Starbucks marketer Ian Cranna on changes at the coffee chain

By Gemma Charles, marketingmagazine.co.uk, Thursday, 19 April 2012 10:00AM

Starbucks' coffee giveaway last month certainly attracted publicity, but major challenges loom for its UK vice-president of marketing

Ian Cranna

Ian Cranna

Starbucks has earned its reputation as a digitally focused business adept at deploying cutting-edge techniques. Last month, however, it turned to the oldest marketing trick in the book to launch its personalisation drive and stronger lattes: the giveaway.

Anyone who visited the coffee chain on the morning of the promotion is likely to have encountered queues around the block for the free lattes. At the same time, the chain's baristas started wearing handwritten name badges and asking customers their name. The initiative was publicised by a one-off, 60-second TV ad the day before.

Explaining the promotion, fittingly over a coffee, Ian Cranna, who was appointed as Starbucks UK and Ireland vice-president of marketing at the end of last year, says: 'We had some roundtables with customers and what we heard was that people who were passionate about coffee knew the barista's name, and their barista knew their name.'

He adds: 'Life is less personal these days. You get up, get on the Tube, and there's a grey sea of faces, and then you come to Starbucks, the grey turns to colour, the baristas smile, say "hi", and know who you are.'

Pricing strategy

In general, Brits want a stronger coffee hit. Over the past two years, the number of Starbucks customers buying an extra shot has increased by 60%. This now comes as standard in espresso-based drinks, but Starbucks is not changing its pricing, so those accustomed to paying for an extra shot will now shell out 14% less for their drink. The rationale, adds Cranna, is that Starbucks' focus-group research showed how important the 'value piece' is to customers.

This is not just an altruistic measure, however. Michelle Gass, Starbucks EMEA president, was reported as saying that she expects the cost of the extra shot to be offset by increased latte sales.

Starbucks is one of those brands that provokes strong opinions and the latest activity was no exception, prompting much debate about whether the hype generated was worth the cost of the free coffees.

Cranna, who went on a multi-store tour from Canary Wharf in the east of London to the centre of the capital that day, claims the promotion was an 'unprecedented success'.

The stats provided by Starbucks look impressive: 2000 lattes a minute given away between 8am and 9am, and 25,000 tweets with the hash tag #freestarbucks. The figures reveal little, however, about the promotion's long-term effect on the bottom line.

Costa's expansion

Pinning the likeable Cranna down about specifics is not easy, as he is a cautious interviewee. For example, after revealing the not particularly illuminating fact that one in two Starbucks customers buying coffee also buys a food item, he asks the PR entourage listening in whether he is allowed to say this.

He will not be drawn on wider sector trends, such as the effect of McDonald's stepping up its focus on the sector with its 'Full Bean' range or the rapid expansion of Costa, the UK's biggest coffee chain.

Whether it is a deliberate ploy or not, Cranna also avoids saying anything that portrays Starbucks as a big business with commercial goals and has a habit of lapsing into touchy-feely jargon or what his boss, UK managing director Kris Engskov, has referred to as 'Starbucks-speak'. Nonetheless, he seems to talk from the heart when the subject turns to Starbucks' values.

What he found when he joined in 2004 - and says still holds true - is that the business wanted to be 'successful, not only in the commercial sense, but recognising the importance of the environment and society'.

'The people who uphold our values are the people that work in the stores,' adds Cranna. 'If we do something that is not as well tied to our values as it could be, the person I hear from straight away is a barista.'

Fresh positioning

It is for this reason that baristas will take centre-stage in Starbucks' marketing efforts through a press and digital push created by Abbott Mead Vickers BBDO. A year ago, Starbucks introduced 'You & Starbucks: It's bigger than coffee', which was lauded as its fresh global positioning. So why the change?

Cranna claims that Starbucks likes to 'do things differently every time' but adds that the link between the past and current campaign is 'the people connection'.

While it may appear to Londoners that there is a Starbucks on every corner, by UK store numbers it is a distant second to Costa, which has more than 1300 outlets to Starbucks' 607. According to its 2011 annual report, in the year to October 2010, Starbucks closed 65 stores in the UK and the following year recorded a net increase of just six stores.

This looks set to change, however, as Starbucks plans to open 200 'drive-thru' outlets and 100 conventional stores over the next four years.

The company has its eye on expanding into other areas; hence the ditching of the word 'coffee' from its branding last year.

In November 2011, Starbucks entered the premium juice sector with the $30m acquisition of Californian juice-maker Evolution Fresh, opening the first branded store in the US in March. It has also moved into the energy-drink sector with the launch of Refreshers, a canned beverage containing fruit juice and green coffee extract.

'We want to make sure that wherever our customers want Starbucks products, they can have them,' is Cranna's summation of the strategy.

Extended presence

Starbucks Via, the company's instant-coffee brand, is there for the consumer who wants quality coffee on the go, while its whole-bean coffee products have been sold in UK grocery channels since 2006. More recently, Starbucks has extended its retail presence to chilled coffee and Frappuccino products and mounted an assault on the coffee-pod machine sector last month, with Verismo by Starbucks.

Of Verismo, Cranna says that with the premium single-cup segment being the fastest-growing area of the global coffee industry, 'it's right that we are part of that'. Verismo has yet to launch in the UK but when it does, it may need serious marketing investment, as it is late to the party in a sector where Nestle's Nespresso, the global market leader, has a strong foothold, backed by ads starring George Clooney.

One area where Starbucks has made the running, though, is digital. Free wi-fi is in all branches, and in partnership with Apple, it offers a free iTunes music track or book to download every Monday in-store. Instead of waiting for NFC to gain greater traction, Starbucks developed an app that allows consumers to pay using their smartphones. In the UK, only iPhone owners can make use of this, but Cranna says it will soon be available for Android handsets.

Starbucks has a dedicated social-media team in-house, whose job it is to have meaningful conversations with consumers. Cranna argues that Facebook and Twitter are primarily for engagement.

'Of course we will use the channels to help (consumers) understand what we are doing, but what customers want in that space is engagement, not marketing,' he explains. One of Cranna's goals is to build on what he learned from running the US Frappuccino business, where the marketing is geared more toward digital because of the 18- to 24-year-old target audience, to the UK.

US expectations

While like-for-like sales have grown for 10 consecutive quarters in the UK, this may not satisfy Starbucks HQ in Seattle. The business reorganised last year to a structure with three divisions, including EMEA, to help it perform better outside its US heartland.

Gass, who is credited with helping chief executive Howard Schultz turn around the US business four years ago, is formulating a 'renaissance' plan for EMEA; in January, chief financial officer Troy Alstead admitted the region was 'under-performing'. Around the same time, Brian Waring, Cranna's predecessor who was promoted to vice-president of marketing for EMEA at the start of the year, left after eight years, with no explanation from Starbucks. While there is no suggestion his departure is linked to the reorganisation, change is clearly in the air.

Its new loyalty programme, for example, could be interpreted as a harder approach. 'My Starbucks Rewards', introduced at the beginning of the year, drew grumbles from some consumers, who felt that the old programme was more generous.

As the freebie coffees fade in the memory and a renewed push on making the numbers kicks in, Cranna will have to make sure his mission to connect with Starbucks customers remains on course.

THREE CHALLENGES FACING CRANNA

- Meet the demands of the 'EMEA renaissance' set out by the region's president, Michelle Gass.

- Fend off increasing competition from McDonald's and the UK's biggest coffee chain, Costa.

- Win over customers who argue that the revamped loyalty scheme 'My Starbucks Rewards' is not as generous as its predecessor.

CV

- Merchandise manager, BHS (1993-1997)

- Manager inventory planning and retail liaison (Calvin Klein underwear and accessories) Warnaco (1997-2000)

- Head of trading, Habitat UK and France (2000-2004)

- Trading manager and various roles at Starbucks in Seattle and Amsterdam, rising to vice-president marketing and catergory, Starbucks UK and Ireland (2004-present)

PERSONAL FILE

Lives West London.

Family Wife and two daughters.

Hobbies Travelling. 'I love different sights, different smells and different food.'

Favourite brand apart from Starbucks Apple.

And another thing Cranna has always preferred coffee to tea.

THE CAMPAIGN

The Olympics overhaul: Branches and baristas

Starbucks has embarked on an £8m renovation programme of 70 of its London stores ahead of this summer's Olympic Games and the Queen's Diamond Jubilee celebrations.

Six outlets in desirable locations will be given treatments aimed at celebrating British architecture. One of the stores, on Vigo Street, near Piccadilly Circus, has marble columns, a mother-of-pearl ceiling and a vintage chandelier. Another on Brushfield Street, near Spitalfields Market, has been extended from two floors to three.

Separately, the coffee chain introduced a press and digital campaign last month featuring six of its baristas, with the aim of showcasing its 'obsession with getting every coffee right for every customer'.

STAT ATTACK

65 - Net decrease in number of UK Starbucks stores in year to October 2010

6 - Net increase in number of UK Starbucks stores in year to October 2011

Source: Starbucks

This article was first published on marketingmagazine.co.uk

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