Oh, Starbucks, Where Art Thou?

by Kate Newlin , June 1, 2009

The brand I get asked most about -- and the one, frankly, I worry most about -- is Starbucks. Is it simply the poster child for two decades of "trading up" that we're now trading off? Is it doomed to die a tortuous public death by a thousand cuts, as McDonald's, Dunkin Donuts and anyone else with the ability to sell coffee for a buck slices and dices its share? And what's with that earnest, honest print ad campaign? Does anybody read that kind of stuff anymore?

The essence of a passion brand is that it provides the kind of experience that makes me want to share it with others -- and woe unto my friends if they don't love it the way I do. I'm more likely to question my relationship to my friends than to my passion brand. And for sure, Starbucks has played that role for millions throughout the world. The challenge now is daunting: Think about trying to woo an ex-lover: Once we've decided to live without our daily Starbucks, will it ever again seem irreplaceable?

The print ad campaign Starbucks is running makes me sigh. The company is so frustrated by the claims of the competition --$4-latte-is-dumb kind of thing -- that it's trying to reinvigorate its brand passion by rational argument. But, think about that ex-lover paradigm and imagine telling him/her that it really makes sense for you to be together because of your ancestry, the way you order in restaurants or how much the in-laws like you. Not really going to work!

Much as I respect Starbucks, they are tone-deaf to the emerging world order. How should they go about this? There are two essential things to bear in mind:

The price guys are desperate. If Starbucks underestimates how much McDonald's and Dunkin Donuts need to attract its customers, it will underestimate how hard these competitors are going to play. But with every major casual dining franchise in the country offering price promotions for lunch and dinner (Two for $20 screams Applebee's, 15 meals for under $15 shouts Outback, two for $3, three for $4 and 4 for $5 announces Dairy Queen), their basic value propositions are under attack from the food guys.

Dunkin has always had a tough time playing to the lunch/dinner crowd. It has to make it work at breakfast. And McDonald's knows that while other more hospitable chains are cranking out "value meals," it can make it work if it gets coffee right. High margin, high volume liquid gold, if it gets it roughly right for the grab-and-go adult who may order a few other savories at the same time.

Starbucks has a piece of equity that it is under leveraging. Schultz's "third space" edict. Remember that? We have to go to work, we have to go home, what we want is a third safe place to just hang. The genius of allowing customers to linger is a benefit in sharp contrast to the fight-and-flight feelings generated by a trip to a McDonald's Café. Does anybody really want to stay in the no-smile zone of a McDonald's or a Dunkin Donut shop?

And yet, as people increasingly need a neutral space to polish their resumes or nurse a cuppa while waiting for an interview, doesn't a $2 Pike's Peak blend look like a bargain? As we agree to meet for an informational interview, doesn't Starbucks send the right professional tone? You bet. For millions of Americans who don't have to go to work -- but wish they did -- Starbucks could be their local branch office, and it should be.

My Rx for Starbucks is to relish, revitalize and market their comfort zones. These are invaluable assets in an increasingly hostile and recession-weary world. Location, location, location: Your settings are your genuine and competitively sustainable point-of-difference, augmented by the savvy professional barristas you've bothered to train and retain. Trust them to tell your coffee credentials, not print ads.

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3 comments about "Oh, Starbucks, Where Art Thou? ".

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Anne Peterson from Idaho Public Televsion, June 1, 2009 at 11:51 a.m.
Even though Starbucks coffee is not my favorite, the environment the company creates in its stores is excellent. The company creates inviting spaces, with each store having its own unique quality. This is something they are very very good at and should capitalize on.
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Paula Lynn from Who Else Unlimited, June 1, 2009 at 4:38 p.m.

The Starbucks story has been told many times with the names changed and some of the details (much like marriages and divorces). Way too many people cannot afford the money or the calories from lattes and frapaccinos instead of a cup of coffee. As pleasant as the environment and the experience and the taste may be, that level of company growth and volume once attained cannot be sustained in an over saturated world. Just because another restaurant opens does not mean you will eat 2 dinners tonight. Bet many readers can think of many other examples.

Al Haberstroh from MontAd, June 1, 2009 at 9:25 p.m.

It is true that brand image hinges on the final touch point. That is how Starbucks beats McDonalds and Dunkin Donuts. That said, when you allow the brand to be marginalized, like the Starbucks outlet in my local Kroger, you start to loose that advantage. Add to that the "to go" trade and all of a sudden Mickey Ds and Dunkin look better. Starbucks needs to leverage their environmental advantage but has a problem in that, really, a $4 cup of coffee is stupid. Consumer are now realizing that excess consumption is, well, stupid. So Starbucks can protect the price and margins at the cost of market share or leverage the advantages they have and lower the price a bit, live with reduced margins and retain share. Ain't market reality a pain.