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In the spotlight: Starbucks

Technology & Data

In the spotlight: Starbucks


“In my opinion Australia, per capita, is probably one of the most competitive coffee markets in the world,” says Holly Gray, national marketing director of Starbucks Coffee Company Australia. “I don’t know whether you have ever had coffee in the US, but their history of coffee is not the greatest! So that’s been the role we have played, where we come into communities and introduce them to really great speciality coffee, whereas in Australia, great speciality coffee is available on every street corner.”

Seattle-born Gray is enthusiastic, effusive and favours a tall skim caramel macchiato. Her story of how a big American brand won over the coffee-soaked hearts of the decidedly cynical Australian public is one of persistence, subtlety and converting customers one cup of coffee at a time. But, with the recent backlash in public opinion regarding Starbucks’ stance on several controversial issues, such as the trade-marking of Ethiopian coffee, has the coffee giant strayed too far from its roots?

Starbucks, which takes its name from Herman Melville’s Moby Dick, first opened its doors in Seattle’s famous Pike Place Market in 1971. For the next 10 years the small business continued to satisfy Seattleites with excellent coffee, but it wasn’t until Howard Schultz joined the company in 1982 and directed Starbucks to emulate Italy’s espresso bars, that the idea of expansion was realised. During the 1990s Starbucks extended its reach across the US, and then the world, opening its first Australian outlet in Sydney’s CBD in July 2000. Now there are Starbucks coffee houses dotted all over Australia, including a drive-through version in Mt Druid, New South Wales. Despite Australia’s competitive coffee market, it seems this US giant has been able to move in with relative ease.

Holly Gray is adamant that Starbucks is not just another coffee chain, or even just another café. She believes that the point of difference, which has resulted in a worldwide net of more than 11,500 outlets, is all down to what she refers to as ‘the Starbucks experience’. And, as any coffee connoisseur knows, a good coffee is as much about the barista as it is about the beans. The way that juice bars are consistently staffed by frighteningly perky juicers, the ‘partners’ at Starbucks are all of a similar mould – knowledgeable about their product, personable and capable of consistently delivering not only good coffee, but ‘uplifting moments’.

“Customer loyalty is one of the things that is most critical to our success as a business and our store baristas are really the ones that bring the Starbucks brand to life for our customers,” explains Gray. “Oftentimes I hear our customers say ‘my Starbucks’ or ‘the baristas in my store’. They really become connected and attached to those baristas because they are the ones that are creating uplifting experiences for them every day. And they are small things, like remembering a customer’s name or remembering a customer’s favourite drink. These are the types of thing that really connect and build loyalty, sustainable loyalty, for us.”

At a time when the Australian population is striving to buy local, think local and, most importantly, support their local economy, the hulking shadow of a worldwide US chain sends a shiver down the spine of many coffee swillers. But Gray describes the Starbucks mentality as being focused on individual stores, rather than the overarching corporate US brand.

“How do you create that environment in one specific store within one community and connect with those customers and those organisations in that community so that we are seen as the coffee house of choice for that community? That’s what we really instil in the store managers and partners that work in our stores to create, so we are more connected with that one individual community than we are part of a big global company or brand.”

Starbucks astounded marketing pundits when, upon opening the doors of the Sydney CBD store in 2000, no advertising campaign of any sort was initiated. The company has continued to avoid traditional marketing whenever possible over the years, and one might wonder what the marketing director of a company that traditionally doesn’t market itself finds to fill a day, but Gray says there is plenty. While television, print and radio campaigns are avoided, stand-alone letterbox-drops heralding the opening of a new Starbucks may occur, or the odd advertorial featuring one of Starbucks’ store managers might appear in a local paper. But the essence of Starbucks’ popularity is that the company has captured the marketing Holy Grail: word of mouth.

“The way we have built the brand here in Australia and how we will continue to build the brand here is through word of mouth or an experiential marketing approach,” says Gray. “Word of mouth is obviously only received through existing customer loyalty and so that’s where we really rely on our stores to create those relationships with customers who in turn will tell their friends and families about Starbucks.”

The brand has also made a name for itself as a practitioner of experiential marketing campaigns. Over the recent Christmas period Gray launched a promotion that included Starbucks ‘parking angels’, who topped up parking metres in the city, and a campaign known as ‘red cups on cars’, where cars with magnetised Starbucks Christmas cups were driven around the Brisbane and Sydney CBDs. Socially-conscious passers-by who attempted to alert the drivers that their coffee was on the roof of their cars were informed of the promotion, thanked for their trouble and presented with a complimentary Starbucks Card for their troubles. Gray says the campaign was well-received by those individuals who participated, but admits that these types of campaigns are hard to launch Australia-wide.

“As you can imagine those are very small, very high touch, high resource-required activities, but these are the kind of ways we have built the brand over time across the world and it’s something we are committed to doing here in Australia as well.”

And while loyalty is the cornerstone of this brand’s success, even traditional loyalty tricks are avoided, with Gray describing ‘buy 10, get one free’ frequency cards as too prescribed. Even the lure of online is treated with caution; it may be attractive if utilised in a unique way, but banner ads are dismissed as simply too generic.

“We do obviously appreciate that such marketing activity is beneficial to the overall brand, so that’s why the focus on the experiential marketing. The things that are unique and unusual and are not expected are what we try to do,” says Gray. “And I can tell you that as a marketer it is really hard; it is much easier to create a TV campaign or a print campaign than it is to come up with an innovative way to introduce a new product.”

One thing about Starbucks is that it is consistent. No matter which store you go into, you are assured the same products, the same standard of service, and a similar, if not identical, experience. While this may be simply too sterile for some, Starbucks fans love this quality about the brand. And consistency extends to the brand’s marketing teams around the world, who, although are charged with the responsibility of building the brand internationally, can only experiment within some fairly tight guidelines, as Gray explains.

“It is important that we are all aligned under the premise that we need to be promoting the Starbucks brand in a consistent manner across those countries, because our customers actually expect that consistent experience when they are visiting our cafés no matter where they are in world.”

But the authoritarian global policy has an upside – a network of powerful resources at your fingertips. “One of the benefits of the fact that you are part of a bigger company is that you can leverage things like creative execution and product innovation,” says Gray.

As an affirmed non-traditionalist, Gray has quite a few tools in her armoury, including PR and sampling, but, as she repeatedly states, the brand’s partners are its best marketing tool, in more ways than one.

“One of the other things that is really important to us is connecting with our community in relevant ways; so whether that is our store partners getting out and participating in clean-up day for the community, or a not-for-profit walk where they are raising money for a cause. Those types of things are really important for us to be involved in, because that’s part of who we are as a company and what we get in return is more visibility and exposure.”

But ask any Starbucks frequenter which marketing medium their coffee brand of choice prefers, and the answer is surprising: television. Starbucks has become so ingrained in popular culture, from roles in TV shows such as South Park and The Simpsons to films like You’ve Got Mail and The Devil Wears Prada, that everyone just assumes they have seen a TV advertisement.

Somewhat surprisingly Gray reveals Starbucks’ policy stipulates that the company will never pay for product placement. So all those guest appearances in blockbuster films have been at the request of the filmmakers, rather than the brand, which is a pretty high compliment, really. Starbucks can even afford to be choosy about which projects it lends its image to.

“We have one partner in Seattle who actually reviews all the requests, all of the scripts, because the thing about product placement is that we want to make sure that [the brand is] being placed in a TV show or movie that is consistent with who we are, the company and our values.”

Mutually beneficial partnerships with other brands are another route that Starbucks has begun to explore in order to continue offering its customers a higher quality experience. Local partners include Fairfax, which offers discounted newspapers to Starbucks coffee drinkers, and, more recently, HP and Telstra. Telstra’s wireless broadband is a big drawcard to customers who can bring their laptop and work, email or blog from the comfort of a Starbucks lounge, their furiously typing fingers fuelled by Starbucks’ branded caffeine.

Some analysts have argued that Starbucks’ rapid growth has diluted the integrity of the brand. And with news of Starbucks’ restrictive stance in the recent Ethiopian coffee trade-marking scandal, after years of spouting pro-fair trade opinions, as well as the long-winded memo from Howard Schultz complaining about “the commoditisation of the Starbucks experience”, which was leaked to the world, it may appear that there is some truth behind this statement. But Gray believes that the meteoric growth has been valuable rather than a hindrance.

“Growth has allowed us to have a voice on important issues like sustainable coffee and healthcare, which isn’t as much of an issue in Australia, but in the US there is pretty much a healthcare crisis underway.

“By expanding our store penetration and increasing our overall awareness of our brand, people seek out our input and look to us to set the tone around some of these important issues, which is also a bit of pressure, but a fantastic opportunity to influence policy and make change.”

But the other side of this expansion is the anti-corporate feeling global brands often attract. There is an entire website devoted to rumours surrounding Starbucks called www.starbucksgossip.com, which delights in promoting scandalous statements and media reports to the world. For Gray, dealing with this negativity has been a steep learning curve.

“That’s been a hard thing for us to accept, that as we grow and as our brand becomes more prevalent and more visible we are going to attract some more negative attention. We now know that negative publicity is going to continue for us because of our size and scope, but what’s important for us is that we realise that negative publicity is going to happen, so what we have to do is be proactively telling our story.”

The story behind that Ethiopian situation is that particular African growing regions wanted to trade-mark their coffee, preventing other coffee growers from using the names, such as Sidamo, Harar and Yirgacheffe, and would also enable these regions to charge more for their coffee, theoretically increasing profits for the farmers. Starbucks came out against the decision, believing that increasing the price would deter buyers and reduce profits. The media, as well as charitable organisations such as Oxfam, however, condemned the company, declaring Starbucks simply didn’t want to pay more for its coffee.

Starbucks recently issued a statement that the company would stand by the farmers’ decision and would support them wherever possible. The damage, however, had already been done.

“It’s hard because whenever you have a negative situation occur like that it does erase a little bit of the positive messaging that you have been working so hard to get out there amongst the press and amongst our customers,” says Gray. “But it just means now we are challenged with making sure we are telling our story really proactively, both through our stores and through the media.

The Ethiopian coffee trade-mark issue has been a great learning experience for us. I think that we still believe that the trade-marking of the coffee that comes from those African growing regions is not necessarily in the best interest of the farmers, but we respect the right and the choice of the Government of Ethiopia and we’ll support them on whatever they end up deciding to do.

“You know, the whole issue has also highlighted the importance of really proactively telling our story rather than letting somebody else set the agenda for us.”

And that’s what she has set out to do. This is the story of how a local Seattle coffee shop and a local Seattle girl took on the world and, for the moment, it looks like they’re winning.


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