Thursday, February 21, 2008

Prediction: $1.00 Starbucks Coffee = Bad Move

Quick Prediction: Starbucks attempt to move down market with $1.00 coffee will prove to be another in a recent string of brand mistakes. Starbucks stands for "expensive coffee" in the mind of the consumer. Adding a $1.00 cup of coffee to the menu, and attempting to compete with McDonalds and Dunkin' Donuts will dilute that perception, eroding the core perception of "expensive coffee", and revenue growth with it.

Another recent mistake was the hot sandwiches for breakfast. While I personally loved them at first, the quality seemed to wane after several months. Worst of all, the ovens made Starbucks smell like a fast-food joint, not like a coffee shop. Frankly, it was disgusting. In a business like coffee, smell is a huge part of brand perception...and the sandwiches were killing the coffee shop vibe.

It's funny [not so funny, I guess, more sad] to watch big companies like Starbucks start to mess with, and in some cases throw away, that which made them powerful brands in the first place. Starbucks is "expensive coffee", Dunkin' Donuts is "everyman coffee", and McDonalds "fast food and kids". Dunkin' is doing great job with embracing who they are, and presenting an alternative to Starbucks. Starbucks could stand to learn from them. Stick to your position, Starbucks, or watch it erode and die.

UPDATE (2/22/08): Looks like movement in the right direction. Of course, its very unfortunate to see layoffs, but previous management laid a course that was unsustainable, so the course has to be corrected. My hat's off to him for doing what needed to be done. Now, will he dump the $1.00 coffee, too? Time will tell.

UPDATE (2/25/08): I just heard from my wife that some stores are reporting that they won't be getting rid of the hot sandwiches due to so many people complaining about their disappearance. This raises another interesting question: how to weight the protests of a vocal minority when trying to pull a brand back to its position. I'm sure there are people who would love Starbucks to sell cheeseburgers, and if Starbucks had introduced cheeseburgers, they would complain when they were taken away. The instinct, of course, is to try to please all your customers. The problem is, you can never be all things to all people. When you try to, you lose your focus. When you lose your focus, customers stop coming because they don't know what you stand for. If I want a burger, I'll go to McDonalds. If I want coffee, and I don't want the fast-food burger experience with it, where do I go? Not Starbucks, I guess. We don't have Dunkin' Donuts here, so I'll go to my neighborhood coffee shop. The point is this...I don't have research on it, but I bet Starbucks is driving more people away with the fast-food experience than they are gaining by keeping the hot sandwiches. The counter-intuitive thing about positioning is that it, by definition, drives some people away, because your brand doesn't represent what they want. But it also strongly attracts those that want what you represent (assuming you're well differentiated from competitors). Those are the people you want to please, not the loud people tugging you away from your position.


Michael said...

There are a couple of other developments at Starbucks over the years worth noting.
1. The advent of the drive-thru window at Starbucks. Now they are just another fast-food place.
2. The new espresso machines a few years back That took control of the espresso shot out of the hands of the barista.

Aaron Gray said...

It certainly is uninspiring to watch the barista put a cup under the spigot and push a button, isn't it? You or I could do that. It took the mystique away, that's for sure.