Say it ain’t so!
Starbucks has announced it’ll be testing a “$1 Coffee” in some markets this year. This is their idea of a prudent response to the forthcoming economic downturn all the experts are so certain is on its way. They think fewer people will be able to afford, or will be willing to spend money on, their gourmet coffee.
Indeed, their numbers may drop some, but I think they are in danger of gambling on what will turn out to be, at best, a short-term gain, and at the expense of long-term losses in brand equity! Howard Schultz and the gang created an entire category! There was no such thing as “gourmet coffee” available to the masses until they came along! They own the words “gourmet coffee” in the mind of the marketplace, for crying out loud! They are a case study in how the market will eagerly pay a premium for a quality experience! They are one of the best case studies in branding we could ever study, regardless of what industry we’re in! Now they want to throw all that away because of a little downturn? You gotta be kidding me! Yeesh!
They’d be wise to do a little case study research of their own. One example that comes to mind is how the motion picture industry experienced its Tipping Point in the 1930s. In the midst of the worst economic depression this nation knew before or since, motion pictures, a luxury good, took off like crazy. This was because the worse times got, the more people wanted to hang on to whatever pieces of luxury they could! Movies were an escape! An experience! Not at all unlike the “luxury experience” one participates in when visiting Starbucks. They would be far better off to simply weather the storm than to dilute their brand and potentially open the door for a new premium coffee experience to be offered by someone else.
In my ECHO marketing workshop I teach, more like preach(!), the importance of not playing the price game! Anybody can cut prices, but it takes real savvy to build a brand, and once you build a solid brand, you have an asset that will pay for itself many times over. You also have an obligation to meet the expectations of the customers who helped you build the brand.
If you want to cut something, Starbucks, ease back on the number of locations and focus on efficiency.
Or set fire to every location and hope to collect the insurance! That’s what you’re doing to your brand.