Tuesday, October 06, 2009

Is Starbucks Really this Stupid?

I've been watching for quite awhile as the once powerful Coffee King has destroyed themselves, month after month for the past couple of years.

And it's not the economy, or the competition. They need a plan. Click here for more details on a Plan.

And read the latest from Laura Ries:

Starbucks is Shooting Itself in the Cup

Starbuck shoots itself

Starbucks latest offensive isn’t against McDonald’s or Dunkin’ Donuts it is against itself. And if Starbucks weapon is as successful as it says it will be then they could be shooting themselves in the cup.

Starbucks new weapon is its Via instant coffee, a brand that went nationwide this week after several months of testing in Seattle, Chicago and London.


To support the Via launch, Starbucks will be promoting a “taste challenge” in its own stores. The “taste challenge” aims to convince consumers that they cannot tell the difference between a cup of Starbucks instant coffee and a cup of Starbucks store brew.

Instant coffee as good as store-brewed Starbucks? Sounds impossible.


But Howard Schultz is convinced people won’t be able to tell the difference. He has even been fooling people with Starbucks Via instant coffee for almost a year at home and at his office. Nobody including his wife, according to Schultz, realized it was instant.

It’s a brilliant idea for a new gourmet instant coffee to set-up a blind taste test against the world leader in high-end coffee. Especially if the instant coffee wins the taste test.

It’s an insane idea for the world’s leading gourmet coffee chain to set-up a blind taste test in its own stores that it hopes it will lose. Losing a taste test devalues the loser as much as it praises the winner.


Weaker brands have used blind taste tests for decades to try to take market share from leading brands. The “Pepsi Challenge” and the companion commercials of the 1980’s pitted Pepsi against Coca-Cola.

Blind tasters overwhelmingly picked the sweeter taste of Pepsi over Coke. The humiliation of the taste test losses in part led Coca-Cola to launch the disastrous New Coke. A key factor in the development of New Coke was that it should beat Pepsi in blind taste tests.

Today, Starbucks is using a taste test that could lead to another disaster. If a cheaper, instant coffee can be easily made at home or work and it tastes as good as the real thing, why waste time and money going to a retail store?

Starbucks really let the fox in the hen house by hosting the taste tests in its very own stores. Starbucks is telling consumers exactly what they shouldn’t be telling consumers right in its very own stores.

In the minds of consumers Starbucks is believed to be expensive but “worth it.” Consumers praise the high-quality of the coffee. Hosting a taste test in your own stores to tell consumers your product is no better than instant coffee is not a good message to send and not a good challenge to lose.

Starbucks, of course, claims that its instant coffee will not damage its core store brand since “portability” and “value” are the important selling points of Via.

Apparently, the inconvenience of long lines and extravagance of a high price are things consumers would not give up for a Starbucks instant coffee that tastes the same as the store brand?

A brand can often be successful by being the opposite of the leading brand. Target vs. Walmart. Scope vs. Listerine. Pepsi vs. Coke. Monster vs. Red Bull. But there is no potential for one brand to do two strategies at once and succeed.

A high-end brand needs to stay focused no matter what. Introducing cheaper versions of expensive products damage the credibility and power of the core brand.

In the current economic climate Starbucks has been under intense criticism over its “$4 cup” image. Starbucks needs to flight that by promoting a simple pricing strategy to drive home the message that $2 is really the price of a cup of coffee at Starbucks and that it is worth every penny because it’s Starbucks.

Suggested headline for a Starbucks ad:

Two bucks and worth it.”

Instead they are spending money on ads with this headline
“Instant coffee that tastes as delicious as our brewed.”


This ad and Via instant coffee at $1 a cup isn’t likely to tempt too many Taster’s Choice drinkers who get a cup of instant for 10 cents.

What the introduction, advertising and promotion of Starbucks Via is most likely to do is drive people out of Starbucks stores by denigrating the brand in the minds of the consumers.

It is the law of unintended consequence. Saying that an instant coffee (even an expensive instant coffee) can taste just as good as the Starbucks real thing devalues the brewed high-end coffee category.

It is bad enough when your competition knocks your brand, it is worse when you do it to yourself. Yet it happens all the time.

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