Friday, January 25, 2008

Starbucks coffee for a dollar... strategic?

Who would have thought that upon his return to the company Howard Schultz, the visionary behind the great Starbucks success, would have authorised a sales promotion that may be one more factor adding to the company's current troubles.
Starbucks are set to release a coffee that will retail at $1 and provide free refils in some of their stores as a (ill thought out) response to increased competition in the premium coffee market.
Pricing is a huge part of marketing, and certainly an aspect of the marketing mix that Starbucks has exploited in the past to convey an image of superior quality and service etc.

This was written a while back by john moore a previous marketing employee for the coffee giant:

“Starbucks fiercely protects its pricing power because it knows a low-price strategy is the quickest pathway to commoditizing and marginalizing coffee back to being, well, just coffee. It also knows if it lowers prices, it will have a hard time ever raising them again. Most important of all, Starbucks knows higher prices bring them healthier profit margins, which fuel the cozy experience customers enjoy."

The past success of Starbucks was based on the fact that its coffee was not for everyone, it was its exclusivity that earned Starbucks most of its reputation (and profits) and by trying to make it an "everybodies coffee" the brand will lose part of its magic and appeal (think of what happened when "chavs" popularised burbery design) to those who are die hard fans of the brand.

As I see it this move smacks of flagrant short-termism in a bid to claw back visitor numbers and share prices but in turn has jeopardised the long term relevance and health of the brand.

1 comment:

jedimasterbooboo said...

I'm confused because they've always had some coffee of the day for like 70 or 90 cents or something. I'm wrong? Now I'm confused.