Page 268 - DMGT510_SERVICES_MARKETING

Unit 14: Service Strategies

Given such a connected world, how can companies maintain their underlying brand identity Notes
in face of worldwide external shocks such as the current global recession? Should brands
practice consistency or continually adapt?
Before answering those questions, take a look at one of the world’s iconic brands – Starbucks.
Starbucks is almost single handedly responsible for creating the concept of a third place
between home and work where people can relax, enjoy a cup of coffee and experience the
inviting ambience.
Since its founding days in the early 90s, Starbucks has strived to build its brand identity on
offering customers a relaxing and enjoyable experience. In addition, Starbucks has also
built its brand on things that tend to be out of the box, by consistently defying the
conventional wisdom.
When companies were aggressively advertising, Starbucks decided not to advertise. When
cost cutting was the dominant paradigm of the industry, Starbucks chose to emphasize
non-routine procedures to create excitement among the baristas instead of streamlining
procedures to minimize cost. Unlike most other companies, Starbucks made its employees
its partners, by offering them stock options and health insurance.
As against rigorous customer surveys Starbucks chose casual and informal chats with
customers to gather their overall mood. All these clever strategies have enabled Starbucks
to build one of the most iconic brands that has continued to resonate with customers
across the world for more than fifteen years. That was until the economic conditions
started worsening.
Since early 2008, Starbucks has been forced to bite the dust and succumb to the aftermaths
of the recession. Founder Howard Schultz returned as the CEO. Cost cutting and efficiency
was made the guiding strategy. More than 800 Starbucks stores were closed in the US
alone. For the first time Starbucks invested more than US$200 million in advertising. And
for the first time in its history, Starbucks started price campaigns in select stores to lure
customers away from other price competitors such as McDonald’s and Dunkin Donuts.
These events beg the obvious question. Given such fundamental changes in the macro
environment, should iconic brands like Starbucks stay true to their strategic brand vision
or continually adapt to regain competitive advantage?
Regaining lost glory and recapturing global brand leadership should be a two-pronged
strategy. Iconic brands should strategically manage the dual process of continuous
innovation on the one hand and reinforce their guiding strategic brand vision.

Innovation Drives Strong Brands
Innovation is a fundamental building block of iconic brands. Leading brands create their
corporate strategies with an inherent strategic element encompassing innovation. Such
innovation is not limited to bringing new products to markets, but is expanded to innovation
in communication (with customers and other stakeholders) and innovation in
implementing cost-cutting and efficiency enhancing strategies. Such continuous innovation
serves dual purposes.
First, innovation enables iconic brands to refine and redefine their cores in line with the
changing needs. Second, innovation allows iconic brands to continually adapt to the
changing needs of customers, thereby protecting its competitive advantage.
Innovation should be practiced along with an organization wide brand vision, which acts
as the strategic blueprint of the brand’s path. Such strategic vision should not only delineate
the boundaries of the brand but also should chart out the possible strategies of the brand
Contd...

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