Brand Psychology: Luxury Watches as a Brand Extension for Starbucks

This report explores the brand psychology behind Starbucks' brand extension into luxury watches. It discusses the market opportunity, benefits, and brand proposition, including the unique selling proposition, brand values, brand personality, and brand identity.

Brand Psychology

EXECUTIVE SUMMARY
The following report is based on Starbucks which is a coffee and coffee house chain. This
entity currently deals in provision of beverages of different aromas and flavours. To enhance the
brand positioning, management of this firm is executing brand extension by coming up with
luxury watches in market. The new product will be launched for a number of occasions such as
formal, casual, males, female, gift purpose etc. The luxury watches would also work as a fitness
band with heart beat measuring instrument. STP analysis of new brand portrays that the market
would be segmented demographically whereby Starbucks will target individuals belonging to
age group of 24 to 60 coming under middle and elite class. The positioning of this would be done
by way of digital marketing and social media. Premium pricing strategy would be used for
luxury watches so as to be perceived as a product of high value by the people.

Table of Contents
EXECUTIVE SUMMARY.............................................................................................................2
INTRODUCTION...........................................................................................................................1
Brand Audit......................................................................................................................................1
Overview of the Brand................................................................................................................1
Current market share and major competitors..............................................................................2
How the brand’s products and services are currently marketed and branded.............................2
Brand Segmentation, Targeting and Positioning........................................................................3
Product/Service Idea........................................................................................................................4
Describe and justify why your new product/service is an attractive market opportunity...........4
Benefits of Brand extension for the branded company...............................................................5
Brand Proposition............................................................................................................................6
USP, brand values, brand personality, brand identity and demonstration of how these are
mutually supportive.....................................................................................................................6
Brand Execution...............................................................................................................................7
Overview of price, place and promotion strategies for the extension along with discussion
over how these will support brand values, personality, and identity..........................................7
Importance of Persuasion to brand..............................................................................................8
Measurement....................................................................................................................................8
Suggest and justify appropriate brand measurement techniques for your new brand launch.....8
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

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.
(Source: Market Share of Starbucks, 2020)
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
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Illustration 1: Market Share of Starbucks

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
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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
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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. ‘
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.
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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.
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.
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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.
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
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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.
Importance of Persuasion to brand
Persuasion can be referred to as the process of positively influencing the consumer purchase
behaviour 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
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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.
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 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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REFERENCES
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attractiveness and consumer–brand identification. Journal of Business Research, 69(8),
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side effects. Health Psychology, 35(2), p.187.
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