Monday, February 23, 2009

A Business Publication Questions Starbucks' Strategy

The current issue of Business Week contains an article questioning Starbucks' current marketing strategy. As noted in the sub-title: "By itself, instant coffee could work... But coupled with word that value meals are coming, it suddenly feels... ill-advised." Amen to that!

I certainly don't agree with BW's conclusion that Starbucks should refrain from lowering prices during a recession. I do concur, of course, that the 'bucks should try to retain its former luster by returning to its old mission of serving good, strong, bold coffees.

Here's an excerpt from the article by Rick Wartzman:

The Seattle-based company has been in the news a lot lately. ...It announced that it would soon introduce discounted pairings of coffee and breakfast food. It also launched a new line of instant Joe. ...It's hard to imagine that one won't affect the other.

In isolation, peddling packets of VIA Ready brewe would be a chancy - but potentially rewarding - move for Starbucks. But the company's effort could be tripped up by its other recent goal: Persuading recession-weary consumers that its offerings are, in fact, light on the wallet. Though VIA was in the works for many years, (Howard) Schulz said, its unveiling "happens to... coincide with the downturn of the economy."

It feels as if the company is simply trying to reposition itself as a place to find a "good deal" - an image that... runs directly counter to what made it so special to being with. "I think they run the risk of confusing the brand," says a professor of marketing, "(when) Starbucks no longer competes in the coffee connoisseur market... it competes in the convenience market - a very cluttered and highly competitive space."

Whenever an executive "tries to impose what he considers rational on an apparent irrationality... he is likely to lose the customer," (Peter) Drucker (once) cautioned. This is precisely the danger for Starbucks. While the company may attract some folks with its new approach, it could alienate just as many - or more - who feel as if Starbucks has compromised its character. What Starbucks should do, even in this downbeat economy, is to keep prices where they are and focus instead on retaining its fast-fading luster.

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