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    Benefits of Brand extension for the Starbucks

    University: Anglia Ruskin university

    • Unit No: 5
    • Level: Undergraduate/College
    • Pages: 13 / Words 3269
    • Paper Type: Assignment
    • Course Code: MOD0006875
    • Downloads: 304
    Question :

    Project Question

    Analyze how your existing brand equity and brand and asset can be leveraged to successfully introduce a new brand extension. You have to provide new products or services which help to create brand value for the Starbucks company.

    As a brand management consultant, you are needed to develop a brand extension strategy in a report.

    Structure of the Report

    1) Cover page and Executive Summary

    2) Table of Contents

    3) Brief Overview

    4) Brand Audit: this should include your analysis of:

    1. Existing market share and its competitors
    2. How the brand’s products and services are currently marketed and branded e.g.

    brand elements/artifacts; product attributes or characteristics of the brand, pricing,

    communications, distribution policies; brand positioning, segmentation, targeting

    5) Product/Service strategy: It should include an overview of your product/service idea, perceptual maps, target market, and key competitors in the

    new category

    6) Brand Proposition: based on the opportunity identified above, this should include your unique

    selling proposition, brand values, brand personality, and brand identity/visuals and you should

    demonstrate how these are mutually supportive

    7) Brand Execution: It includes price, place, and promotion strategies for the extension as well as discuss how these will support your brand values, personality.

    8) Measurement: Suggest and justify appropriate brand measurement techniques for your new

    brand launch.

    9) Conclusion

    10) References

    Answer :

    INTRODUCTION

    Brand can be referred to as the name, symbol, design, term or integration of all of these for the distinct identification of merchandise and facilities apart from the rival firms operating within the confines of same corporate industry (Buil, Martínez and Matute, 2016). Brand management is an essential process for each and every brand operating within the market. This is concerned with the management of perceptions of individuals who have or have not taken an experience of the offerings of brand. In this regard, brand extension is a strategy which is used by corporations with a view to enhance and capital upon the brand equity. Hereby, brand extension can be defined as the marketing strategy whereby a firm uses the existent brand name to come up with a new product category in market.

    The present project is based upon Starbucks which is a coffee corporation and coffee house chain. The firm operates with its 30000 outlets across the globe. Owing to such an extensive global presence, the management has now come up with “luxury watches” to facilitate brand extension. This is being done to maintain the goodwill at market and enhance the brand positioning.

    Brand Audit

    Overview of the Brand

    Starbucks is the most renowned brand famous for its beverages and snacks, whereas it is also an inspiration for most of the new and small eatery ventures. It was founded in 1971 in Seattle Washington by three Americans named Gordon Bowker, Jerry Baldwin, Zev Siegl. With the worldwide level chain of thirty thousand branches (Faasse and et. al., 2016). It took about nine years to get the market recognition as it first came as a profitable venture in early 1980s in Seattle, Washington. In 1996 Starbucks opened its first branch outside North America in Tokyo, Japan. In 1999, Starbucks tried new innovations with eateries at San Francisco Bay area with a giant restaurant chain formerly named as Circadia, and after getting recognized by the people about that restaurants were directly owned by Starbucks, Starbucks then transformed the restaurants into Starbucks cafes, which ultimately brought up revolution in the restaurants and cafes market. Nowadays Starbucks offers products in these segments as Coffee, beverages smoothies, tea, baked goods and sandwiches.

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    Current market share and major competitors

    At present, Starbucks is the leading brand within the confines of coffee industry. The major hand behind the current successive position of Starbucks is its premium goods and services along with its efficient marketing on various platforms (Du Preez, Bendixen and Abratt, 2017). Currently, the respective brand holds 59.2% of the overall market share.

    As a company starts to grow rapidly towards the highest position of market it gets involved in the market at a more competitive level (Boukis, Gounaris and Lings, 2017). Starbucks faces massive competition from a number of top notch brands like Dunkin Donuts, Costa Coffee, Cafe Coffee Day and McDonald’s.

    How the brand’s products and services are currently marketed and branded

    A good marketing is what a business needs to interact with new and potential customer as well as to maintain genuine relations with the existing consumers. There are various kind of media and promotional tools used by Starbucks for the purpose of marketing but the major source of outcome belongs to its use of social media to conduct marketing. Its a new marketing trend which holds the maximum share in promotion of growing businesses. Starbucks uses social media marketing for publishing business content (Hemsley-Brown and Alnawas, 2016). The presence of this brand over multiple social media apps and platforms provides aid to it in building up new connections and maintaining the old ones also. Effective social media marketing executed by Starbucks has led to increment in the value of brand and sales. Over the course of time, it also gave boost to the traffic on brand's website. Starbucks uses most of the social media platforms for the brand promotion and advertisements. According to the statistics report, it has 37.2 million Facebook likes, 11.9 million Twitter followers, 16 million Instagram fans, 153K YouTube subscribers, 397500 followers on Pinterest and 2.86 million Google+ follower.

    Brand Segmentation, Targeting and Positioning

    It is highly essential for each and every brand operating within the market to identify its target audience. This helps in devising effective strategies through which the attention of target market can be gained towards the offerings of the brand (Hammerl and et. al., 2016). In this relation, Starbucks make use of STP model to determine its target audience. This model is discussed in relation to the brand as follows:-

    Element Definition Description
    Segmentation This can be referred to as the act of dividing the market on a particular basis for the determination of a target market.  The market is segmented by Starbucks demographically on the basis of age and social status.
    Targetting This can be referred to as the selection done by a brand of an appropriate target market with the intent of emphasizing over gaining the attention of selected segment (Elbedweihy and et. al., 2016). Starbucks would be targeting the individuals belonging to 24 to 60 years of age who pertain to middle and upper class sections of society.
    Positioning This encompasses all the strategies through which a brand intends to place its offerings among the target audience. The positioning strategies taken into use by Starbucks are social media and digital marketing. With this, the concerned brand is able to create awareness among the target audience about its offerings in an effective manner.

    Product/Service Idea

    Describe and justify why your new product/service is an attractive market opportunity

    Starbucks is a leading brand which offers beverages and snacks by maintaining its chain of restaurants. It maintains a good brand image throughout the world due to quality of services that keep the customers satisfied and bound with the taste of Starbucks, which support it in achieving the competitive edge at marketplace (Hegner and et. al., 2017). This is a positive factor for Starbucks which support it in performing well out of competition and get enter into new market easily to offer its services. Now, in order to expand its business Starbucks has decided to perform brand extension by entering into a different market in order to offer “Luxury watch”. This new product is an attractive market opportunity as Starbucks is offering only premium services through its restaurants and now it is entering into luxury section with high goodwill which support it in surviving in marketplace effectively.

    The main idea behind this brand extension is that watches are also remain a accessory that define one's personality and way they carry themselves. Therefore, people use to wear watch as per the occasion they are attending and for this they usually purchase watches on behalf of reputation of brand. Hence, Starbucks decided to enter into luxury watches segment where it will be offering different set of watches as per the occasion such as formal, casual, males, female, gift purpose etc. The brand value of Starbucks will support in attracting the customers toward it and it would be able to get position in marketplace for offering services (Piehler and et. al., 2016). In addition to this, it can promote its luxury watches at its restaurant in order to capture the attention of customers toward it and develop an awareness regarding its brand extension so that it get accepted by its target market. Despite of this, the customer can also purchase or review its watch model over its official website where they get instant discount.

    In order to represent the position of Starbucks and existing competitors in marketplace the perceptual map is applied. The perceptual map refers to a chart which is used by the market researcher and businesses in order to understand how target customers feels about a given product or brand. This will support Starbucks in performing a comparison with other brand in term of factors that attract customers toward it so that it can formulate its marketing strategy accordingly.

    The target market for Starbucks would be middle and high class people as it is entering into a luxury segment so the price of product will be remain higher which remain affordable to middle and high class people only (Ilicic and et. al., 2016). But the competition for the luxury watches is related higher as there are number of competitors already present in marketplace such as Swatch, Tag Huger, Tissot etc. that may provide huge competition to Starbucks. ‘

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    Benefits of Brand extension for the branded company

    Brand extension of Starbucks through the launch of luxury watches would hold a number of benefits for the branded company. This will provide the brand with the opportunity to gain the attention of a new segment of individuals which is luxury segment. By providing watches of high quality and having stylish and latest features, Starbucks will be able to tap the minds of people who possess likelihood towards watch segment. This means that the brand extension will provide Starbucks with the scope to enhance its market positioning along with its profitability in upcoming future.

    Brand Proposition

    USP, brand values, brand personality, brand identity and demonstration of how these are mutually supportive

    The Starbucks is entering into a new market segment i.e. luxury watch in order to expand its market by performing brand extension on behalf of its current brand value. This segment holds huge number of opportunity that take Starbucks to new heights and it become able to be ranked as the topmost brands holding maximum customer satisfaction (Hsieh and Chang, 2016). But in order to achieve customer satisfaction as well as achieve effective market position, Starbucks is required to consider some of its brand or product factors that help it in performing well among other competitors as they mutually support in dealing with rivals. These factors are mentioned below:

    Unique selling preposition:- While positioning it as a “luxury watch brand”, Starbucks is offering its product over a unique selling preposition i.e. watches it offers will perform dual functions. This means that it act as a smart watch that work over heartbeats and at the same time it act as a fitness band that customers use while performing physical exercise. These features can be easily switch by customers by a swipe button where they can use it as a smart watch that can be used in their busy schedule or they can use it as fitness band at the time of their morning walk, gym etc.

    Brand values :- Starbucks is a brand that holds value among its customers, which is all because of its years of experience as well as quality of services as compare to other brand in marketplace (Ismail, 2017). As Starbucks is new to market of luxury brand it become very crucial to make it brand value stronger for its luxury watches in order to gain acceptance in marketplace. This can be done by using exiting brand value and offering watches of high quality as compare to existing rivals.

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    Brand personality :- In order to promote its luxury watches, Starbucks has decided to sponsor its advertisement for models through some famous Hollywood celebrities that support in forming up a unique brand image by connecting with the personalities that people usually follow in term of their lifestyles, fashions, choice etc. this support in enhancing the sales of watches.

    Brand identity/visuals :- The brand identity plays a significant role in attracting the attention of people toward its customers and remain remarkable in the mind of customers. This mainly includes logo, colour, design which act as a symbol of determining a particular brand. Therefore, Starbucks has decided to keep the brand logo similar for watch as it is for its coffee restaurant (Yeh, Wang and Yieh, 2016). This is so because it support in endorsing the brand equity for luxury watch section by using its existing customers to get positioned in marketplace.

    These all are crucial factor for a brand and its success within marketplace by acting as supportive forces that contribute toward presenting the products of brand in front of customers in such a way that they can rely over its quality. This in turn supports in building up a positive relationship among brand and target market that results into organisational success.

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    Brand Execution

    Overview of price, place and promotion strategies for the extension along with discussion over how these will support brand values, personality, and identity

    The management of Starbucks has proposed to execute brand extension strategy by entering into luxury market with its luxury watches. In this relation, the brand recognises the significance of devising effective product, price, place and promotion strategies. This would provide aid to the brand in significantly appealing to the audience at market place and thereby leave an impeccable impression upon them owing to the new product introduced. Such strategies would together support the values, personality and identity of brand as identified above. In this regard, such strategies are discussed with the help of Marketing Mix as follows:-

    Marketing Mix (4P's)

    This can be referred to as the set of tactics, strategies and actions executed by a brand with a view to promote a product or brand at marketplace. The 4Ps which constitute the marketing mix are Price, Product, Promotion and Place. These are discussed in relation to luxury watches being launched by Starbucks in market, underneath:-

    Product: Starbucks is coming up with luxury watches in market by leveraging its existent brand name, quality, differentiation and variety. The watches that would be launched by the respective brand in market place would be a composite of a luxury watch showing time and a watch which monitors the heart rate and steps (Su and Reynolds, 2017). By introducing this product in future course of time, the brand is aiming to gain a high share in market and even inflate the value of products sold by Starbucks as perceived by customers.

    Price: It is important for each and every brand functioning as a part of the market to devise effective pricing strategies so as to appeal to large base of customers. In relation to the luxury watches being launched by Starbucks, it has been decided by the management of the firm that it would be using premium pricing strategy (Zhang, Benyoucef and Zhao, 2016). This has been decided looking upon the hi-tech characteristics and features of the luxury watches. Further, the watch is introduced with the aim to target middle and upper class sections of society. These sections perceive goods to be of good quality only if their value is high. Thus, realising this, Starbucks has decided to use premium pricing method for its new product category.

    Place: Starbucks would be selling the luxury watches on the brand's website or physically within the outlets. The decision to make sale of new product in online as well as offline format is taken in order to tap the attention of computer friendly as well as individuals belonging to the opposite category.

    Promotion: Starbucks would be capitalising upon social media marketing as well as Personal Selling to achieve high income from sale of luxury watches in market place. Both the methods would provide aid to the brand in setting an effective connection with the customers and thereby impressing them with the hi-tech features as well as characteristics of the merchandise.

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    Importance of Persuasion to brand

    Persuasion can be referred to as the process of positively influencing the consumer purchase behavior or in other words the ability to convince customers to buy a product. Now, in the present scenario, Starbucks is carrying out brand extension by way of launching luxury watches. The concept of persuasion is very important for Starbucks in this respect as this will imply that more and more number of individuals would be attracted towards the new product offered by the entity at market place. It indicates an overall increment in the revenues as well as profitability of the corporation.

    Measurement

    Suggest and justify appropriate brand measurement techniques for your new brand launch

    KPIs, measurement of traffic on brand's website and metrics are 3 techniques which are suggested to Starbucks for measuring the success of new product launch. Key Performance Indicators (KPIs) can be referred to as the measureable value which reflects the effectiveness with which corporation is accomplishing its corporate objectives. In this regard, with the application of KPIs, Starbucks will be able to evaluate whether the launch of luxury watches is able to yield the objectives which were set up at the beginning of the plan. Further, the increment in traffic over the website of Starbucks will provide the entity with understanding of the response of customers towards the extended brand (luxury watches). Thus, all of these 3 brand measurement techniques would provide aid to Starbucks in gaining knowledge of the response that is delivered by customers after the consumption of newly extended brand, that is, luxury watches. With the application of all of these techniques, Starbucks would be able to ascertain whether the luxury watches introduced by it in market place have been able to attain positive responses from public at large (Zhang, Benyoucef and Zhao, 2016). Whereby the application of these techniques display negative result in relation to new brand launch, Starbucks would have the option to incorporate changes or innovation within the luxury watches and thereby enhance the customer response in an effective manner.

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    CONCLUSION

    On the basis of above project, it can be inferred that brand management is a crucial and never-ending process for each and every brand operating within the market. Further, it is analysed that brand extension is an impeccable strategy to leverage brand equity. This provides aid to a brand in facilitating increment in customer base as well as profit margins. In addition to this, it has been acknowledged that a perceptual map provides entity with knowledge regarding the perceptions held by customers about a brand or any of its offerings. Apart from this, it is important for a brand to execute effective marketing strategies in order to gain positive responses from public regarding the new product or service.

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