Where Starbucks' Marketing Went Wrong

onward bookIn Howard Schultz’s book Onward, he talks about how Starbucks rebounded from troubling times that included hundreds of store closures and thousands of layoffs, to get back on track to growth and strong profits. Schultz who started out in marketing at Starbucks before buying the company from the original owners and shifting the business strategy to serving beverages, talks a lot about branding and customer experience in the book. Despite his emphasis of maintaining a strong brand however, the never ending expectations of continued growth and poor marketing decisions have led to many mistakes that have hurt the strength of the Starbucks brand.

Automatic Espresso Machines

To increase efficiency and reduce customer wait time, Starbucks switched to automatic espresso machines that resulted in a loss of “romance and theater” that was originally envisioned. Schultz helped to restore the experience by making the process more manual, so that baristas could provide more of a performance for customers.

Breakfast Sandwiches

Schultz was not a fan of the introduction of breakfast sandwiches and was animate about getting breakfast sandwiches out of Starbucks. He talked about the smell of burnt cheese overwhelming the aroma of coffee that killed the brand story of an authentic European coffeehouse. Schultz was able to get rid of breakfast sandwiches temporarily, but decided to bring them back to increase sales per transaction and after the cheese was adjusted.

Licensing Stores
Schultz emphasizes the pressure Starbucks received from Wall Street to continue to grow and this probably led to the licensing of Starbucks as mini-Starbucks in grocery stores. Schultz explains that they decided to not franchise Starbucks stores to maintain consistent quality, but Starbucks’ stores within a store are not much better. Licensed stores are staffed by the licensee’s employees, who often provide substandard service that leads to a customer experience that is inconsistent with real Starbucks stores.

No National Advertising

Traditionally, Starbucks has stayed away from national advertising through major media. Strong brand awareness, word of mouth, and the addictive nature of coffee helped Starbucks get away with not advertising as much as other major brands for several decades. However, their lack of advertising hurt Starbuck’s ability to communicate important differentiators. For example Schultz talks about how Starbucks stresses using only high quality Arabica beans rather than the inferior Robusta beans, however many customers who didn’t know this complained of a burnt taste. Schultz also talks a lot about social responsibility such as providing healthcare for all employees and buying fair trade coffee, but a lot of customers are oblivious to these efforts. Schultz began to change his thinking about advertising and hired BBDO, which has produced some effective national ad campaigns.

Instant Coffee
Schulz talks about how there was great resistance to the idea of instant coffee over concerns that it would hurt the high quality and premium positioning of the Starbucks brand. Despite Schultz’s desire to differentiate Starbucks Via from instant coffee and Starbucks attempts to create a new product category, customers still perceive it as instant coffee.

Where Starbucks’ Marketing Went Right

My Starbucks Idea

My Starbucks Idea allows people to submit their suggestions to Starbucks and ideas are voted on by the community. Listening to customers through the My Starbucks Idea community has led to helpful insights and some ideas that were implemented to improve the customer experience.

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1 Comment

  1. David Patterson

    06.30.2011

    Reply

    Have you seen how Starbucks is promoting Dunkin Donuts recently online? Ok, not exactly, but they are promoting Marvel comics hard on their wifi login page and it happens to lead to the Marvel Comics page WHICH has Dunkin Donuts ads ALL over it!! Do you think Starbucks realized this when they signed the deal? I don’t think so. Just type in “Starbucks marketing fail Marvel Comics” into Google and you will be surprised…..

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