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August 05, 2008

Two Buck ‘Bucks

SOURCE: Associated Press article
Starbucks offers afternoon drink deal nationwide

Looking to bring more value-seeking consumers through its doors for a late afternoon caffeine fix, Starbucks Corp. said it will now offer its morning customers any iced grande beverage for $2 after 2 p.m.

The price is a big cut from the normal price of most grande-sized iced drinks. A grande iced latte, for example, costs about $4. To get the discount, customers must present a receipt from their morning Starbucks visit.

"I think we've kind of hit the nail on the head," said Brad Stevens, vice president of customer relationship management. "It's easy for baristas to implement and it's easy for customers to understand."

Sadly, this is yet another decision the company has made which has “… lead to the watering down of the Starbucks experience, and, what some might call the commoditization of our brand." [SOURCE]

As marketers, we know PRICING TELLS A STORY. All high-priced products must deliver an interesting story to justify its higher price. On the other end, low-priced products settle for telling an uninteresting story, beyond simply getting goods on the cheap.

Reading in-between the lines I’m picking up on something even more alarming than the company’s decision to become a priced-to-sell retailer. I’m picking up on a cataclysmic shift in company culture.

Re-read the quote from Brad Stevens. He says the Two Buck ‘Bucks promotion “is easy” for employees to implement and for customers to understand. True. HOWEVER, the Starbucks we’ve come to appreciate developing a relationship with never did anything “easy.”

The Starbucks company culture has never been about doing things the easy way.

The easy way is to size drinks Small, Medium, Large, and Extra-Large.
The easy way is to roast coffee less for a mass appeal taste profile.
The easy way is to have lucy-goosey espresso making standards.
The easy way is to not offer part-time employees full benefits.
The easy way is to treat customers as just a transaction.
The easy way is to compete on low prices.

The hard way is to size drinks Short, Tall, Grande, and Venti.
The hard way is to roast coffee longer for a more polarizing taste profile.
The hard way is to have strict espresso making standards.
The hard way is to offer every employee full benefits.
The hard way is to have employees build relationships with customers.
The hard way is to compete on high prices.

If we wanted “easy,” we would have never interrupted our old daily ritual to make Starbucks part of our new daily ritual. If Starbucks had always done things the EASY WAY, they wouldn’t have changed the game for how to build an endearing and enduring brand.

As for the decision to compete on low prices to drive traffic in the afternoon daypart with Treat Receipts … I’m troubled by this. Just as I was troubled when the company experimented earlier this year with selling a One-Dollar Cup o’ Joe.


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It won't be long before their brand has totally been commoditized. They will be the next Krispy Kreme or at least that's the direction they're going.

All the "hard" things you refer to is their brand and its identity. What's Starbucks brand identity today?

When a new customer sees a Starbucks what will they associate with it?

I don't know that I agree that they have strict expresso making standards. Starbucks has really brought down the value of a barista. Most barista's at starbucks have no idea about the proper temperatures, pressures, grind and bean. It's all simply done by a machine now. The magic went out the window with drive-throughs and automation. It's no longer a 'third place' to build a relationship with the staff and experience something new.

I go to a private coffee house now and have learned so much about coffee! As well, I've built a great relationship with the owners. It's my second home... not my third place!

Starbucks was simply turning into the McDonald's of coffee. It's too bad!

Heck, they're running coupons for the same deal in newspapers in the Chicago area! The ads - full page, full color, prominently placed in the front section of the Chicago Tribune - inform about the treat receipt promo (bring in your morning receipt for a $2 afternoon iced drink). The ads also offer a coupon you can cut out to get the same deal - just bring in the coupon to get the $2 grande iced drink after 2 PM, no morning purchase necessary.

I never thought I'd see Starbucks coupons.

as always, a great post

the thing that's amazing is that the vice president of customer relationship management calls this hitting the nail on the head.

Giving money to people isn't a relationship.

John, you know you got a good post when Seth Godin says so (he never visits my blog ;)

But dare I say in this case Seth is correct. There is no future for them in this.

Although they could develop that exciting Bed, Bath and Beyond direct mail system....what do you think ;)

Thought of you when I read that in the news. Great post.

Their strategy can't possibly be about moving closer to what Dunkin Donuts and McDonald's are all about.

They were always about a higher priced cup of coffee that people emphatically decided was worth it for a list of tangible and intangible reasons. Recessions and $4.00 gas changes things a bit but, it should not cause you to abandon your business personality.

Can't imagine this came bubbling up from

While I agree with the sentiment here, I do find myself asking the question: "What do you do when Dunkin' and McDonalds start 'drinking your milkshake?' I'm assuming this is a response to shrinking sales, which is partly due to economic factors, but perhaps people are just tired of fancy shmancy coffee? I think Starbucks needs to be more like Starbucks, not less, but maybe I'm wrong?

People go to and buy Starbucks coffee not only for its fancy schmancy-ness. Drinking Starbucks puts you in a group, like Mac users. Anyone can drink Dunkin.

Problem is that Starbucks (like John points out) has forgotten that. Selling on price with get people in their group quickly out.

It seems like a strange promotion all around -- as in, I can't tell who really benefits from it.

The customer presumably benefits by getting a discount, but what good is a discount on something you never intended to order? There's a big difference between "buy one, get one free" and "buy one, get one cheaper." Presumably customers already make conscious decisions on when they go to Starbucks and why -- it's part of their "ritual." It's part of their individual stories.

That's one reason why -- not to go off on a tangent here -- the Vivanno line doesn't make sense to me. Where does a smoothie fit into the daily "ritual" of a Starbucks customer? Likewise, where does this new, cheaper drink fit in?

And how does Starbucks benefit? They hurt their already painfully low operating margin. Even worse -- and I think this is the big killer -- they set up to slow down life for the regular afternoon customers who are paying full price. People who, as part of their daily "rituals," have chosen for whatever reason to include Starbucks after rather than before lunch.

I think this is the downfall of any company -- when it stops respecting the way individuals engage with a brand and make it a part of their day, and simply play "MBA math" and treat people as sheep to be given incentives. At best, economic game theory; at worst, blunt social experimentation.

On that note I'd add -- the comparisons to McDonald's are being too kind to Starbucks. McDonald's intimately understands its customers' stories. They have playgrounds and clean restrooms for a reason! This is a much darker place for Starbucks, I'm afraid.

It's disappointing to see Starbucks so misunderstand the appeal of its brand. Starbucks isn't about coffee deals - it's about the way people feel like when they're drinking it. They don't want to feel cheap and commoditized.

Bad decision for Starbucks. Definitely not the best way for them to go.

I'd almost say that they should go the other way. What if they made some Starbucks into exclusive coffeeshops with memberships to get in the door? Bring back the atmosphere, and charge for it.

That seems more aligned with their brand than discount coffee.

Starbucks is a great place and I think they really do try hard to do things to make their customers happy. Everytime i've gone to starbucks the customer service i've gotten was good but it could've been great. Everyone has room for improvment on their customer service skills. I'd recommend checking out an awesome website calles Mindshare There are great tips in it! Check it out!!

Scott (BIG Kahuna) ... agreed, SBUX is no longer slouching to commoditization ... it is speeding towards it by acting like a typical fast food business.

Douglas ... SBUX has precise standards for espresso/coffee prep. Problem is, SBUX Baristas don't always follow the set standards. (That's why the company felt the need to close up its North American stores for espresso "re-training" earlier this year.)

Seth ... Hugh MacLeod said it best, "... when you start turning your products into commodities, you start treating your customers like commodities.”

Howard ... that's what gets me ... SBUX always distanced itself from typical fast food joints. Now, the company is mimicking them. A recipe for failure.

Rick ... well said, to fight the adverse headwind, "Starbucks needs to be more like Starbucks, not less."

JMW ... love your angle that this boomerang margin-crimping tactic is playing "MBA Math" and is "At best, economic game theory; at worst, blunt social experimentation."

Katie ... totally agree, it is "disappointing to see Starbucks so misunderstand the appeal of its brand."

I'll be the dissenting voice here. When push comes to shove, every business wants to stay in business, and the current economy is high on the shoves. If Starbucks wants to offer additional products and dilute their brand in order to stay afloat -- or, perhaps, grow in a new direction -- why bemoan their evolution from what they used to be? It simply opens the door for someone else to become what Starbucks used to be, and that's how businesses evolve.

Also, notice that the main thrust of this promotion is to get people into the stores to try an iced beverage. If the beverage is available at a discount, people will be more inclined to buy something else while they're there. And, sorry to the "afternoon routine" customers, but the people who bought a morning coffee AND an iced afternoon beverage *are* worth more to Starbucks than your lone coffee purchase.

I like what Starbucks was, but I can't fault them for diluting their brand in order to stabilize their business.

Why bemoan? Because the brand graveyard is littered with companies that have ventured far from their comfortable home in search of new customers. Once these brands eventually realize how sweet home really is ... they turn back and return ... only to find a ramshackled home destroyed by the erosion of employee confidence and customer defection.

That's why we marketers bemoan.

The peril of wandering too far from what made your brand successful may be true -- alas, "you can't go home again" -- but when that happens, it opens the door for new brands to take the old brands' place. It may be bad news for Starbucks purists, but it's great for every other small-to-mid-size coffee chain looking to capitalize on the customer experience that Starbucks is leaving unprotected -- or for the independent cafes who may be able to absorb discontented Starbucks regulars.

When the economy bucks, businesses (and customers) evolve. What worked for Starbucks when gas was $1 a gallon may not work now. Change or die.

I am a starbucks regular (daily ritual) as well as a stock owner (oh the pain!) -- so I totally get the company has to 'do something' to get repeat visits in the afternoon (my guess is the traffic has declined RAPIDLY). That said, I also get the 'price discount' is their attempt to do so -- however, it definitely does NOT build a relationship -- and in fact, is building a habit for me (eg in the afternoons, I really dont think I should have to pay a full $4.06 including tax for a latte) -- Instead, I think they should have invested more heavily in their Starbucks Card program, and did things like incent me (eg the more lattes I buy -- eg 10 lattes, I get a free CD or free dessert or something that encourages the relationship and makes me look forward to frequency) -- I dont know, this route, is a temporary bump up in store visits, but definitely not a brand builder.

The $2 drink receipt is way beyond horrible. It is the death of brand. Starbucks is becoming the poster child for how to destroy a brand.

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