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Starbucks Forges 'Moments of Connection' By Offering Experience

Coffee Marketer Doesn't Spend Much on Advertising, but Gets Closer to Consumer With Digital, Social Media

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Starbucks has long been something of a curiosity in the marketing world because it has spent so much less on traditional advertising than other big chains. And yet, it's been doing better than what almost anyone expected from it a few years ago.

Going Blonde: Starbucks is introducing its lightest roast yet.

By 2007, the average number of transactions per store fell, and a leaked memo by then-chairman Howard Schultz said that some of the chain's decisions "have led to the watering down of the Starbucks experience and what some might call the commoditization of our brand." Mr. Schultz placed some blame on himself, and pointed to the disappearance of the in-store coffee scent and the mass-chain feel of the stores as downfalls.  In January 2008, Mr. Schultz again took hold of the chief executive reins and announced sweeping plans -- including the closure of underperforming stores -- for the ailing company's turnaround, pinning much of its comeback on customer experience and innovation. Since then, the chain has unveiled a number of successful products, including its surprise hit oatmeal and what it called the first innovation in the instant-coffee category in decades, Via. It's also upped its traditional marketing tactics and bet big on digital and social media.

After kicking off this past year with a massive brand relaunch, including a new logo that signaled its intent to "think beyond coffee," the chain has been aggressive in its product rollout. It released a line of Bistro Boxes aimed at offering healthier fare and has gotten more aggressive in the grocery aisle with new products like its K-Cups single-serve offerings. In October, the chain said it would launch a "blonde" roast, its lightest offering yet, in an effort to capture a bigger share of the U.S. coffee market; it also announced an overhaul in its packaging.

In its most recent quarter, Starbucks posted an 8% gain in both U.S. same-store sales and global sales.

Offering products customers want and giving them a good experience is a form of marketing for the company. Annie Young-Scrivner, global CMO, calls the customer experience "moments of connection" -- those few minutes the company has with its customers, which can make or break how customers feel. "We have one moment to make [the customer's] day," said Ms. Young-Scrivner. She added that listening to and engaging with customers "has allowed us to stay very fresh" on customer needs with the help of sites such as MyStarbucksIdea, a forum where customers can make suggestions.

Although Starbucks in 2010 doubled its spending, according to Kantar, it still only spent $97.6 million -- just about 1% of the chain's system-wide U.S. sales. In the first half of this year, it allocated $14.8 million for TV out of a total of $51.8 million, and the upcoming January launch of blonde coffee will include national TV advertising along with digital and social media.

Starbucks agencies are creative shop BBDO, which it's been with since late 2008, media agency PHD, both of New York, and digital shop Blast Radius, Vancouver.

Marketing initiatives this year include social-media efforts and advertising for Frappuccino -- which the company said has been the most engaging product on Facebook in the last year -- as well as a digital scavenger hunt featuring Lady Gaga. The chain also promoted its 40th anniversary with, among other things, MyStarbucksSignature, a website that lets customers create customized drinks.

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