Egyptian temples were filled with graphic art. Medieval navigation maps were full of symbols and imagery.
Graphic design is not a new concept. The term itself may have been first coined in 1922, but graphic design has existed since the earliest cave art.
The Middle Ages and the Renaissance saw the heavy use of heraldry–the armour, family, class, rank and pedigree. Cattle branding was used to show ownership and quality. Continue reading
From the sublimely irresponsible to the ridiculously silly, here is a subjective assessment of three companies involved in particularly bad behaviour. Continue reading
I love Nick Cave. As a teenager and young adult, I had each Bad Seeds album and subjected everyone in my family, and later share houses, to The Mercy Seat, The Weeping Song, strains about Alice waking and smoking Christmas trees. Continue reading
While checking your Facebook News Feed, you may have come across the Pantene #Whipit ad that has now officially ‘gone viral’.
In case you missed it, here it is again.
Filmed as a TV Commercial for the Philippines market, the Pantene ad has caused a global sensation for its radical departure from conventional shampoo advertising.
Taking a leaf from Dove’s Real Beauty campaign, (which has been tremendously successful), Pantene confronts gender bias and sexism in the corporate workplace and encourages women to shine.
The inspiration for the campaign came from an October 2013 study that revealed that women were still experiencing double standards and gender bias “even in progressive Metro Manila” Rappler.com.
The ad features corporate females doing identical tasks (presentations, running meetings, crossing the road, working late at night) and being perceived differently (boss / bossy, dedicated / selfish).
Pantene partnered with active social news website, Rappler (in the Philippines). Rappler’s mission is to generate smart conversations through uncompromising journalism where “stories inspire community engagement and digitally fuelled actions for social change.”
The partnership resulted in a social marketing campaign tagged #Whipit in order to try and:
a) subvert these perceptions (Rappler), and
b) make some money selling product (Pantene).
Pantene with agency BBDO Guerrero Manila took a radical departure from the standard shampoo ad script, which often makes women feel disempowered because no shampoo really creates the preternatural shine (or the fabulous good looks and attractive glances) that the ads suggest.
Instead, BBDO and Pantene have taken an empowerment approach and focused on successful women (with good hair) in corporate situations.
The titles demonstrate the faulty perceptions about females in the workforce compared to men.
It has succeeded creating a relevant, albeit tenuous, link to its haircare products and value proposition of shiny hair. Shiny hair, shine as a person. Get it? [Hmm, sort of]. Quality of the product / inequality of the situation.
The ad ran for a month or two before a mention by Facebook COO Sheryl Sandberg saw it rocket to worldwide popularity.
“This is one of the most powerful videos I have ever seen illustrating how when women and men do the same things, they are seen in completely different ways,” Sandberg wrote on her official Facebook page.
There are critics. Some say the theme conflicts with the product itself.
The results of the campaign are not available yet, as it still ricocheting through cyberspace.
It has generated thousands of tweets and nine million YouTube views.
Personally, I like the ad and for something that has only ever aired in the Philippines, it’s what I would call a ‘good spend’. I think it has generated smart conversations and created popular awareness about the differences in perceptions, including from and by women.
It also makes me think that Pantene really is a smarter product than others and reflects my self-concept, which is pretty critical when marketing things like this. Like jeans for twenty-somethings, it’s not about the denim, it’s about how you see yourself and how you want others to see you. In marketing parlance, we call it the ‘transformational appeal’ and it can be more effective than an ‘informational appeal’ as long as you can make it past the rationality hurdles.
That’s why I also like the ad from a marketing communications perspective, because it does what many brands try and fail to do well, which is successfully enter emotional and higher-order territory and favourably reflect the target market back to themselves.
Apple was initially subversive (watch the famous Superbowl ad styled on Orwell’s 1984 here), now it’s creative and inspirational. Nike uses the ‘power of the individual’ (watch). Dove is ‘Real Beauty’ (this is beautiful).
Even though I find some of the quasi-spiritual underpinnings of certain fast moving consumer goods eye-rolling, they can be enormously powerful. Archetypes and storytelling; quests, ideals and journeys are universal and deeply felt.
They work because you can add have more nuts, thicker cream, a cheaper price, an easier payment system, but so can your competitors. There is no real differentiation and therefore no real loyalty. When you own emotional territory, it is very difficult for a competitor to displace this. You’re on a higher plane. You ‘connect’.
As Services businesses, it’s easier for us. There is always a deeper, laddered down benefit of what you do. Always. The hidden, but powerful value proposition may be security. Confidence. Assurance. Romance. Idealism. A means to express individual self-identity.
If you need help laddering down to your higher order benefit, send me an email.
Also what do you think of the Pantene #Whipit ad? Love it or loathe it?
Yahoo! was born in the early 1990s, surrounded by empty pizza boxes. It was the brainchild of founders David Filo and Jerry Yang, computer science PhD students. Continue reading
The following is a plausible, hypothetical case study of a sport sponsorship partnership, which uses emerging best practice principles including sponsorship-linked marketing, co-marketing alliances, and image as well as values transfer. No permissions have been gained and assumptions have been made with respect to some internal company information. As such, specific information in this report should not be considered factually correct for any purpose other than understanding how sport sponsorship planning could be conducted. I hope it is helpful.
Green & Black’s premium chocolate and the mountain bike marathon event, Highland Fling, share many things in common including a target market / fan base as well as brand personality fit and strategic objectives. This report shows how the two organisations can serve the objectives of each other in a three-year partnership based on collaboration between people, resources, skills and capabilities, in order to affect a 3% increase in Australian chocolate market share for Green & Blacks by growing the popularity of the Highland Fling and the esteem of Australian ‘serious leisure’ cyclists.
Green & Black’s (G&B) is a brand of organic, free trade chocolate that began as a small enterprise and is now owned by Kraft. It operates in the chocolate and confectionary category, specifically, the premium chocolate segment.
The Australian chocolate market is worth $2.7 billion p.a. Average Australian consumption is 4.4 kg per year. The market is saturated with predominantly milk chocolate products and rivalry is intense. The market is mature, but the premium segment is in growth at 2.3% p.a. (IBISWorld, 2013). Seventy five per cent of purchases are from retail consumers. Net profit margin per product is 6.8%, meaning that G&B will make 59 cents on every $4 100gm bar. The market is stable and is considered “recession proof” (Henschen, 2008).
G&B has an advantage of being part of the Kraft group from whom it can utilise resources, marketing expertise and packaging economies-of-scale if required. The G&B management controlling the Australian market is located in Dunedin, New Zealand. Because of its Fair Trade status, G&B enjoys a high degree of autonomy from Kraft’s operations (World Chocolate Guide, 2013).
Competition is from Kraft (who owns Cadbury and their extensive product lines) at 49.1% share; Nestle (21.5%) and Mars (14.3%). In the premium segment, the market leader is Lindt (5.8%); Ferrero (4.5%) and then Darrell Lea (4.1%). G&B has less than 1 per cent share (0.7%) (IBISWorld).
There are two groups of G&B customers. Young, affluent urbanites and everyday luxury buyers, generally mothers. Taste and quality are the key determinants for both.
More consumers are increasingly attracted to dark chocolate because of the health benefits, which include high anti-oxidants, low sugar and no dairy, as well as an increase in consumer concern about ethics and sustainability of food. The segment has expanded by 65% since 2002 (Market Research.com, 2013).
The cacao for G&B’s product is not sourced from the Ivory Coast of Africa where the majority of the world’s chocolate comes from using child slave labour. It is sourced from village workers in Mayan village, Belize. Here, the beans are “picked, dried, roasted on a hot plate over a woodfire and ground by hand in a machine resembling a large household mincer” (Purvis, 2006). The result of the G&B enterprise has meant that 70% of children in outlying villages now have secondary education compared to 10% before G&B began operating there.
G&B positions its products on taste with organic and Fair Trade status as supporting elements. The brand’s name refers to ‘Green’ being the environmental and ethical dimension of the products and ‘black’ refers to the high cocoa content, a hallmark of authentic chocolate (Green & Black’s Website, 2013).
G&B has historically resisted ‘push’ strategies in favour of a philosophy that is about having consumers ‘discover’ the brand and then drive word of mouth. G&B is noted for its distinct brand story. It won the Worldaware Business Award in 1994 for its and became the recipient of the UK’s first ever Fair Trade brandmark (Burkitt & Zeally, 2007).
Internationally, the brand recognises that its Fair Trade status and organic attributes are not inimitable and copycat brands with the same attributes are appearing. As a result, G&B now accentuates its ‘playful’ brand personality with image-driven short copy ad campaigns (below) that ensure its position in the mind of the consumer is as a chocolate for ‘grown-ups’ rather than families (Cadbury) and teenagers (Mars).
Figure 1. G&B UK Advertising Campaign
For KRAFT, the place of Green & Black’s in the category portfolio is to take the niche alternative, healthy, Fair Trade choice for ‘grown ups’: the affluent and ethical Australian consumer.
The goal is to increase Green & Black’s Australia market share from 0.7% to 3.0 % before June 30 2016. That will increase net revenue from $38,161,200 to $163,548,000 assuming the margin remains consistent.
Expansion into Australia has proven difficult. The brand is relatively unknown and the distribution is solely through supermarkets. The core problem is brand awareness and lack of product trial. A SWOT/TOWS is below and outlines the strategic situation.
| OPPORTUNITIES | THREATS | |
| • There’s growing demand for Dark Chocolate for health benefits• World Vision promoting ethical suppliers alternative to ‘blood chocolate’• Sport sponsorship increasingly explored by manufacturers• Branding and Promotional activities stimulate product trial.
|
• New dark chocolate lines from competitors are imminent.• KRAFT’s Cadbury products moving to fair trade and may cannibalise.• Branding and promotional tactics like Mars ‘super-size’ products• Input price rises (cocoa and sugar) | |
| STRENGTHS | SO | ST |
| • Fair Trade Status / Organic Status.• Powerful history and brand story• Product trial is almost always very favourable• Owner, KRAFT, can provide resources if requested | • Use sport sponsorship to increase awareness and product trial.• Infuse brand story into promotional packaging• Use a sponsorship vehicle to promote the ethics of the products. | • Pre-empt new competition through increasing awareness of story and origins.• Use freebies or samples to encourage later purchase. |
| WEAKNESSES | WO | WT |
| • Relatively unknown in Australia• Distribution solely through supermarkets so trial is not easy• Consumers very brand loyal to competitors. | • Awareness-building will help tap the dark chocolate interest.• Sponsorship will encourage selection at supermarket (75% impulse purchase). | • Earlybird awareness of the brand and story may thwart new line penetration• Direct online store may reduce overheads in event of input price increase |
In order to achieve the corporate goals, G&B must significantly increase awareness and generate favourable attitudes of brand liking and preference. Given the positioning strategy, the brand seeks to become embedded in communities.
In order to maintain the global brand’s positioning strategy of below-the-line communications, as well as to generate reach to build awareness and be cost-effective, G&B has reviewed its TOWS strategic options and decided to sponsor a sporting event. The sport choice selected was Cycling. This is due to the fewer instances of clutter in this sport than other mainstream sports in which sponsorship is saturated.
Cycling is the fourth most popular sport in Australia. Fourteen per cent of men and nine per cent of women participate in cycling activities and this constitutes approximately 1.89 million Australians (Brown, O’Connor, Barkastos, 2009).
The strategy for G&B is to generate grassroots awareness and product trial through a sport sponsorship framework, preferably one that supports and reinforces G&B core value proposition of being sustainable, alternative, ‘grown-up’ and high quality.
The criteria for the sport property are:
• the opportunity should be unique or novel
• the partnership should be of value to both brand and sport by deepening connections with customers / fans
• there should be opportunity to make a significant contribution to the sport
• the sport should offer adequate exposure
Two events were scrutinized: Tour Down Under, the professional road cycling event and 110km mountain bike marathon Highland Fling in NSW Southern Highlands.
Both events were screened using the Sports Sponsorship Screening Instrument (Irwin, 1995). Both share a good fit in terms of target market / sport participants in that they are 20s-40s, educated, ethically-minded and reasonably affluent consumers.
1) With over 30 incumbent partners, the excessive clutter in terms of the number of sponsors as well as the confusing array of sponsorship / partnership ‘levels’ and in-kind supporters is unlikely to achieve cut-through (Amis, Slack & Berrett, 1999).
2) Were G&B to achieve any cut-through for its investment, it is likely to be mistaken in the mind of a consumer / spectator for another brand in the chocolate category with a larger share of voice (e.g. Lindt, Mars or Nestle) (Cornwall, Weeks & Roy, 2005).
(3) Given the professionalism of the event and the skillful use of social media and broadcast opportunities, little added value can be given by applying G&B’s resources and capabilities
4) Given the frenetic schedule of the event organisers, it is unlikely that the desired level of inter-organisational cooperation and collaboration would be available to see such a sponsorship form the basis of a medium-term (minimum 3 year) partnership.
The Highland Fling is an off-road mountain biking (MTB) marathon event that has been running for nine years. It attracts around 5,000 participants and spectators each year and attracts minimal sponsorship clutter, and little media. Event participants come from the Southern Highlands, Sydney, Canberra, Wollongong, interstate and some from overseas (Wild Horizons, 2013).
The event seeks a new major sponsor to whom it grants naming rights each year. There is little evidence that the sponsorships have been well-leveraged by sponsoring brands. Event marketing is left to the event organisers where there is limited marketing or media experience. That said, it is likely that extensive naming and management cooperation can be gained, facilitating a mutually rewarding long-term relationship.
| Strengths• Highly loyal participants• Full naming rights• Close to Sydney, Wollongong and Canberra
• Willingness to collaborate • Strong congruence with target market & fans • Strong market orientation and connections with cycling community internationally • Carbon neutral • Minimal sponsor clutter
|
Weaknesses • Smaller event (5,000) annually• Long registration queue• Previous sponsors have not leveraged their commitments
• Most of the tracks in bushland (no spectators) • Website
|
| Opportunities• Sampling• Extend spectatorship through media• Online registration
|
Threats / Risks• Ambushing• Major incident (accident)• Degenerative behaviour
|
Although the Highland Fling is not currently a major event, it presents a major opportunity to become so with a vast but as yet untapped potential to generate traditional news and broadcast coverage and, more importantly, online viral reach.
Enabling this lift in event profile would benefit the sport property and esteem of its highly engaged fan / participants, but also raise awareness and liking of the G&B brand. It also meets the criteria of inter-team management collaboration, presents an event of rare or uniqueness, and the opportunity for a powerful image transfer (Ferrand and Pages, 1999).
Utilising the inherent depth of loyalty and passion with G&B’s complementary resources and capabilities, a distinct competitive advantage can be developed as has been seen in the case of firm Owens-Corning in Canada facilitating the increase in popularity of freestyling skiing (Amis et al, 1999). This would be mutually advantageous and result in G&B being perceived as a vital and trusted member of the group, rather than ‘wallpaper’ as it may with another event.
The Highland Fling event fans tend to fit the ‘New School’ psychographics (Argus, 2013):
– Cycling enthusiasts
– Predominantly male but strong female participation
– Tertiary educated with a professional background and mid-high income
– Aged from mid-20s to mid-40s with most in mid-30s
Across this spectrum of participants there are multiple motives for participation including competitiveness, fitness, risk and adventure (Crum, 1998).
This event is perceived as a ‘hard core’ cycling event in the “serious leisure” cycling category”. The motivations for participation are “social, embodiment, self-presentation, exploring environments and physical health outcomes” (Brown, Trent & O’Connor, 2008). The cycling fraternity is a tribe where “the importance of the activity and the level of participation is high” (Bull, 2006).
Group affiliation is high. Highly identified attendees and spectators are likely to view any sponsor as being part of the ‘in-group’, meaning there is a high degree of image transfer to G&B. This is supported by “Self-esteem theory” which posits that the motivation begins with ‘belonging’ before it moves to the ‘personal’ (Burke and Stets, 2000).
Considering the sport participation ‘escalator’ (Mullin, Hardy, Sutton, 2000), participants of this over 18s event can be considered highly engaged. However, there is space for different levels of engagement with the shorter races, as well as a gap for 14-17 year olds to ensure their ongoing involvement and ascendency in connections with both the sport and the brand.
The Highland Fling begins in Bundanoon, a village that became Australia’s first town to voluntarily ban bottled water. It has also been involved in a long community standoff with Coca-Cola who wishes to conduct aquifer drilling in its pristine national parks. This legacy suits G&B’s ‘alternative’ positioning.
The archetypal elements of this story (David and Goliath / the power of community) resonate with the history and brand of G&B, given its positive impact on the Mayan village of Belize and the resultant income and educational advancements this has brought to that developing region.
G&B brand is known for an increasingly irreverent personality in other markets around the world. It forgoes above-the-line advertising and promotions for creative, minimal print ads, sponsorships and experiential sampling encounters.
Highland Fling is also known for an irreverent personality. The 110 km race is the full fling and the shorter 14 km race is the casual fling. The double entendres fits with the in-house style of G&B.
For G&B, brand awareness is very low. The objectives of the sponsorship are:
To achieve these objectives, the strategy is to:
The total investment in the sponsorship itself will be $200,000 per annum, comprised of a $50,000 initial investment and accompanied by $150,000 to leverage the associations and build the event’s profile. The expected duration of the partnership is 3 years.
Ferrand and Pages (1996) remind us that we need to be simple in order to cut through, and to put our focus on the collective rather than the individual, in order to generate feelings of connection and tribe. The sponsorship will use the term ‘Tasty Fling’ to emphasise the exciting and decadent aspects of the chocolate and the event.
The event manager of Highland Fling is Wild Horizons. This company has deep insights into the cycling community, opportunities to access this group, and is owned and led by Huw Kingston, a high profile key influencer of the serious leisure cycling community internationally.
In preliminary discussions with Wild Horizons, a decision to undertake a co-marketing alliance and adopt a Resource Based View (Amis, Pant & Slack, 1997) whereby the complementarities of both organisations could be manipulated to form an event and brand competitive advantage.
A cross-functional ‘Sponsorship Activation’ team within G&B will be developed with key members of marketing, IT and human relations. This team will work with Wild Horizons to assist manage the event program and the alignment of both parties’ objectives over the next three years.
An initial event blueprint (Bitner, Ostrom & Morgan, 2007) was devised that documents each event registrant’s actions and movement and the backend processes involved. It also documents physical evidence requirements and opportunities. This has formed the basis for the development of a co-marketing alliance as well as the investment items for G&B.
An initial review of past years’ feedback and results with the Wild Horizons team has found overall very positive experiences and emotional bonding between participants and within the event. There were the exceptions of two perceived main drawbacks, however – the physical registration process resulting from a lack of online payment gateway and transport inconveniences.
Wild Horizons’ role will be to manage and co-ordinate the event and provide a team of on-site staff to facilitate the smooth execution. They will also manage the first-aid, camping area and onsite food and beverage stalls as usual. As they have an excellent market orientation in terms of understating the fan base and sport industry, they will be advisors as to the effectiveness of communication elements through the use of a ‘test marketing’ group they formulate. This group will also be used as an advisory panel for the sponsorship partnership and serve as idea generators.
G&B will lend IT capabilities in the design and installation of an updated Highland Fling website with CRM and online event registration and payment portal. This will capture registrant’s details, enable ongoing communications and avoid the long registration queue identified in the blueprinting.
Sent to each registrant will be the route map, detailed instructions as to how to arrive in Bundanoon and a sticker with their competition Number and co-branding. . There will also be a G&B gift sample. The route map will be designed by G&B marketing department and feature chocolate iconography.
The early stage of the course is flat and classified ‘easy’. The white chocolate will brand the section as ‘an easy fling’; the wood-chipped line section of the course will be the ‘crunchy fling’ (hazelnut); the muddy, slippery section will be ‘butterflinger’ (butterscotch); the section with sharp turns and tight corners will be the ‘spicy fling’ (chilli) and the dimmer, rainforest section will be ‘decadent fling’ (dark chocolate 85%).
Due to the limitations on the event participation numbers, the reach can be extended though social and mainstream media. Twenty riders will be selected by Wild Horizons to be outfitted with Go-Pro video cameras which will be used to capture live footage of the event and fed to the YouTube live streaming.
G&B will reinforce Highland Flings social media promotion of the event with their own and enable user-generated content from the event to be uploaded to the new website.
The trickiest hairpin turn in the heart of the race will be kept under HD video surveillance and an award for Technical Quality will go to the participant who makes the most adept maneuver of this junction. The footage will also be repurposed for media broadcast opportunities for commercial programs including Sports Tonight, Fox Sports and nightly news programs around the country. Other video clips will be used in the YouTube live broadcast.
Three stills photographers from G&B will rove around the event and capture images for news publications, magazine articles, G&B advertising campaigns (in which rivers of mud may be used to resemble chocolate) and social media.
The three principle corridors that event participants are likely to come travel through are from Sydney, Canberra and Wollongong.
To assist in the comfort and convenience (and thereby create positive disconfirmation of the overall event experience and brand liking), some luxury coach services will be provided for the 90 minutes journey the day before the event and run from Sydney Airport, Canberra and Wollongong to Bundanoon.
In order to move the younger target customers and fan base along the escalator of brand and event awareness and liking, an app based on the event will be designed for the free download of a targeted group of 14 – 17 year olds.
In Australia, the course stages named after products will have packaging temporarily reflect the event staging names. The brand stories of both organisations will be synthesized into an event narrative and printed on the inside of the packaging also. QR codes and web links will lead to richer online stories and interaction opportunities.
G&B will take out full-page ads in RevolutionMTB magazine, Cyclist magazine and some online advertising in cycling-related websites in the six months leading up to the event.
Along the main transport route for event participants, five billboards will promote the event, including three along the M5 Motorway.
The Sponsorship Activation Team alongside the Wild Horizons team will generate Media Releases about the event partnership and the higher-order congruence of conscience of both parties.
The nature of World Vision’s work to end ‘blood chocolate’ will be showcased on both the websites of the event parties and the event itself. World Vision can be also be included in these communications with information about the chocolate from the Ivory Coast of West Africa (World Vision Website, 2013) and the disastrous impact that is having on the lives of many in those areas.
Ideally, both will make an investment donation with World Vision whereby the ethical dimension of the partnership may be reinforced.
In order to proactively thwart ambushing attempts, Wild Horizons will liaise with accommodation venues in the event proximity and G&B will supply them with friendship hampers for their staff. Private landholdings on which the race event takes place will also be sent gift thank you hampers by G&B via Wild Horizons to help inhibit these parties as targets of either ambush marketing or event sabotage.
Videos featuring the footage of the event will be annotated by G&B’s marketing team and feature irreverent commentary. No advertising will be permitted on the clips to avoid any intentional or unintended promotion of competitor or other brands.
The event organisers will also use their knowledge and connections with the cycling and MTB community to promote G&B event partner.
In order to accurately measure the impact of the co-marketing alliance, some measurement research will be undertaken prior to the event and after the event each year.
Brand awareness levels will be gauged through surveying. As this has been criticized as being an inadequate measure (Abratt & Grobler, 1999), this will be accompanies by richer qualitative data, including focus groups and perceptual mapping, also.
These interviews and surveys will be conducted before and after the event with random samples of adults in the target market. This will be done to measure the amount of processing that has occurred in terms of image transfer and concomitant emotional and cognitive benefits associated with the brand (Gwinner & Eaton, 1999)
Sales figures will determine the market share and any changes before, during and after the event.
Each year, it is expected that the group team will evaluate the effectiveness of the sponsorship and work together in a weekly updates for the following year’s activities. Improvements and modifications to the program can be made on a flexible basis.
Finally, the event sponsorship will be evaluated in terms of what other types of investment (such as advertising) may have achieved instead.
This sponsorship plan assumes that the Highland Fling event will continue for a further three years in order to achieve the 3-year strategic objectives.
By blueprinting the procedures and activites undertaken by each team independently and together, it is possible that any changes in the management teams can be mitigated and successful results carried over to future years.
It is assumed that the ownership of Green & Black’s (KRAFT) will not pose a negative association. It is possible that some may construe G&B’s partnership with Highland Fling and World Vision as disingenuous and exploitative, however, little can be done to minimise this risk other than keeping true to the brand origins story and continuing discrete business operations.
In the event that the sponsorship partnership is very effective, emerging sports that share a close congruence with the target market / fan base and shared values will be considered to build the G&B brand even further.
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World Chocolate Guide Website Retrieved on 17 May 2013 from: http://worldchocolateguide.com/brand/green-and-blacks/
World Vision Website http://www.worldvision.com.au/issues/human_trafficking___slavery/whatisthisabout/What_is_the_real_cost_of_chocolate_.aspx
Quester, P (1997), Awareness as a measure of sponsorship effectiveness: the Adelaide Formula One Grand Prix and evidence of incidental ambush effects, Journal of Marketing Communications, Vol 3 Issue 1
Fast food master of the universe, McDonald’s began as one single drive-in restaurant in California. If you had have driven up to the menu board in 1954, you would have seen a long list of standard menu items including 15-cent hamburgers, cheeseburgers, pies, chips, milk, and milkshakes. Continue reading
Starbucks opened its first store in Seattle in 1971. By 1992 it was publicly listed and had 140 stores and a growth rate of between 40 and 60% each year.
Starbucks currently has over 15,000 stores in 44 countries.
Right from day one, Starbucks did not see itself as a ‘coffee’ business, but a ‘service’ and experience business. Its model was built on the European coffee tradition, with which America was unfamiliar. Coffee in the States was generally a jar of percolated brew sitting on a hot plate.
The brand was built with a number of key attributes – the customer should be greeted within five seconds, there would be eye contact, their name would be remembered, and visiting the store was a place to relax, socialise, read, surf the internet and be seen.
Advertising and promotion were not to be the primary communication vehicles. Starbucks philosophy is based on the understanding that a positive emotional experience will generate word of mouth and lead to customer loyalty.
The first store to open outside of the USA was Tokyo in 1996. The company has been very successful in Japan and it continues to be a high performing market.
In China, its biggest growth market currently, the pastries and drinks are smaller to suit local tastes and a green tea frappuccino has been introduced. Similarly, the product items have been adjusted to cater to local tastes in Saudi Arabia and Japan.
There is growth in the large cities of Beijing, Shanghai and Guangzhou where middle-income professionals are burgeoning.
The coffee industry in Australia is worth $3 billion a year, with $1 billion of that consisting of takeaway cups. It was already mature when Starbucks opened its first store in Sydney in 2000. The retail market is tough with intense rivalry and returns of just 4% p.a. net profit.
Australia’s large migrant population, especially those from Greece and Italy, meant that the Australian market had adopted the routine of morning coffee many decades earlier. The European tradition was not new or novel. The local drinking palate was sophisticated, liking strength undisguised by syrups or excessive milk.
In 2008, Starbucks announced it was closing 61 out of its 87 Australian stores (73%) remaining with less than 2 per cent market share of the speciality coffee market – an unwinnable formula for an economy of scale and out of step with the ‘clustering’ saturation strategy used in the rest of the world. Starbucks announced the reason for the closures was consumers’ tightening of belts due to the global financial crisis and fears of recession.
In the Australian speciality coffee market today, Gloria Jeans dominates the high-end. As a franchise, its store owners know the local area, tastes, people and communities.
Second is McCafe (servicing the economy end), as well as Coffee Club, Wild Bean (an offshoot of BP at service stations) and Hudsons. Starbucks is in sixth place with less than 2 per cent share.
Starbucks may have assumed that Australia had a very close ‘psychic distance’ from the USA and expected its stores to be met with the same enthusiasm as America. Its offering to Australians was the same as the US offerings.
Unlike McDonalds and Krispy Kreme, who both opened one or two stores in a slowly, slowly approach to stimulate demand and create a sense of scarcity, Starbucks saturated the Australian market with 87 stores and was soon perceived as a ‘mass brand’ not the exclusive brand position it was after.
The Starbucks team also failed to understand the psychological and socio-cultural aspects of the country it was entering.
Australia is not one homogenous market; it consists of over 235 different ethnicities and has a proud tradition of backing the underdog — in this instance, the small shop around the corner. Many consumers were found to actively dislike the ‘super-size’ high sugar/high-fat mentality of America which Starbucks was found to epitomise.
Even worse, Starbucks coffee was generally considered ‘watered down’ and inferior to what was already available at a much lower price. Ethically produced coffee and personal relationships were also important for the Australian market.
It may not have been these factors alone that were the undoing of Starbucks in Australia. The company was already contradicting its own value proposition when it introduced competing priorities in stores, such as the key performance target of servicing ‘x’ number of customers per hour.
With a value proposition built on friendliness and space away from work or home that can be used for relaxation and socialising, the pressure on staff to generate steady customer turnover meant that they were less able or inclined to engage in conversation or relationship-building with customers.
The use of vacuum-sealed coffee and automated machines to make coffee 40% faster, thereby reducing queue wait, also meant the augmented sensory benefits of watching the grinding and ritualistic preparations of the drink, as well as the hedonic aroma, were removed.
The in-store furnishings, magazines, music and wi-fi were imitable and being copied from stores all over the place, including Gloria Jeans, McCafe, Wild Bean and Coffee Club.
The Starbucks loyalty card was just like any other and posed no point of difference or customer motivation, who would just use the loyalty card of whichever company they happened to be using at the time.
In their favour, competing brands were also known for food. Although Starbucks does sell a range of pastries and sweet snack-foods, Starbucks owns coffee in the mind of the consumer and the brand is not perceived as a place you go to eat. McCafe (McDonald’s) means coffee and also food, as does Gloria Jeans (light food) and Coffee Club is where you can get a good coffee as well as a decent, not unhealthy lunch. With an average per visit spend of much less than its rivals, Starbucks found itself in tricky waters.
Finally, Starbucks strategy not to advertise or run promotions may have sounded good at first, but it probably needed to re-evaluate this at the earliest signs of competitive rivalry. Awareness was high, but such communications could and should have been used to convey the brand message or reason for being. The brand essence should have been reformulated for the Australian market and then communicated with clarity and simplicity as a reason to patronise its stores.
Instead, McDonald’s – well-known for its high ad spend – was able to curtail any growth of Starbucks by using subversive messages to undermine it, like this one.
Starbucks failure in Australia demonstrates why you need to understand your market before entering. What works in one place may not work elsewhere. While some overall methods or services will remain the same, a global strategy must always take a backseat to local needs and be adjusted accordingly.
Solid research, particularly, observational and ethnographic (such as that performed by IKEA and Tesco before they open stores in new foreign markets) is extremely important. A few months of studying and spending time with coffee-drinking Australians may have saved years and millions of dollars to Starbucks in the long-run.
7 Jan 2015 Update:
It seems like Starbucks has learnt a few things from the Australian experience. They have introduced the flat white, which is my favourite coffee, into American Starbucks outlets.
According to Wikipedia, the humble flat white was developed in Australia and New Zealand in the 1980s. It consists of a double shot espresso (ristretto) with microfoam of hot milk poured over the top. By microfoam, I mean milk that has been heated and jiggled to form small bubbles. Sorry, I’m not a barista.
A flat white tastes just like a coffee with milk, but far better. The consistency is velvety. It would have to be the most unpretentious and ubiquitous of coffees ordered today in Sydney.
Happy drinking!
Special thanks to the comprehensive review by Richard Fletcher and Heather Crawford upon which much of this article is based.
Richard Fletcher, Heather Crawford (2012), “International Marketing: An Asia-Pacific Perspective” 5th Edition, Pearson.
Whirlpool Corporation is the world’s number two appliance company, selling $18 billion of ‘white goods’ each year, including washing machines, microwaves, refrigerators and stoves. It is number one in the USA, where it is headquartered. Continue reading
IKEA’s founder, Ingvar Kamprad, died in January 2018, aged 91. After starting from the humble Swedish beginnings, his entrepreneurial flare led to a multibillion-dollar global empire. Did you know the name Kamprad is a variant of Comrade? His passing marks a good time to review the strategy of IKEA. How radically it differed from other furniture businesses at the time of its conception makes for a good strategic case study.
The customer profile is the global middle-class. They are interested in items such as bookcases, side tables, storage units. They are aspirational. They are delighted by the value but also the philosophy of style and good design and frugality. Spending amounts are very similar around the world. Continue reading