An excerpt from an article in today's Financial Post called "Making Starbucks recession proof" by Steven Kates:
"In its positioning efforts, Starbucks needs to emphasize that it provides great-tasting coffee, reliability, speed, convenience, and cleanliness for the customers' dollars...it may have to relinquish some of the shared cultural associations of its past, including authenticity, or a connection to the European barista culture. Afterall, how authentic can mass-produced coffee really be? In this regard, Starbucks is very much like McDonald's, local coffee chains and independent coffeehouses."
Full Article: http://www.financialpost.com/story.html?id=1049967
As I sit and read this article in my local Williams Coffee Pub, I wonder what the implications of Starbucks' massive growth and subsequent contractions will be in the coming months, and how bright it really was to cling to its so-called "authentic" association for as long as it did.
My trips to Starbucks are normally for one reason and for one reason only: Chai Tea Lattes. I don't buy them because they are "authentic" or "European" (because they blatantly are not), but because they are so tasty. $5 medium tasty? Well, that becomes questionable as my bank account dwindles.
But that's neither here nor there. Where is Starbucks to go now? Their exuberantly priced coffee and Borg-like expansion onto the street corners of our cities the kiosks of our campuses got so out of hand that they became a novelty. And the scariest thing about novelties is that they wear off. So Starbucks in now closing stores and elbowing for space in the morning routine of increasingly price-sensitive customers with the likes of Tim Horton's and (Gasp!) McDonalds.
The author suggests that Starbucks should emphasize that although it is a very large corporation, it is a nice very large corporation. It needs to abandon that tricky word "authentic" for something different...but personally I think "good corporate citizen" is even less authentic than the word "authentic."
I am sitting at Williams right now because I was hungry and they serve sandwiches, I was thirsty (and in need of a caffeine fix) and they serve coffee, and I wanted to use my computer and they have wireless. I don't really know whether or not Williams is a good corporate citizen. They provide a straight-forward service for my straight-forward needs.
Or do they? Why didn't I just go home? I have sandwiches, coffee, and wireless there. Hmmm.
Where can Starbucks fit now that the niche they created for themselves is being filled by smaller, cooler, and more "authentic" coffee places? As their store counts decrease, which will be the first to go? Which will be the last?
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In the article it states, “How trendy can the brand be if it serves millions of very different kinds of customers?” Now with having an undefined target market and having higher prices than your competitors may not be such a wise thing to do at a time like this. Customers are being cost effective and don’t want the “same type of coffee” or any other beverage for a higher price. Starbucks is not like Tim Hortons or McDonalds where there is one at EVERY corner in EVERY city. Starbucks customers in United States and in Europe have a totally different lifestyle than Canadians. I personally don’t believe in the Starbucks market position right now because they keep talking about how they provide an “atmosphere” for people to relax which other competitors don’t, that may work well in the Euro market because the lifestyle there is different, its more relaxed whereas here its mostly go go and go, so basically I think the target market they go after (usually people with a high disposable income because they blast like $5 on coffee are working business professionals). Therefore they don’t even have the time to sit around and talk in the coffee shop. All they need is a good coffee on the run. So now that the economy is in a recession and consumer confidence is at an all time low everyone looks to reduce their spending on unnecessary luxuries which is essentially what Starbucks is. They can’t apply the same marketing plan to all countries because the lifestyles are very different. So how can they solve this problem? You can go either way, 1) if you want revamp the image to cater to a larger demographic or another route is 2) realizing it’s a specialized coffee destination for the elite. I would go for the second strategy and start by redefining their target market. Understand what your customers’ tastes and preferences are. From a pure business standpoint, they need to limit their offerings of coffee to just the popular ones, reducing overhead costs by eliminating the unpopular ones will help them reduce operating costs. They need to analyze which beverage is doing the best or worst and take customers surveys to get customers inputs. They need to educate the customers that the higher price of the coffee is warranted because it is a different type of coffee from the competitors so basically they need to look at their market and reeducate the customers of why their coffee is the best. I would classify the Starbucks into three categories: OUTSTANDING, WELL, and POOR by looking at how they’re net profits were over the last few years. I think by focusing on the stores that are doing well or have potential in them can help them in this recession rather than focusing on the stores that aren’t doing so well.
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