The impact the Taxation scandal had on Starbucks

The impact the Taxation scandal had on Starbucks

As an old saying goes any publicity is good publicity, but when consumers here that some of their favourite brands have been avoiding the taxman. From Starbuck to Amazon to Google and now Apple, brands are learning that the public will be angered by their actions.

With Amazon and Google these are brand, which consumers will be using on a daily bases, as much as it angers consumer these brands will have little or not effect in try to retain customers. The phrase “Google it” just shows the power which Google had gathered as the number one search engine.

Whereas brand such as Starbucks are located within most city centers, they could have a more negative impact and consumer may choose not to visit them no longer due to them not paying the correct taxes and using lop-holes within the system so that they have less to pay.

When the news became apparent during November/December time in 2012, tax avoidance campaigners took matters into their own hand and held protest at Starbucks cafes throughout the UK, even though the company has pledged to pay millions of pound of extra tax as a means of trying to rescue some form of customer retention.

Starbucks had sales of over £400m in 2011 alone, but failed to pay any corporation tax. “Starbucks transferred some money to a Dutch sister company in royalty payments, bought coffee beans from Switzerland and paid high interest rates to borrow from other parts of the business” (Vanessa Branford & Gerry Holt, 2013). Customer perception of brand can change very quickly and this proved to be a significant factor in Starbucks. The café based company angered current customer as well as the nation when figures were released that they had only paid £8.6million in UK tax for the past 13years.

MP’s brand companies Amazon, Google and Starbucks as “immoral” for the way in which they went about their tax avoidance scheme (Robert Booth, 2012).

Starbucks’s main competitors Costa Coffee witnessed a sale increase of 7.1% in the last three months. The large increase comes as the protesters boycott Starbucks for its main competitor Costa Coffee (Simon Bowers, 2012). To add to this Starbucks also witness a decrease in its “Buzz” score. The Buzz score measure the number of negative and positive press, which has been presented about the brands. Before the Taxation scandal Starbucks were had a Buzz score of 0.7 whereas after the news came out about the none existing tax contributions within the last two years the buzz score decrease to -13.9 (The Week, 2012).

Out of the three brand Starbucks has suffered the greatest not only has it lost market share to its main competitors but also receiving bad press left right and center. The power of social media has also had a large negative impact on Starbucks; consumer took to social media to voice their opinion and concerns over the lack of tax payments.

On October the 16^th a day after the story immerged, a significantly large number of twitter user 44% of the having head comments about Starbucks via Twitter with and 39% of these user seeing negative press being said about Starbucks (Peter Campbell, 2012).

Large companies such as Starbucks it is important that the fundamental rules of business take place and one of those means paying taxes for the profits in which the brand has generated. The brand’s image was in danger of being ruined to and extent as its received a large amount of negative press nationwide as this was one of the main stories on the news and a large number of people were talking about the brand negatively through numerous social network platforms.

Even thought this bad press followed Starbucks throughout the UK their sales have increase by 11% worldwide within the first three months of the year.

Starbucks state within their website they have found “Making a profit in the UK difficult and therefore have not been in a position to pay much corporation tax”, this will come as alarm news as Starbucks announced last year when the taxation scandal was occurring that they would pay £20million towards corporation tax within the next two years.

Starbucks are two big of a brand to let one large problem to have such a negative impact where it no longer serves a purpose within the Café industry. Costa still proves to be its main competitor and with the latest sandal this has only played right into the hands of Costa as they have continues to increase their market share whilst keep existing consumers and gain a large number of Starbucks’s old customer too on the way.

Starbucks needs to be seen as they are reacting to consumers worries and if they are not making a profit then no one will expect for them to pay corporate tax, but if they were too go through another legal battle over not paying the correct amount of tax I don’t think the law will be on its side as much this time.

Conflict between brand values and celebrity endorsement and what is future of advertising?

Conflict between brand values and celebrity endorsement and what is future of advertising?

Celebrity endorsement have become a fundamental feature to the modern day brand as some feel that it is essential to have this celebrity endorsements so that consumers can relate back to the brand through the celebrity.

According to Kotler et al (2009), the use of celebrity endorsement can enhance both the brands attitude and also this can improve or represent the companies believes and values through this endorsement.

Brand values are such a fundamental part of an organisation, for companies such as Nike they have to be seen that they are always doing right and keeping the brands image clean. Within the last five years Nike has suffered with three of its celebrity endorsements crisis some of which could have had a very large impact on the business as a whole, and what some would argue the potential consumer have changed their opinions slightly of the brand.

Nike have suffered due to their celebrity endorsement in recent years, when celebrity endorsements works effectively brands get Celebrity figures such as David Beckham or Michael Jordan who represented both of their brands to a professional manner. They have both conducted themselves to a level a high standard, it is fundamental that when you have got a worldwide leading brand such as Nike or Adidas sponsoring you that you are a great brand ambassador as both of these celebrities are household names. 

The recent missteps with several athletes, including Tiger Woods, Lance Armstrong, Kobe Bryant and Oscar Pistorius have damaged the brand image but more importantly customer have began to question the brand values of Nike. Having such public figures as a face of you brand is very important in the modern day, but when things go wrong that when the customer remember which brand they were signed to.

Nike are now facing the same problem once again as one of their star names Oscar Pistorius is at the centre of a murder case, therefore this has brought more bad publicity to the brand as everyone is more than aware of the fact that this athlete is sponsored by Nike.

Nike is performing well and its revenue is increasing year in year out, but the brand as a whole is entirely dependent of being perceived as a cool brand (Jim Edwards, 2013), and once a brand no longer becomes cool that’s bad news for companies even as large as Nike. To keep their cool factor Nike need to become pioneers of advertising once again, and depend less on celebrity endorsement and allow for the products to sell themselves rather than receiving bad press through these celebrity endorsements. Most recently, Nike has distanced themselves from Oscar Pistorius, Olympic runner who has recently been charged with shooting his girlfriend. Coincidentally enough Nike produced an advert with the strap line “I am the bullet in the chamber” this has now become very inappropriately since the events that occurred involving Oscar that he is currently being held accountable for. When companies look for celebrities or athletes, they look for someone who has role-model capabilities (Bruno Delorme, 2012).

Nike’s brands personality and brand values need to be the key thing, which is, outlined to the celebrities, which they endorse. By doing the these celebrities will be more aware of brand values as a whole is about but also in how they should represent the brand. Nike need to be more careful about the celebrities in which they choose to endorse as they have had the biggest problem in recent year with bad press coming from the celebrity endorsements.

Advertising is still a Fundamental part of Nike, after ten years of continues growth, Nike’s sales have reached $21 billion therefore many it the largest sports company in the world. Adidas, which is Nike’s closest rival, game second with 30% less income (Scott Cendrowski, 2012).  To maintain or even increase the gap on Adidas, the marketing campaigns needs to represent the brand values and beliefs through their advertising.

Over the year Nike has seen a shift in the type of advertising that it uses towards its target market. Nike core customer is aged between 16-24 (CNN, 2012) whom on average tend to spend around 20% on footwear than the older age groups.

With this age group in mind Nike has identified, the means in which they advertise towards them have switched. Whereas before TV advertising was the “Must-Do” aspect of advertising even large companies which extravagant advertising budgets have also decreased their TV advertising spend.

According to Kantar Media, in 2000 Nike was spending over $200million on “traditional media” advertising whereas not this figure has decrease to around $113million. Nike has identified that its key target audience i.e. those that are 20% more likely to spend more than any other age group are more susceptible to advertising online.

Digital allows Brand build a new and very different relationship with the consumers as it has the better platforms to interact with the consumer more closely and therefore this gives the opportunity to also make the advertising more tailored. “Connecting used to be, “Here’s some product, and here’s some advertising. We hope you like it” (Mark Parker, 2012). Nike have outlined the importance of keep up to date with the new effective means of advertising, Nike spent $800million on “Nontraditional” advertising in 2010 alone as it has seen that online advertising is a new means of connecting better with the consumer.

With the extensive spend on nontraditional advertising, this has allow for Nike to get closer the its consumers, this therefore means it will be able to follow them more effectively and gather information about what makes them purchase and what doesn’t. But this also builds a sense on an online community where customers can follow Nike through social media and be the first to find out about new offers or products.

What is the Future of Advertising?

Advertising is always going to play a pivotal role in our lives whether we like it or not advertising is always going to be around informing us about new products and services. Digital has enabled advertisers with an easier approach as because of digital that are so many more way in which potential customers can be susceptible to advertising. Therefore this mean that there are a number of different way in which people can interact with brand through different digital products.

With the Digital Switch over Smart TVs have Internet incorporate within therefore the owners will be able to access the Internet through this device and therefore become prone to advertising. Also with the increase in both smartphone and tablet ownership these device allow advertiser a new platform for them to target customers through.

From and advertising point of few Digital present a enormous opportunity as there are a large number of different way in which advertisers have the ability to advertise towards the consumer. But this also presents a huge challenge due to the fact the potential costumers will be receiving more advertising means the advertising needs to be more specific for the consumer to truly engage with it.

“Digital technology and the Internet - and the explosion of mobile and other web-enabled devices over the past few years - is turning advertising on its head” (Andy Hart, 2013).

Traditional advertising such as TV, Print and Radio were the fore fronts of advertising and these were the most effective means of advertising prior to the introduction of digital. Digital is not just another means of advertising, this allows for traditional and digital advertising to work hand in hand as it connect old and new and fills the gaps in between.

Consumers have become “Multi Screen” users as they watch TV and also access the Internet through breaks and in between shows with the use of smartphone and tablets. A research conducted by Nielsen stated that 85% of tablet and smartphone owners use these devices as a “Second Screen” on a monthly basis with 40% of these owners using these devices as second screens on a daily basis (Nielsen, 2013). Around 41% of tablet owners use their device whilst watching TV with an additionally 39% of smartphone owners also using the devices as a form of second screen (Sarah Perez, 2012).

Mobile advertising us also an essential means of advertising as it account for around 7% of all digital spend, and 20% of mobile spend is now being used on “Rich-media ads”, (Jon Mew, 2012). Mobile advertising is gathering importance within the advertising industry, as smartphone and tablet ownership is increasing at an incredible rate, mobile advertising has gained large importance as potential consumers can be reached throughout their day through these devices.  

Mobile advertising has yet to achieve its full potential, some would argue that the pace which smartphone and tablet ownership has increased has not allowed enough time for advertisers to gather enough information of what are the effective means of mobile advertising which is going to generate the highest return on investment (ROI). This dissertation will look into how the increase in smartphone and tablet ownership has increased the relevance of mobile advertising but will also uncover what are the limitations and have has this hindered the growth of mobile.

Smartphone and tablets have extended the possibilities for marketers to penetrate into this growing trend (Beth Schults, 2013), as a result mobile advertising will therefore become simpler to target and segment into different markets, this will ensure that the right product offer or service is advertised only to consumers who are of interest, with the aim that this will increase the level of purchases.

Apps were the breakthrough, which marketers needed to make mobile advertising into a powerful tool within the marketing industry (Warc, 2012). Apps are a vital tool in unlocking the full potential to digital. According to Nielsen 27% of Tablet and 30% of Smartphone users used these devices in order to gain more information on products, which they had seen on TV advertisement (Nielsen, 2012).  Mobile advertising now accounts for 7% of all digital spend in the UK (Opera Software, 2012).

Using mobiles to access the Internet is increasingly and dramatically becoming a vital part of everyday life, with around 50% of users using mobile as the primary source of accessing the Internet (The Guardian, 2013).

Consumers will always engage better through advertising, which attracts their attention as this meets the needs of what they may be looking for to purchase. Tailored advertising means that the outputs become more effective as consumers feel that the personalisation makes the wonder how this advertising has reached them but also how they knew that the user was looking for this product or service. Tailored advertising works best when targeting a smaller more specific target market, this would mean consumers would potentially be less likely to be “Annoyed” or “Irritated” by these advertisements, as some, if not all of the products that are being advertised are of those which they may be interested in (Magdalena Lechner, 2013).

Large advertising companies are realising that large campaigns don’t always reach the correct consumer engagement because they have not used a funnel type scenario where they only concentrated on a specific market segment. With advertisers turning to a more tailored approach this will make the advertising, which the consumer is receiving more useful and could and will increasing the customer demand (Andy Hart, 2012).

Mobile has opened a lot of doors for advertising and many see smartphone and tablets as the primary means of advertising to the consumer in the future. A study, which was carried out by Insight Express showed that consumers who viewed a campaign through a tablet engaged better with the advert then those whom viewed this advertisement through TV (Kathy Crosett, 2013). Mobile has also opened the door to location based advertising, I think that this means of advertising will be best used by high-street brand as well as restaurant and cafes those who inform consumer of what they are offering which is better then its competitors. Brands who want to advertise something like a “Lunch-Time” special will only be able to primary attract the consumers attention through mobile as most people will be at work during the day and therefore will not have access to a TV or Radio. But with the use of location based advertising this will mean that when the consumer walks past a shop they receive and alert informing them directly of the offer/s which is in place.

Internet user tend to be those of which are most open to advertising whilst surfing the Internet, so that once that are subjected to this advertising they have the ability to seek more information regarding the product and also if it is possibly available with a better price tag.

"The future of advertising is, as it always has been, intrinsically linked to technology and people” (Nicola Mendelsohn, 2012), The president of the IPA states that advertising is always going to depend on technology but also strongly depend on how user will engage with this advertising through different platforms. The main challenge for advertisers is on how they will take advantage of the vast creative opportunity which mobile has presented.

Some rules will never change no matter of how influential digital can be within the advertising industry and that is that advertisers should “Never lose sight of their audiences, simplicity wins and creativity rules”, (Andy Hart, 2012).

I strongly believe that Mobile is the way forward for advertising, as this works well for both parties Advertisers will have more opportunity to advertising to the consumer through different platforms. The only problem, which is facing mobile, is the privacy issues and how mobile user does not fully trust making payments. Mobile Internet usage has already eclipsed desktop Internet usage therefore mobile privacy is a very important issue, which mobile operators must resolve (Chantal Tode, 2013). Industry specialists who have called for privacy laws and regulations to be put in place often refer to mobile phones as “Tracking Devices” (Business Week, 2013). This is because mobile applications have the ability to store the data regarding the pages in which the user has visited.

With the latest update of Apple, all iPhone users, which are running the IOS 6 operating system, not have the option to “Limit Ad Tracking”. Apple has state that they will reject all application which use “Cookie-Tracking” methods, as Apple has also found out that without the consumers full trust of mobile advertising this will only limit the potential (Sarah Perez, 2013).

Mobile advertising holds the key to the future of mobile advertising; advertisers just need to find a fine line of where receiving adverts does not become annoying, as this will make the advertising obsolete and not fit for purpose.