about the great success of large companies and their downfalls, which only increases over time, confirm the relevance of the research topic. The existing literature on brand positioning no longer covers the current issues that are just starting to emerge in the aftermath of the pandemic and difficult economic situation around the world that took shape in February 2022 and is still gaining momentum. This also proves the theoretical and practical value of this study, which is expressed in the collection of updated information based on the established theory of branding and the proposal of an up-to-date comprehensive approach (based on innovation) to positioning established brands with a huge legacy according to consumers view, which is the base for modern brands at this stage of evolution.
The structure of this study consists of the first chapter with a literature review and study of the theoretical foundations of branding, innovation, and their relationship; the second chapter with the definition of the research methodology, expected findings and the creation of frameworks for further research; the third chapter with a discussion of the obtained results and conclusions.
Research Gap
Researchers such as Durana, Perkins, Valaskova (2021) confirm in their research that today a brand can succeed in the market only by using a market-oriented approach. However, other scholars, such as Milbert (2008), argue that a catchy logo is no longer enough to win loyalty, and because of the glut of markets, consumers have become more selective and eager for innovations that will match their interests. Sawhney (2007) conducted a study on how a company can increase its innovative activity, but when building an innovation assessment model, the author used only the view of the management of leading brands.....
Perception of the brand as a "name, term, design, symbol, or any other feature that identifies one seller's good or service as distinct from those of other sellers" forces people to make conscious choices (American Marketing Association, 2014). It turns out that, in a broad sense, a Brand is a promise that a company can keep. Even if it is not the tastiest milk a customer has ever had, there is a good chance he will keep coming back for that particular milk because the brand makes and keeps a promise that is close to the customer's values in every product, experience, and marketing activity.
Modern realities dictate the condition that with high market competition, a brand can be competitive only if innovations are introduced in a timely manner. This explains the need to use innovative approaches in the branding of all companies, including recognized industry leaders. In the history of branding, there are many examples of once legendary brands that were considered as leaders in their industry, became nothing and lost to the newly emerging brands that blew up the entire industry with their innovations. One of the loudest examples of this phenomenon can be considered the history of the Nokia brand, which was the leader in the mobile industry in 2000. In 2002, Nokia released another bestseller, the 1100 series. It had a more understated design but performed as well as its legendary predecessor and was cheaper. Not surprisingly, given the low price, the model has become incredibly popular. But the company's success did not last long, the problems began in 2007, when the first iPhone appeared on the market. The novelty was much inferior in functionality, but it had an undeniable plus - a touch screen.
Nokia made a strategic mistake, they refused to simplify the design for a long time. The company believed that a user-friendly interface is not the main thing, users need functionality. But, as it turned out, people are ready to sacrifice complex functionality in favor of a simple interface on a smartphone that is just comfortable to hold in their hands. In 2010, when Apple began to break sales records with their iPhone 4, and Samsung began to enter the market in time with the Galaxy S, Nokia introduced a device that was outdated in all respects, except for the camera. This is how the company set off its own bankruptcy process by refusing to enter the era of new changing values of its customers and continue to insist on its old competitive advantages.
There are similar cases in every industry, such as the story of Eastman Kodak, which occupied 80% of the photography industry at the best of times, according to Forbes (Peter Cohan, 2011). Upon its inception, the company immediately became an innovator in photography by creating a consumer market for amateur photography. Kodak's business strategy followed the model of founder Gillette, who practically gave away razors to cash in on blades. Kodak cameras were sold at a low price to increase sales of an additional product - photographic film. But soon digitalization occurred in the photography market, under which Kodak's main competitor, Fujifilm, skillfully adjusted.
Fujifilm's strategy vowed to be flexible and responsive to change by switching between a pool of scenarios. This is how masters win in a competitive game when the rules change. What exactly prevented Kodak from rebuilding as well? Commitment to their idea: we are about film, this is the value of our business, and the production of new equipment is a risk. Kodak's inflexible strategy has led to compression instead of maintaining the status quo. Kodak did not introduce innovations in time and then could no longer hold its position, irreparably lagged behind competitors and went bankrupt.
With regard to recent global shocks such as the Covid-19 pandemic, the British Arcadia Group (brands Topshop, Burton, Evans and others) has filed for bankruptcy (Bloomberg, 2020). While other retailers were developing the online segment, Arcadia Group owner Philip Green was skeptical about the possibilities of the Internet, which led to irreversible consequences. The Financial Times called the bankruptcy of Arcadia Group the biggest "pandemic casualty" in retail, which has been too slow to respond to market changes for e-commerce investment.
A large number of similar cases about the great success of large companies and their downfalls, which only increases over time, confirm the relevance of the research topic. The existing literature on brand positioning no longer covers the current issues that are just starting to emerge in the aftermath of the pandemic and difficult economic situation around the world that took shape in February 2022 and is still gaining momentum. This also proves the theoretical and practical value of this study, which is expressed in the collection of updated information based on the established theory of branding and the proposal of an up-to-date comprehensive approach (based on innovation) to positioning established brands with a huge legacy according to consumers view, which is the base for modern brands at this stage of evolution.
The structure of this study consists of the first chapter with a literature review and study of the theoretical foundations of branding, innovation, and their relationship; the second chapter with the definition of the research methodology, expected findings and the creation of frameworks for further research; the third chapter with a discussion of the obtained results and conclusions.
Research Gap
Researchers such as Durana, Perkins, Valaskova (2021) confirm in their research that today a brand can succeed in the market only by using a market-oriented approach. However, other scholars, such as Milbert (2008), argue that a catchy logo is no longer enough to win loyalty, and because of the glut of markets, consumers have become more selective and eager for innovations that will match their interests. Sawhney (2007) conducted a study on how a company can increase its innovative activity, but when building an innovation assessment model, the author used only the view of the management of leading brands.....
3.1 Empirical Findings Discussion
The empirical study released information on comparison of the theoretical basis of brand evolution with a real evolution of well-established Starbucks brand and confirm that it is expressed in a change in its positioning. Initially, the author considered theoretical data through the prism of a literature review to form a base in order to achieve the goal of the study and answer the research questions. A review of existing branding and innovation research showed a comprehensive picture of the scientific gap exists at their intersection.
From the entire pool of research on branding and positioning, a study by Keller K. (2019) was singled out, which confirmed that (1) a brand only exists as long as its concepts are valuable to customers and influence their purchasing decisions, and (2) a brand only exists as long as it has corporate value and generates profits for the company. This statement underlined the urgency of finding ways to develop brands in a deeper study of the explicit and hidden desires of customers. Such aspirations, which are already known to the market, form trends, the most prominent of which, according to Errichiello and Zschiesche (2022), is "green" movements today. As a result of a comprehensive analysis of the scientific literature, the author revealed that the fact of changing market trends, which occurs when the values of buyers change, characterizes new milestones in the evolution of brands.
According to a latest management research (Durana, Perkins, Valaskova, 2021), the company's management which modifies its attitude to reflect current industry and market insights, lead the company to more likely experience the full benefits of their sales tactics operating on behalf of its brand. This concept has been widely discussed in various business and marketing textbooks and lead to the author's conclusion that competitive advantage of the brand is typically achieved through the transformation of existing resources and the introduction of innovations.
The concept of innovation was considered on the basis of the latest edition of the Oslo Manual (2018), from which four subtypes of innovations were identified for their comprehensive assessment, and the study by Mohanbir Sawhney (2007), from which a unique model of the Innovation Radar was identified for its subsequent modification based on the results obtained during the study of secondary and analysis of primary data.
To increase the accuracy of this modification, diversification was used not only in relation to the resources for obtaining information, but also in relation to the methods of its collection. Thus, loyal Starbucks customers were interviewed according to the recommendations of Saunders (2012), by conducting 5 in-depth interviews with open and probing questions, during which it was revealed that the customers of this brand value its authenticity and most of them are afraid of Starbucks' actions towards digitalization.
In parallel, as a result of all the interviews, certain dimensions were identified for the innovative development of the brand, which would meet the expectations and requirements of customers without damaging the authenticity and core values of the brand. These elements included Collaboration, Publicity, Transparency, Eco-friendliness, Competitors and Events. After adding the above elements, there were 20 potential development directions in the modified system for tracking balanced brand positioning based on innovation (fig. 6, p.46). According to the author's assumptions, a certain combination of these indicators may reflect the balance of the mix between the brand's desire to develop innovatively and the desire of customers not to lose their usual experience of visiting a coffee shop, but with certain pleasant modifications that satisfy their needs.
In order to modify the system, which the brand will consider robust, the author had to look at the importance of specific elements on a larger scale, which was achieved by conducting a mass online survey. Following guidance from Saunders (2012), an online questionnaire was developed that aimed to collect up-to-date primary data on what exactly influences the perception of the Starbucks Coffee Company brand and its selection from customers. Based on the results of this survey, it was determined that the maj ority of Starbucks' committed customers (69%) are unwilling to sacrifice the brand's authenticity in the sake of digitization and innovation. Customers interviewed clearly expressed dissatisfaction with the new innovative type of Starbucks Pickup in partnership with Amazon Go, as they felt it made Starbucks "a soulless place for people in a hurry" and "killed the spirit of the aesthetic process of drinking coffee." For conclusions about the degree of importance of the identified elements, which should be statistically justified, the author chose two types of statistical analysis (Saunders, 2012).
As a result of the regression analysis, the author was able to conclude that the most statistically important factors on the basis of which buyers consciously or unconsciously made a choice in favor of the Starbucks brand were Organization, Brand, and Platform. The essence of the Organization element lies in the unique internal culture and organization of the interaction of employees between each other and with the company's management. The Brand element in turn translates the brand's expansion beyond the coffee industry, such as the release of a series of documentaries from Starbucks. The essence of an element like Platform is to offer new combinations and flavors of base drinks, such as the famous Starbucks pumpkin latte or salted caramel latte. Based on statistical values, it was decided not to include elements such as Solutions, Experience, Processes, Supply Chain, Networking, Trends, Events, and Competitors in the modified system (Appendix 6).
These findings clearly meet the thesis's research purpose and provide answers to the research questions given at the beginning:
1. How has the approach to branding changed over time, and what specific changes in brand positioning strategies have occurred as a result of it?....
The empirical study released information on comparison of the theoretical basis of brand evolution with a real evolution of well-established Starbucks brand and confirm that it is expressed in a change in its positioning. Initially, the author considered theoretical data through the prism of a literature review to form a base in order to achieve the goal of the study and answer the research questions. A review of existing branding and innovation research showed a comprehensive picture of the scientific gap exists at their intersection.
From the entire pool of research on branding and positioning, a study by Keller K. (2019) was singled out, which confirmed that (1) a brand only exists as long as its concepts are valuable to customers and influence their purchasing decisions, and (2) a brand only exists as long as it has corporate value and generates profits for the company. This statement underlined the urgency of finding ways to develop brands in a deeper study of the explicit and hidden desires of customers. Such aspirations, which are already known to the market, form trends, the most prominent of which, according to Errichiello and Zschiesche (2022), is "green" movements today. As a result of a comprehensive analysis of the scientific literature, the author revealed that the fact of changing market trends, which occurs when the values of buyers change, characterizes new milestones in the evolution of brands.
According to a latest management research (Durana, Perkins, Valaskova, 2021), the company's management which modifies its attitude to reflect current industry and market insights, lead the company to more likely experience the full benefits of their sales tactics operating on behalf of its brand. This concept has been widely discussed in various business and marketing textbooks and lead to the author's conclusion that competitive advantage of the brand is typically achieved through the transformation of existing resources and the introduction of innovations.
The concept of innovation was considered on the basis of the latest edition of the Oslo Manual (2018), from which four subtypes of innovations were identified for their comprehensive assessment, and the study by Mohanbir Sawhney (2007), from which a unique model of the Innovation Radar was identified for its subsequent modification based on the results obtained during the study of secondary and analysis of primary data.
To increase the accuracy of this modification, diversification was used not only in relation to the resources for obtaining information, but also in relation to the methods of its collection. Thus, loyal Starbucks customers were interviewed according to the recommendations of Saunders (2012), by conducting 5 in-depth interviews with open and probing questions, during which it was revealed that the customers of this brand value its authenticity and most of them are afraid of Starbucks' actions towards digitalization.
In parallel, as a result of all the interviews, certain dimensions were identified for the innovative development of the brand, which would meet the expectations and requirements of customers without damaging the authenticity and core values of the brand. These elements included Collaboration, Publicity, Transparency, Eco-friendliness, Competitors and Events. After adding the above elements, there were 20 potential development directions in the modified system for tracking balanced brand positioning based on innovation (fig. 6, p.46). According to the author's assumptions, a certain combination of these indicators may reflect the balance of the mix between the brand's desire to develop innovatively and the desire of customers not to lose their usual experience of visiting a coffee shop, but with certain pleasant modifications that satisfy their needs.
In order to modify the system, which the brand will consider robust, the author had to look at the importance of specific elements on a larger scale, which was achieved by conducting a mass online survey. Following guidance from Saunders (2012), an online questionnaire was developed that aimed to collect up-to-date primary data on what exactly influences the perception of the Starbucks Coffee Company brand and its selection from customers. Based on the results of this survey, it was determined that the maj ority of Starbucks' committed customers (69%) are unwilling to sacrifice the brand's authenticity in the sake of digitization and innovation. Customers interviewed clearly expressed dissatisfaction with the new innovative type of Starbucks Pickup in partnership with Amazon Go, as they felt it made Starbucks "a soulless place for people in a hurry" and "killed the spirit of the aesthetic process of drinking coffee." For conclusions about the degree of importance of the identified elements, which should be statistically justified, the author chose two types of statistical analysis (Saunders, 2012).
As a result of the regression analysis, the author was able to conclude that the most statistically important factors on the basis of which buyers consciously or unconsciously made a choice in favor of the Starbucks brand were Organization, Brand, and Platform. The essence of the Organization element lies in the unique internal culture and organization of the interaction of employees between each other and with the company's management. The Brand element in turn translates the brand's expansion beyond the coffee industry, such as the release of a series of documentaries from Starbucks. The essence of an element like Platform is to offer new combinations and flavors of base drinks, such as the famous Starbucks pumpkin latte or salted caramel latte. Based on statistical values, it was decided not to include elements such as Solutions, Experience, Processes, Supply Chain, Networking, Trends, Events, and Competitors in the modified system (Appendix 6).
These findings clearly meet the thesis's research purpose and provide answers to the research questions given at the beginning:
1. How has the approach to branding changed over time, and what specific changes in brand positioning strategies have occurred as a result of it?....
