BRAND LOYALTY: A

STUDY WITH
REFERENCE TO
STARBUCKS
(Phase II)

By Group 11

Baruni Goel 18P132

Kaushal Dhanuka 18P146
Madhav Khandelwal 18P148
Shreya Gupta 18P168
Vishal Agarwal 18P177

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Literature Review
Starbucks Experience

The entire idea of Starbucks is to create a “third place” where people can hang out besides their
home and workplace. They can sit, relax, socialize, listen to good music and most importantly
have a cup of coffee that is made according to their taste. Starbucks creates an ambiance in
which consumers perceive they can live. They have gone out of their way to get their customers
to live there, by providing things like oversized couches and free WiFi. The average Starbucks
consumer frequents a Starbucks at least 18 times a month and 10% of those, tend to visit twice
a day. They offer a wide variety of products including packaged goods like cookies, sandwiches
and pastries, which ensures that people come their throughout the day and not only in the
morning.
Starbucks is enhancing the customer experience by doing the following things -

 Personalization - Their ambience is relaxed and consists of elements that would exist in
your local cafe where you can just sit and relax. You can specify all the different
requirements that you have for your coffee and the barista’s follow that to a tee. For
customers who use a Starbucks every day, baristas even remember their regular orders
to improve the experience. Lastly, the name writing and calling exercise is the best way
to make a customer feel completely attached to the brand.
 Seasonal Favourites - Every festive occasion Starbucks launches different drinks for
the customers to enjoy and experience new drinks. They also launch drinks according to
seasons. This makes sure that the regular customers have something to look forward to
and are never bored.
 Loyalty Program - Membership rewards have been commonplace for some time, but
Starbucks has mastered the system. The company has created a loyalty rewards system
where its customers gain rewards on all their purchases within the family of Starbucks
products. Members earn "stars" on everything from coffee drinks to accessories, from
grocery store purchases to purchases at Teavana. When customers initially sign up,
they are placed at the welcome level with no real perks except a free drink on their
birthday. At only five stars, or five purchases, consumers gain access to a green
membership. With a green membership, customers receive free refills on their coffee,
iced coffee and tea purchases when they visit stores. Then at 25 stars, or 25 purchases
within 12 months, consumers will receive the prized gold membership, along with a gold
card in 4-6 weeks. Every 12 purchases the member earns a free drink as well as other
special offers from time to time. Starbucks has begun to roll out its rewards system in the
majority of its markets, including China. In two years the company has built a base of
more than 3 million members in the U.S., and they now account for 35% of transactions
in its stores.

Brand Loyalty

The marketing literature states brand loyalty to be an interplay between the consumer’s attitude
and his/her repeat purchase behavior. When a customer repetitively buys a brand in a
systematic manner, and has an emotional attachment to the brand, we can term it as brand
loyalty.

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Attitudinal loyalty deals with how a consumer develops a strong tie with not only a brand, but
also the employee, thus allowing the purchaser to pay premium prices for that product.
Attitudinal loyalty is how one associates with that brand. Emotional attachments are related to
attitudinal loyalty and occurs when a consumer has a preference for a particular company’s
offering in terms of products or services over competing brands. Customers like this, are the
ones who encourage family and friends to experience brands, such as Starbucks, BMW and
Harley Davidson.
The behavioral aspect of brand loyalty measures the behavior of the consumer on the following
aspects:
1) How much of the item does a consumer buy
2) How often does the consumer purchases the product
3) The redundancy in purchasing the product
In other words, behavioral or purchase loyalty is the repeat purchase behaviour of a customer.

Loyal consumers can be distinguished from non-loyal consumers in the following ways;
1) Loyal consumers buy the same items again and again
2) They also look at other product categories that the core brand has to offer
3) They are also strong ambassadors of the brand and help the brand with positive word of
mouth
From the company’s perspective, brand loyalty is important to the bottom line in three ways:
higher sales volume, the ability to price in a premium manner, and customer retention.

Factors that Affect Brand Loyalty

Following are the factors that are known to affect Brand Loyalty -

Perceived Service Quality - It is the measure of belief that the customer has in the quality of
your service both in terms of what is expected and how consumers perceive the quality of other
competing brands. It has its links with the levels of satisfaction and focuses mainly on cognitive
behaviour.

Costs - Costs can be classified as Economic and Transaction Costs. Economic Costs are
further classified into monetary and non monetary costs. Monetary costs represent the amount a
consumer spends on any product or service. Non monetary costs represent the service time,
basically the service provided to impress the consumer. Transaction Costs are too non
monetary in nature and they occur during the exchange process between the consumer and the
company.

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Situational Factors - In popular context situational factors represent the perceived opportunity
for engaging in attitude-consistent behavior, incentives for brand switching through reduced
prices of other competing brands, and effective point of sale promotions that might increase the
mind share of a competing brand over one normally preferred by the customer.

Perceived Value - It represents the consumers’ overall assessment of the product utility on the
basis of what was expected and what was provided. In cases where consumers feel that the
value provided to them is higher than what was expected, chances of a repurchase are much
higher.

Satisfaction - It represents the response that is generated from the consumer side after they
have had access to a particular product or service. It is imperative for brands to improve
customer satisfaction in order to improve Brand Loyalty. It is one of the most important pillars in
the process of building Brand Loyalty.

Building Brand Loyalty

In today’s market, Brand Loyalty is a part which most companies like to establish, but always
remain in a fix as to how to go about it. In this part, we shall be taking up certain aspects which
will show how to build brand loyalty for a brand.

Brands need to be focussed more on the customers than on sales, because satisfied customers
are going to drive more sales for them. If they go the other way round, then eventually, the
customer base will decrease and there will be no brand left to build. Loyal customers are a
company’s most precious asset, and they need to be retained.

Following points describe how a Brand can go about building a loyal customer base for itself:

1. Engaging the customer: The best a company can do is be in constant touch with its
customers. That can be done by keeping them updated on their recent events, latest updates,
current offers, regular interaction, etc.

2. Providing good customer service: A brand must pay attention and understand its customers.
Regular customers must be provided certain incentives over the others, and also be made to
feel privileged. Once a customer is satisfied with a brand’s service, he/she will have a top-of-
the-mind recall of it.

3. Building brand awareness and brand promotion: Brands must make sure they are visible at
the right place and to the right people. In order to build a positive brand image, they must relate
to the customer. When consumers consistently see a product, such as Starbucks, and have
more opportunities to use and purchase the product, the more likely customers will be aware of
it.

4. Stay relevant and focussed: The brand must focus on a fixed target group and not try and
reach everyone in the market. They must keep themselves updated with what their competition

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is doing, what the current trend is and modify their offerings according to that so as to stay
relevant to the target group.

5. Keep innovating: As mentioned in the above point, the company must keep innovating so as
to stay relevant to its customers, and offer them good options when they come back to the
brand.

6. Make it a memorable experience: Any customer will come back to the brand only if the first
encounter is worth remembering and worthy of visiting again. Hence, the brands must make
sure that whoever is interacting with their brand, it is worth their time!

Hypothesis
The objective of this study is to determine:
 What factors influence brand loyalty for Starbucks and which ones are relevant to the
hospitality industry
 To study the brand identity of Starbucks

Based on this we would like to test whether perceived service quality, costs, situational factors,
perceived value and satisfaction affect the brand loyalty of Starbucks? We would also like to
check if there are any other relevant factors that affect its brand loyalty.

Research Methodology
The research methodology would involve content analysis: of academic and non-academic
articles and literature. This would also involve analysis of responses from a primary research
aimed to understand the loyalty expressed by customers of Starbucks.
For academic articles and literature, sources such as Google Scholar, Proquest and Elsevier
would be primarily used. For non-academic literature, primarily the Google search tool would be
used.
The expectation is to collect data and content from secondary sources as mentioned, and
analyse the same to understand the factors affecting brand loyalty for Starbucks.
Basis the primary research responses, insights on the most recent consumer behavior and
loyalty perception for Starbucks could be determined. This could be complemented with the
findings of the content analysis to arrive at a better conclusion.