Starbucks new strategy to attract customers has left a bitter taste for at least one customer. John Moore, who worked as a marketer at Starbucks for over eight years, takes issue with the new Starbucks $1 cup o’ joe, which undercuts both McDonald’s and Dunkin’ Donuts prices, according to Reuters. John writes:
"In a bigger shift in marketing strategy than spending millions on national television advertising, Starbucks is now selling short-sized cups of brewed coffee for a $1.00 and offering free refills at Seattle-area locations…Oh My!. A low-price strategy is indeed the quickest pathway to commoditizing and marginalizing coffee back to being, well, just coffee."
Read John’s full post regarding the new Starbucks strategy here.
I have to concur: unless Starbucks is modifying its strategy to be a low-cost provider, per Porter, this would seem to go against their historical approach to providing an "experience" to their customers. What do you think?
How is this different than the 33-flavors place offering you a spoonful of ice cream for free?
How is this different than Taco Bell offering three sizes of Pepsi, at differing prices, with all the cups refillable? If you look around, there aren’t many people who are buying the smallest cup.
And if you note, the buck cup isn’t just small, it’s *brewed* coffee instead of *expressed*. Supermarkets advertise goods below cost in order to get you in the door, knowing that, on average, you’ll buy an entire cart of groceries. Starbucks will make money on the mini cup customers because people will buy munchies, music, etc.
Interesting perspective. Has any global brand ever harmed their brand by lowering their prices, which presumably their customers want? If Banana Republic or Brooks Brothers has a sale, I don’t walk the other way.
As gas prices go up and the risk of recession increases this seems like an imperative for all brands. This may even buy off some who would otherwise opt for cheaper options (like home). This opens up a whole other section of customers.
I think brands that take this kind of risk should be rewarded.
Price driven categories become commodity categories (gas, milk, and coffee until Starbucks showed up) and in commodity categories, brands die. Unless suicide is what the Starbucks brand is shooting for, I think this $1 cup plan is bad idea. Starbucks needs to fight any competition from McDonald’s by leveraging their competitive advantage…the experience. Does anyone believe that McDonald’s could ever challenge Starbucks on the “experience” front?
No doubt Starbuck’s have put a lot of time and money into this. So there is a lot of research / facts / figures / findings that we are unaware of. I think it is probably worth questioning why they did this in the first place. What was the evidence / compelling insight to make them do this ?
Maybe the experience thing doesn’t work as well as it used to. I don’t know but it would be interesting to find out, exactly (evidence / compelling insight), why they did this.
I think this decision drove the return of the founder as Starbucks CEO. I think that Starbucks, because they have been willing to experiment different kind of marketing strategies (itunes partnership, selling books, multiplying the seasonal special campaign like Saint Valentine), they have lost their core business vision.