The Importance of Brand Segmentation

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Typical M&A

We’ve all heard this story before big juggernaut company buys smaller yet substantial competitor. Proceeds to re-brand the hell out of all of their locations. This translates into a lot of very unhappy customers who immediately swear off the big Goliath that decimated their beloved champion of whatever trade.

Starbucks Acquisition of SBC

I love the simplicity and intelligence behind the branding decisions of how Starbucks has used SBC to date. The best part of it is many of the people who swear they will never enjoy a Starbucks beverage, have no clue what the SBC beverage in their hand is.

SBC as a brand shield

Starbucks had plenty of opportunities to branch out and partner up with various other chains. The dilemma: how can you partner with McDonalds without ruining the premium name associated with Starbucks? Solution: you buy SBC and proudly serve SBC at every McDonalds. Instead of turning a company into a direct competitor or eroding the key brand, they’ve now got a licensee and additional revenue stream.

Separate, Different, Still Cash-flow

A proper segmentation strategy doesn’t cannibalize your business it offers a new channel and source of customers that your traditional business doesn’t align with. Its obvious the strength in Starbucks is the brand, after all in some markets there can be 3-5 coffee stands on 1 street corner. It stands to reason that SBC’s presence will do little to impact this.

Incubation Market

Having a secondary business unit enables Starbucks to create, test, and market new ideas without harm to the main unit if they prove unpopular. This can also be a way of testing out perception or where/why the Starbucks brand is failing or floundering.

The Viral Video

The point of a good viral is the shock value. Taking a team of SBC coffee slamming employees doing a late night urban branding warfare campaign at the Starbucks headquarters is an instant classic. It has that gorilla marketing feel, and if you’re not in on the dirty joke (that SBC is owned by Starbucks) it has quite a lot of shock value. For those people who are “Anything But Starbucks” it could resonate with them. Fun Stuff.

Conclusion

Branding is a powerful tool, especially in a high margin, high service industry like the specialty coffee business. Starbucks the king of the mountain isn’t beyond reproach and recognized this by aiming to build a successful also-ran brand in SBC.