Inside predictive brand loyalty metrics and the case of Starbucks coffee

1. September 16, 2010 Predicting Customer Loyalty

2. Do brands really need predictive metrics? © Brand Keys, Inc. 2010

3. Just ask GM… © Brand Keys, Inc. 2010

5. GM forgot the consumer doesn’t only shop, she dreams . . . © Brand Keys, Inc. 2010

6. © Brand Keys, Inc. 2010 Brands success is the degree to which the brand meets or exceeds what consumers want, need and expect in the category—both emotionally and rationally. Brands that do that, have equity. Brands that don’t, have problems.

7. Evaluate Brands = what already exists (present) Against Ideal = what consumers wish existed (future) © Brand Keys, Inc. 2010 How do you create brand success?

8. And implement . . . Where should we take the brand? How should we do it? Category Ideal and Brand Performance Hierarchy of Attributes, Benefits and Values © Brand Keys, Inc. 2010

9. The Ideal A consumer-centric view of the category in which the brand competes, letting it understand how consumers view, compare, and choose among category options. © Brand Keys, Inc. 2010

10. Brands are evaluated against the consumer’s Ideal of what matters most! What’s most important to me is . . . I expect . . . © Brand Keys, Inc. 2010

13. And we’ve got the numbers to prove it… © Brand Keys, Inc. 2009

14. Correlation of Brand Keys Loyalty Metrics to Brand Imagery: Ralph Lauren © Brand Keys, Inc. 2010

15. Correlation of Brand Keys Loyalty Metrics to Actual Purchases: Dove Soap © Brand Keys, Inc. 2010

16. Correlation of Brand Keys Loyalty Metrics to Actual Purchases: Kate Spade Holiday Shopping 2008 © Brand Keys, Inc. 2010

18. Independent Validation: Read The ARF’s First Opinion Research Review on the Brand Keys Engagement Method at www.brandkeys.com © Brand Keys, Inc. 2010

19. Some of Brand Keys Clients © Brand Keys, Inc. 2010

23. FUSING Indirect Emotional Inquiry Psychological Jungian-based Personification Questionnaire Direct Inquiry Category Attributes, Benefits & Values Customer Expectation Levels 70% 30% Factor Analysis + Regression Analysis + Causal Path Modeling

24. Customized Applications Ideal 2. Predictive Category Dynamics 3. Brand Health and Brand Planning 4. Media Optimization 5. Communication Testing 6. Research Optimization 1. Brand and Brand Equity © Brand Keys, Inc. 2010 vs.

25. The Starbucks Loyalty Story © Brand Keys, Inc. 2010

26. Loyalty Drivers – Order of Importance Customer Expectation Levels Highest Lowest 1 1. Loyalty Drivers in order of importance. 2. Percent contribution to future purchase/loyalty. 3. Customer Expectation level for each Driver. High = Differentiator 2 Percent of Contribution #1: How do consumers view the category? #2: What is the hierarchy of contribution to loyalty? #3: Where’s the opportunity for greatest differentiation? STRATEGY How Do They Buy in the Category? 2006 Ideal Coffee Provider © Brand Keys, Inc. 2010 3 Low = Table Stakes

27. TACTICS Percent-Contribution of Individual ABVs Driver #2: Service & Surroundings (28%) © Brand Keys, Inc. 2010

28. Customer Expectation Levels 2006 Customer Loyalty Engagement Index: Coffee Starbucks dominates in the driver with strongest customer expectations. © Brand Keys, Inc. 2010 Loyalty Drivers – Order of Importance Highest Lowest

29. Customer Expectation Levels As customers articulate the increasing importance of Service and Surroundings at the start of ‘07, Starbucks loses it strength to Dunkin’ Donuts. 2007 Customer Loyalty Engagement Index: Coffee © Brand Keys, Inc. 2010 Loyalty Drivers – Order of Importance Highest Lowest

30. What Happened? © Brand Keys, Inc. 2010

32. Customer Expectation Levels Service and Surroundings are most important to customers at the start of ’08; Starbucks continues to struggle in the category they largely shaped. 2008 Customer Loyalty Engagement Index: Coffee © Brand Keys, Inc. 2010 Loyalty Drivers – Order of Importance Highest Lowest

33. © Brand Keys, Inc. 2010 In-Market Validation Year Brand Equity Index Brand Keys Rankings In-Market Realities 2006 109 Dunkin’ # 2 Dunkin’ institutes new strategy 113 Starbucks # 1 Starbucks is a thriving brand 2007 115 Dunkin’ # 1 Dunkin’ 11% system wide sales. 5.2% same-store sales 109 Starbucks # 2 Starbucks share price 43% 2008 115 Dunkin’ # 1 Dunkin’ Restaurant Marketer of the year. Same-store sales 7% 107 Starbucks # 3 Starbucks closes 1,000 stores 2009 118 Dunkin’ # 1 Dunkin’ opens 1,500 th store 106 Starbucks # 3 Starbucks to close 600 stores. Same-store sales 5%

34. What is Starbucks Doing? © Brand Keys, Inc. 2010

35. Introducing New Varieties … © Brand Keys, Inc. 2010

36. Offering Coupons … © Brand Keys, Inc. 2010

37. Advertising … © Brand Keys, Inc. 2010

38. And Finally… © Brand Keys, Inc. 2010

39. To create loyalty, first find out what makes it happen . . . © Brand Keys, Inc. 2010 then implement the right strategy, using the right tactics!

40. Thank You! A blind pig may find truffles, but it helps to know that they grow under oak trees. — David Ogilvy (1911–1992)

41. Thank you for your attention. Robert Passikoff President, Brand Keys, Inc. 212-532-6028 x12 [email_address] www.brandkeys.com Amy Shea EVP, Brand Keys, Inc. 212-532-6028 x14 [email_address] www.brandkeys.com