• Business Week, Friday, July 11, 2008 12 PM

Chasing quarterly earnings growth targets undermined the Starbucks brand in three ways. First, the early adopters who valued the club-like atmosphere of relaxing over a quality cup of coffee found themselves in a minority. Starbucks increasingly appealed to grab- and-go customers for whom service meant speed of order delivery rather than recognition by, and conversation with, a barista. Many Starbucks veterans switched to more exclusive brands.

Second, Starbucks introduced many new products to broaden its appeal. These new products undercut the integrity of the brand for coffee purists, and challenged the baristas who had to wrestle with an ever-more-complicated menu of drinks. The brand experience declined as waiting times increased, and the price premium seemed less justifiable for grab-and-go customers.

Third, opening new stores and launching a blizzard of new products takes top management's eye off of improving same store sales year-on-year. This is the heavy lifting of retailing, where a local store manager has to earn brand loyalty and increase purchase frequency in his neighborhood one customer at a time.

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