Coffee Cools Down. Especially at Starbucks.

With the weather being some of the hottest in decades, one might think that iced coffee sales would be going through the roof. But if Howard Schultz, founder and CEO of Starbucks, seemed a bit jittery, it wasn’t from too much caffeine. Analysts’ confidence were apparently on the decline when the company posted what they felt were disappointing earning results. And the share price fell nearly $5 at close of trading Friday.

Starbucks has not been climbing on our Customer Loyalty Engagement Index either. Current overall rankings look like this, with Starbucks moving down a little in terms of customer engagement, and McDonald’s moving up a little:

1. Dunkin’ Donuts
2. McDonald’s/Starbucks
3. Tim Hortons

Customer expectations almost never go down, and that’s even truer in the out-of-home coffee category, where the increase in the number of specialty providers attests to that. Oh, and an increase in the number of varieties on offer, all appealing to coffee aficionados’ palates and a renewed desire for novelty – including iced espressos, chocolate cappuccinos, Japanese-style iced coffees – brewed hot and an alternative to cold-brewed iced coffee – Stumptown’s famous “Bernice,” and New Orleans-style chicory flavored café au laits. So it wasn’t surprising to find that the biggest expectation jump – nearly 25% – was in the Innovation/Variety/Specialty category engagement driver.

And if you look at the brands in terms of how they are seen as innovators (whoever thought the day would come when brands like these would have to innovate beyond serving up a decent cup of joe!?), the rankings stay pretty much the same, but the innovation/variety/specialty numbers tell the real story:

1. Dunkin’ Dounts 91%
2. Starbucks 89%
3. McDonald’s 85%
4. Tim Hortons 79%

It’s been said that behind every successful man or woman is a substantial amount of coffee (variety notwithstanding). But over the 24-hour-period from last Thursday afternoon to Friday afternoon Mr. Schultz’s stake in the world’s largest coffee purveyor evaporated by $151 million dollars. 

And even at Starbucks' prices, that's an awful lot of coffee. 

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Controversy Fizzing Over New York City Soda Ban

New Yorkers – not known for their reticence making their opinions known – gathered at the NYC Board of Health yesterday for a public hearing on the Mayor’s controversial proposal to ban large-sized sodas and sugared drinks from restaurants, sports arenas, movie theatres, delis, and outdoor food vendors.

Nutrition experts and beverage industry reps showed up to face off about the proposed ban scheduled to take effect in September. OK, yes, it’s only happening in New York City. Now. There are likely to be national repercussions. Look what happened with calorie counts on menus and smoking bans. 

But back to soft drinks. Looking at our Customer Loyalty Engagement Index for Regular, i.e., sugared sodas, here’s how they rank when it comes to being “good for you,” the category attribute, benefit, or value we have that comes closest to the health objections Mr. Bloomberg has raised with his proposal:

1. Coke
2. Sprite
3. Pepsi
4. 7-Up, Mountain Dew
5. Dr. Pepper, Fanta

Nutritional experts and doctors, of course, favor the ban prohibiting the sale of any sugar-sweetened beverage over 16 ounces, arguing that large portions make it easy for people to over-consume and that over-drinking is easier than overeating. Critics cite this as another example of government over-reaching into people’s lives. And when it comes to putting on weight, there are lots of products you could point to.

The spiritual teacher, Buddha, noted, “every human being is the author of his own health,” a thought that might well be toasted by everyone. But given the circumstances, perhaps it would be best done with a glass of New York City’s world-renowned drinking water!

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Being Thoroughly Awake to Your Automotive Options

As anyone who’s ever bought or leased a car knows, beyond basic transportation there’s always a list of optional extras--ABS, surround-sound, tinted windows, cruise control, coffee maker. You know, the usual. Wait, coffee maker? Have we mixed up categories? No, you read right, coffee makers.

Fiat, once known for the acronym Fix-It-Again-Tony, more recently known for Jennifer Lopez ads, has announced that its 500L model will be the first car in the world to come standard with a Lavazza espresso machine, making its debut in Italy before buzzing across Europe.

OK, cards on the table. Our Customer Loyalty Engagement Index covers the automotive category and we have lots of attributes, benefits, and values (including options), so usually we can accurately predict what percent-contribution a change to a car can make to engagement, as we did years ago with the 4th door on the minivan.

But in this case we don’t include anything about coffee makers, so we’re not exactly sure into which category engagement driver we might look to see how strategically leveragable caffeinating a car brand actually is. We can, however, comment as regards innovation, a critical category driver when it comes to engagement and loyalty. After all Italy is known for design and innovation and coffee. Wasn’t it at an Italian cafe that Howard Schultz got the idea for Starbucks?

Anyway, here’s the top-7 automotive brands when it comes to “innovation.” After 7 they’re all viewed in pretty much the same way.

1. Mercedes
2. BMW
3. Toyota
4. Ford
5. Fiat
6. Mini Cooper
7. Jeep

As you can see, Fiat came up #5. Maybe it’s that Italian heritage they’ve got working for them. And maybe Fiat felt that today’s drivers needed more distractions while operating a couple tons of metal, plastic, rubber, and glass. Or maybe drivers needed something to keep them awake while sending text messages and reading emails.

Before anyone turns into a tempest in a demitasse, you should know that Fiat says that the machine will only work when the vehicle is stopped. We’re not sure about how desirable an in-car coffee machine is going to be for Italians who like their long leisurely lunches, usually on a sun-drenched piazza.

But Americans love innovation and eating and drinking on the go. Keep in mind that while we didn’t invent the in-car coffee machine concept, we did invent the drive-thru.

Someone once defined the word “forever” as the time to takes to brew the first pot of coffee in the morning. Now, if you drive a Fiat, forever just got a lot shorter.

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The Retail Recession

U.S. retail sales have declined for three straight months in a row, and, as anyone who took Econ 101 knows, weak employment numbers buttress weak spending, Despite lower gas prices, unemployment doesn’t help. Even for those with jobs, marketplace despair and ennui seems to be sapping consumer confidence.

This is the longest losing streak since 2008, when the economy generally, and retail specifically, imploded. That experience did, however, teach companies to introduce tighter inventory controls, so retailers are likely to cut back on orders to keep inventory, consumer spending, and their bottom lines in some sort of sync.

Smart brands continue to build engagement and loyalty between their consumers. And while loyalty and real engagement are, in fact, leading-indicators of profitability, they are not, unfortunately, a guarantee of overall economic consumer confidence. But loyalty is better than no loyalty and is almost always a guarantee that you won’t have to market your goods on price and promotions alone. Even in a bad economy, the “Rule of Six,” kicks in, to wit: loyal customers are six times more likely to rebuff competitive offers. Especially price-based offers.

According to the consumers themselves via our Customer Loyalty Engagement Index, here’s how Department Store brands currently rank when it comes to loyalty and engagement, which matches up pretty well when it comes to actual profits:

1. T.J. Maxx
2. Marshall’s
3. Macy’s
4. Dillard’s
5. Kohl’s
6. Sears
7. JCPenney

The Rule of Six does, however, comes with some reassuring metrics when it comes to consumer confidence. Consumers are six times more likely to think better of you, and six times more likely to recommend you to friends.

And based on the current economic climate, retailers can use all the friends they can get!

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Just In Time: More Apps. And A Webinar to Show How to Optimize Your Digital Advertising

NBC is launching two free Olympic mobile apps. They’re available only to pay-TV subscribers who have MSNBC and CNBC as part of their service. Consumers can watch events and will also be able to look up athlete profiles. They’ll be able to do that on iPads, iPhones, and some Android devices. Oh, and there’ll be advertising too. OK, no surprise. You expected that with a free app.

NBC says it’s the first time all 3,500 hours of Olympic events will be available on smartphone and tablet computers. But given the time-line of smartphone and tablet invention, introduction, and adoption, that’s not quite the mindboggelingly astonishing statement it must have sounded like when they wrote the press release, but, hey, it’s the Olympics and it’s apps!

Production and adoption chronology notwithstanding, it turns out that 50% of U.S. mobile subscribers now have a smartphone. Oh, and not totally unconnected, accelerated smartphone adoption has been accompanied with the acceleration of app downloading, with that acceleration the average number of apps per smartphone has jumped 66%, from an average of 30 up to 49. Most, not surprisingly, have ended up on iPhones, followed by Android devices, and a much, much smaller number of Blackberry devices. Yeah, no surprise there either. No surprise too, that there are more studies out there about the “top apps,” all based on “time-spent.”

Time-spent is one of those interesting factoids that are easy to read, but – when it comes to incorporating advertising on apps (or any other digital platform) – doesn’t have a lot to do with real engagement. What does is the fact that when it comes to real engagement, digital works very differently category-to-category, so the most challenging issue currently facing brands is connecting their brand strategy to digital technology.

We’re going to address that, tomorrow, July 18th, at noon ET when we’ll present “We’re on Facebook. Now What?” It’s real data on three categories and 14 digital platforms that demonstrate how the critical locating the intersection point of emotional and rational category dynamics and use of digital communication platforms in the category can be in marketing and advertising.

To register for this free presentation of findings from one of the largest syndicated studies ever conducted on digital and brand engagement, go to this link.

By the way, we managed to do this via a consumer engagement-based Digital Platform GPS that is predictive of consumer behavior in the marketplace.

Watch for the app!

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When You Can’t Change Brand Equity, There’s Always Your Logo

The 35-year old pizza chain, Chuck E. Cheese, introduced a new mouse logo – a mouse dressed in blue jeans, a tee shirt, carrying an electric guitar – in the hope that it will re-boot its brand equity and get a new generation of children engaged with the brand and into their locations.

The chain could certainly use something to spice up the brand. Currently Chuck E. Cheese ranks next-to-last in our Customer Loyalty Engagement Index, with the big chains looking like this:

1. Domino’s
2. Papa John’s
3. Pizza Hut
4. Godfather’s
5. Round Table
6. Chuck E. Cheese
7. Little Caesars

Logos, it turns out, 99% of the time, end up being a component of the Corporate Reputation driver, which makes perfect sense.

But one logo doth not make an entire pie, keeping with our theme. In the new animated advertising, the new mouse will be voiced by Jaret Reddick, the punk-rock band front man. The theme – “Chuck E. Rocks.”

This is a process companies generally go though when they have reached a point were traditional marketing options have ceased to effectively address problems with flagging brand shares and increased levels of consumer ennui.

Maybe the new logo will end up resonating with consumers. How bad could it be? It’s pizza, after all.

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J. Crew, Chanel, Polo, and Nike Make Brand Keys 2012 Top-15 Fashion Brands

For those of you out there who think brand and fashion have broken up and don't even go to the same parties anymore, think again.

Brand continues to pull at the heartstrings of consumers after the economic free-fall of 2008, when only 8% of consumers said they cared all that much about brands. Well, according to 7,500 men and women, 21-65 years of age, drawn from the 9 U.S. Regions, this couple is back on after their break, with nearly a third of consumers saying brands are an important factor in their purchase decision – more than tripling in importance in the last four years.

This fashion trend has been confirmed by recently reported retail sales where high-end retailers, i.e., those selling brands, have done significantly better than retailers selling predominantly on price. Ralph Lauren, Armani, and Major League Sports brands led this year’s list.

So, what was it exactly that put the spark back in this union? A little something called meaning, which is a big factor in how people decide what something is worth to them. In fact, the change in the economy was what drove up the importance of true brands – brands that actually stand for something in the minds and hearts of consumers.

For the back-story on what brands made the all right moves in this successful consumer romance, click here for more on our Fashion Brand Index study and to see how real brands ranked.

By the way, it’s not only consumers who feel this way. Professionals too. The legendary designer Giorgio Armani once noted, “The difference between fashion and apparel is brand.”

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