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Starbucks – Diversification and Logo

The economic environment is a major external influence for any company.  The same can be said in relation to the world’s largest cafe chain, Starbucks, who have lost customers that have down-traded to cheaper outlets for their coffee.  Hence, a competitor analysis must define a company’s product competition to include all other firms offering the same benefit to customers – regardless of the product’s positioning.  Moreover, Starbucks – through an overly aggressive expansion – have accidentally commoditized their coffee experience.  This has undermined their position is a market leader. But what can be done to remedy this problem?

Howard Schultz, CEO of Starbucks, has long believed the answer is retrenchment and diversification; the former means scaling back expansion, the later involves selling new products in new markets.  What suddenly makes this relevant now?  Well, to catalyse their diversification strategy Starbucks have announced changes to their logo.  This is one of the most significant parts that helps makes the Starbuck brand image.  Given the importance of a brand image in a oligopolistic market, this is a highly risky strategy to fix something that, hitherto, is not broken as such.

The main reason for removing the company name from the logo is, according to Schultz, to free the mermaid – this is supposed to represent the firm’s ability to free themselves from the coffee market.  Namely, ‘Starbucks Coffee’ naturally infers that the brand would be drink-orientated and thus limit their growth potential.  However, it could be argued that a logo is something that consumers use to identify a brand; thus, employees’ strategic visions should be directed by internal documents instead.  Evidently – because a logo’s importance differs from one stakeholder group to another – this is a highly controversial change.  But lets consider the benefits of the new logo.

Firstly, it removes a language barrier.  As part of a broader globalised vision, Starbucks is a truly multi-national firm that uses its American heritage, to differentiate it itself to consumers around the world. Hence, their competitive advantage, to an extent, is based on its favourable provenance paradox.  As the new logo removes the use of language, it consequently becomes more communicable.  Moreover, it shows confidence of the firm in the brand’s effectiveness: Nike, Apple and MacDonald’s are the most powerful brands in the world and none of their logos feature the company’s name.  Yet, these logos are the most recognisable to their consumers.

Secondly, as previous mentioned, it symbolises a strategic change among the firm.  Although a firm’s strategy is of far more relevance to a company’s employees that its customers, it may help to extent the brand’s positioning into more markets – such as books, clothing and music.  One of the main drawbacks of diversifying the product mix is that the company has no established reputation in that new market.  Hence, this weakness can be converted into a corporate strength by communicating to customers ‘You know we already make great coffee, so why not give our other products a try?’.

This may be what HMV group are doing wrong.  They have also attempted to diversify beyond the core business – electronic entertainment – into live music, ticket sales and clothing.  Yet these new ventures have been relatively unprofitable due to poor consumer adoption.  It may be the case that a new logo is required to make consumers aware of a company’s new offerings – after all, this is the first stage of the A.I.D.A. consumer buying process.

Starbucks Diversification & Logo

However, consumers – particularly with effective branding – come accustomed to logos and resist change. This is the case with Starbuck’s most recent change to their logo.  Although this is not the first, and probably not the last, time the logo has undergone alterations, this logo alteration has been the most controversial thanks to the recent emergence of social media. The internet, in the modern world of Marketing, gives individual consumers a platform to communicate with the company and other like-minded stakeholders, increasing their relative power. Consequently, anyone who opposes the logo change has hit out at the firm, developing negative publicity.

For instance, check out the first comment posted on Starbucks’ own blog: “Who’s the bonehead in your marketing department that removed the world-famous name of Starbucks Coffee from your new logo? This gold card user isn’t impressed!”.  This is very familiar to what happened when the clothing store GAP changed their logo, then reversed the changes in response to the consumer backlash the ensued.

Another issue with changing the logo concerns social criticisms of Marketing.  Namely, Marketing can have an adverse affect on consumers through unfairly high prices; marketing expenditure by a firm must be recuperated via their profit margins.  Despite, Schultz’s persistent consumer-focus, one could argue that the company’s logo does not create any real value for the customer – it is purely psychological.  Therefore, Starbucks’ resources may be better focused on making actual product improvements.  Having said that, effective branding – which requires an appropriate logo – does reassure consumers.  In this sense, value is created for the customer, albeit this is later captured from customers as part of the marketing process.

Ultimately, there are always going to be consumers who naturally hit-out at the firm.  Albeit, the new logo may take some getting used to, change is a fundamental part of marketing.  In this context, it makes perfect sense for Starbucks to introduce a new logo at the same time they undergo a new strategic direction.  What, I do disagree with is what that has been changed: the company name has been omitted.  Unlike Apple, McDonald’s or Nike, I do not feel that their logo is effective enough to function without their name.

Moreover, I feel as though they have removed the key component of their brand equity (the value of the brand).  Like how one ‘Googles’ something they wish to know more about, people ask their friends ‘Hey! Fancy go getting a Starbucks?’  The purpose of the change of logo was to make it more communicable; but how does one communicate an image?   Therefore, I would have recommended removing only ‘coffee’ from the logo.  This allows consumers to associate ‘Starbucks’ with a diverse range of markets the company plans to diversify into.

Please leave a comment letting me know what you think of the new logo.



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© Joshua Blatchford author of Manifested Marketing 07/01/2011

Leave a comment

5 Comments

  1. mon

     /  January 7, 2011

    Hey, great topic for this entry!
    I personally think that it looks naked, but its not that disastrious as crap logo of gap. Gap wanted to change because their clothing became too dull and middle aged men oriented, however their logo suggested clothing for bank cashiers.
    Nonetheless, I would not like Starbucks to expand to, say, bread production. But I would love to see Starbucks cakes, chocholates and other rather luxury goods with this logo. But they could leave the old logo in the coffee-shops just to maintain this well established mania. It is sometimes better to have different logos, after all.

    Anyways, I say let’s wait and see what will Starbucks bring, maybe something genius will happen….maybe.

    P.s. Sorry for spelling mistakes (bb on the bus)

    GL!

    Reply
  2. I completely agree with you regarding the logo. When I first saw the new logo, I thought it looked naked. The more I think about their new direction, it would have been better to omit “Coffee” and keep “Starbucks”. After all, Starbucks is Starbucks in any country around the world. The problem with the language barrier only exists with “Coffee”.

    Nice write up! Really enjoyed it! Thanks!

    Rob

    Reply
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