A brand that was built on word-of-mouth and ubiquity has now decided that mass marketing is the answer to its growth woes. An ad campaign entitled, "It's not just coffee. It's Starbucks." is supposed to awaken new customers, guilt old ones back, and make loyal drinkers spend more. According to the New York Times, the bean giant is even willing to climb into bed with MSNBC and pay an estimated $10M+ for the privilege of waking up every day with "Morning Joe."
Starbucks' promotional blitz is an admission of product failure. It's not that Starbucks makes a bad cup of coffee. Nor is brand recognition a problem -- if your street has a corner, you've passed a Starbucks. The real problem is that Howard Schultz and his team don't seem to know what their product is any more.
Everybody has their eye on Starbucks' premium-coffee business. Dunkin' Donuts dared to combat the java juggernaut. Now, McDonald's
If Starbucks fears losing the everyday, premium-coffee drinker, it really needs to watch Green Mountain Coffee Roasters
Oddly enough, while Starbucks has chosen not to address this market, it has decided to take on Kraft's
Slow down and smell the coffee
While coffee is one thing, ambiance is another. Fast-food competitors have nothing on Starbucks when it comes to environment. Try meeting a client or getting some work done at McDonald's or Dunkin Donuts. Imagine meeting a date there? Don't buy that ring just yet, big fella. Atmosphere has been a big competitive edge for Starbucks … until now.
Have you visited a Caribou Coffee
Ironically, it was Starbucks which rode the initial wave of the mobile workforce, quenching their latent thirst for a third place outside of work and home -- liberating them from both their bosses and their bathrobes. Was this by design, or was Starbucks simply lucky? Seeing current customers hunt for power outlets or struggle with the store's not-really-free wifi policy makes me side with serendipity.
So, if Starbucks wants to remain a premium brand, they may want to avoid watering down the experience by cheapening their menu and inconveniencing sit-down sippers. Armed with a proven coffee franchise, Starbucks could view wifi, atmosphere, and community as loss leaders that build social capital and customer goodwill. Ironically, if Starbucks goes the fast-serve route, it risks becoming a full-fledged rest station, attracting more nomadic visitors who only come in for a cup of water, a warm chair, and possibly a quick shower in the bathroom sink.
Brew are you?
Starbucks needs to do some corporate soul searching. Take a look at American Express. It doesn't sell credit, it sells membership. Coca-Cola doesn't sell soft drinks, it sells refreshment. Starbucks, what do you sell … besides coffee? What do you stand for? Ambiance? Community? Social consciousness? Until you figure this out, count on losing both customers and shareholders. I hate to get all philosophical, but your biggest competition is yourself. To grind own self be brew.
Fool contributor Andy Louis-Charles does not own shares of any of the companies mentioned in this article. Andy is a coworking enthusiast and even hosts a weekly podcast on the topic where he moderates conversations on the growing collaborative movement. Share your thoughts on collaboration, coworking, and coffee with him on Twitter @OnCoworking. The Motley Fool is also on Twitter @TheMotleyFool.
Green Mountain Coffee Roasters is a Motley Fool Rule Breakers selection. Starbucks and J.M. Smucker are Inside Value recommendations. Starbucks is also a Stock Advisor pick, and the Fool owns shares of it. Try any of our Foolish newsletters today, free for 30 days.