[Image of: RetailWire Logo and Tagline (for print)]
 
[20 comments]

Starbucks Marketing Via Taste Tests: Crazy Like A Fox

October 2, 2009

Commentary by Bob Phibbs, The Retail Doctor

This week Starbucks' Via instant coffee arrived and the chain is expecting 10 million consumers to visit its 7,500 company-run cafes to participate in a taste test this weekend.

Howard Schultz, the CEO of Starbucks said, "I've been fooling people for almost a year now. This is not your grandmother's instant coffee. The quality of Via is a mirror image of the quality and taste of Starbucks brewed coffee."

What makes Starbucks' launch so interesting is that I can't think of one other brand trying to get you to try their cheaper version and then proudly saying you can't tell the difference. It's like RL POLO or Coach telling people their outlet stores had the exact same merchandise.

This is not like GAP owning Old Navy but defying someone to tell the difference. GAP realizes they are covering two distinct markets that have some overlap and my guess is so does Starbucks. But Starbucks is crazy like a fox.

Now I have to confess to RetailWire readers, when this was first announced I chimed in with, "This thing is struggling to keep the wheels on. They already ceded to McDonald's earlier this week with their 'value' menu.'" I've changed my mind.

Do they expect the Starbucks customer will switch to instant? Probably not but it gave them the opportunity to come back to the market with lots of press and offers to their 4 million Facebook Fans. What was the hook?

You have to come in to the stores to taste it.

Starbucks is expecting a lot of customers Friday through Monday. And while they're there they also may become reacquainted with their addictive habit of their morning coffee.

The first thing that went during the recession for some were the indulgences of specialty coffee; a weekly habit can cost $1000 a year. It's not a secret that their traffic counts are down; this may just be the gimmick to bring those who have built Starbucks into one of the most easily recognized brands in the world back to the cup.

Sure, Via is a product that is targeted to the 21 billion international fast food and vending machine markets but who wouldn't choose a Starbucks out of a vending machine at your mechanic's over the swill that had been sitting on a burner for two days?

Pundits are still puzzling why Starbucks would "push instant" at the expense of their premium brand. Crazy like a fox.

Notice they could have just as easily sent packets in the mail for you to try or bundled it with your morning newspaper. But they knew the goal of their event: to get people to come back to the store and rebuild a brand sorely in need of a jolt.

Discussion Questions: What do you think of Starbucks tying the launch of Via instant coffee to its stores? Are there other instances of a premium brand equating their lesser brand and, if so, did it result in additional sales?

FINANCIALS:     [NASDAQ:SBUX]

Discussion Questions:

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

What's the likelihood that the launch of Via will end up helping rebuild traffic levels at Starbucks stores beyond this week?

Comments:

This is a great move to get people back in their locations. Some may be new people looking for a Starbucks experience at a lower price and others, some of the former faithful who stopped coming. Either way, if you don't get people in the door, it is hard to get them to be customers.

Will it result in the true Starbucks customer switching to instant coffee? Doubtful, even if they cannot tell the taste difference (or don't see themselves as instant drinkers), but it does create a lot of media buzz about Starbucks, Via, etc. Could it backfire? Yes, but only if the media decides to cover the "event" and the results don't meet Starbucks expectations.

[Image of: View Braintrust Panelist button]
Steve Montgomery, President, b2b Solutions, LLC

This will work when the message is placed in the store where Starbucks Coffee is being sold.

Sandy Miller, President, Miller Zell

Starbucks will be enormously successful with its instant coffee campaign. The timing is right and the market is ripe. That said, I do have some concern that an instant brand might erode some of the brand's image, but in terms of making profits, this will be a winner.

[Image of: View Braintrust Panelist button]
David Biernbaum, Senior Marketing and Business Development Consultant, David Biernbaum Associates LLC

This commentary is fascinating to me. I have to admit, I hadn't thought through the idea of "getting people reacquainted with their habit" until Bob's commentary. I really think this program could go either way, with huge impact. Starbucks is really rolling the dice. I really hope they are measuring that impact.

I suspect the telling factor will be how many new (i.e., non current regular) customers they bring in to do the taste test, which suggests they need to be extremely aggressive in getting passers-by (who wouldn't have gone into the store anyway) to go in and do the taste test. E.g., stationing people outside of pedestrian locations to invite customers in. In vehicular locations, exterior signage or even having people carry signs down the block. I can see that SBUX is being aggressive with the viral marketing on this, which makes sense. I also think shying away from traditional media makes sense.

[Image of: View Braintrust Panelist button]
Jonathan Marek, Senior Vice President, Applied Predictive Technologies

'Must come into the store to try it' = promotion.

Equating Starbucks instant coffee with ground = permanent brand effect.

Changing the way America thinks about instant coffee is possible but changing the way America thinks about Starbucks is more likely.

[Image of: View Braintrust Panelist button]
Joel Rubinson, President, Rubinson Partners, Inc.

From what I understand, the instant coffee market in North America is actually fairly small (about 10% of the total market). The instant program is really aimed more at the UK, where apparently instant constitutes the majority of coffee sold.

I think positioning the product as a means to "enjoy Starbucks wherever you are" is smart. It doesn't claim to be any better or worse than their brewed product, it simply gives the on-the-go customer the ability to take Starbucks with them.

There are examples of other brands introducing lower-line products and certainly some with negative results (read Mercedes C Class). However, I don't think that sort of disenfranchisement of loyal customers will happen here.

Doug Stephens, President, Retail Prophet

What we don't understand is, if Via tastes as good as Starbucks' regular coffee as Howard Schultz's claims, why would we want to buy the presumably more expensive fresh brewed variety? Starbucks is about the experience. What's the experience of pouring something from a package and adding hot water? This seems to make better sense in a grocery store setting than as a reason to stop into a nearby Starbucks.

[Image of: View Staff button]
George Anderson, Editor-in-Chief/Associate Publisher, RetailWire LLC

In addition to the media-event atmosphere of this program--which is brilliant--Starbucks has harnessed a convergence of factors. Those customers who have continued to frequent the stores are a loyal foundation, not likely to switch to the low-priced alternative. After all, they've continued to pay for the cachet that goes along with a Starbucks (note: no need to say "coffee" any more) through this downturn.

Additional traffic should be built from those who left and those who are only occasional visitors. And of course, the curious non-Starbucks-ers will be drawn in by the event atmosphere.

About timing--more brilliance. Temperature is dropping in many areas--a hot cup of Joe will be welcome. Octoberfest and other fall events are all over the place in metro areas--lots of mobile consumers. And it's on the weekend--"Did you try Via?" should be heard in workplaces and on the Internet all next week.

[Image of: View Braintrust Panelist button]
Dan Raftery, President, Raftery Resource Network Inc.

Starbucks has never been about the coffee. In blind taste tests, Dunkin' Donuts routinely wins. Starbucks has always been about the emotional connection that it made with its customers, much in the same way that customers paid a premium to wear a shirt with a little polo player embroidered on the chest for all to see. Hey, I'm carrying Starbucks Grande, I must be cool.

Starbucks flourished in an economy and general consumer mindset that everything would go up indefinitely and money was no object. The recent financial collapse as altered that view, probably for a long time to come. Starucks is now moving to expand its sales by offering the brand experience at a lower price, much in the same way that Haagen Daz and Godiva have done.

The media coverage and the buzz will no doubt build traffic into the stores for a short period. In my opinion, the big win is in the revenue line. Those who can still afford the stores will continue to go for the experience, those who cannot or who choose not to will still be able, at a lower price, to access the brand.

You're right, very smart play.

Bill Emerson, President, Emerson Advisors

I've always thought that half of the Starbucks experience is about the cup.

The cup says "I have disposable income." The cup says "I can leave my desk and wander around." The cup says ."I'm on the move." If you can fill the cup for less money, you just might treat yourself to a coffee experience you'd dropped from your routine in a nod to the recession. Can't wait to see the results of the promotion.

[Image of: View Braintrust Panelist button]
Cathy Hotka, Principal, Cathy Hotka & Associates

So, who has actually tried Via? I have; it is better than (conventional/traditional) instant, and not as good as fresh brewed. Perfect. Starbucks (and other premium coffee providers) represent only a small percentage of overall coffee drinkers and this will expand their reach within the broader category. It has already created buzz and it will get more--and new--customers into their stores. Hardcore Starbucks devotees are highly unlikely to "trade down" to instant and for the uninitiated, it's a low-cost and perhaps more palatable entry into the world of premium coffees and the "Starbucks Experience." And for those of us that spend too many hours on planes drinking the mud that passes for coffee, the packaging is convenient, and pre-measured. Starbucks has made several missteps in recent years; this is not one of them.

Mark Baum, SVP & CCO, Food Marketing Institute

Starbucks' strategy for launching Via is spot-on: The market is ready for a premium instant coffee and utilizing the in-store channel as the vehicle for creating awareness and sampling/purchasing the new product will have a significant and positive impact on store traffic.

The majority of those polled here view this as having a long-term impact on driving store traffic, which in turn will allow previous customers and those who've cut back on their daily Starbucks fix to become reacquainted with the premium beverages as well.

For those who've not been to a Starbucks recently, the quality of their morning pastry/muffin/cookie products are vastly improved as well.

[Image of: View Braintrust Panelist button]
Jeff Hall, President, Second To None

Ever try to get a good cup of joe on a major highway? Now you can take Via with you and order hot water! Having just tried Via, it does have a good flavor, albeit a little thinner than the brewed kind. But it's fast and easy when you are on the run and a coffee house isn't readily available.

Yup. If there is a Starbucks store nearby, that will still be my first choice. But Via is a big step ahead of any other instant product I have tried.

And I am especially intrigued by the comment above about coin vending Starbucks coffee. On one side, it brings convenience to retail stores, gas stations, and highway rest stops wanting to offer something better. But at the same time, it was the whole notion of convenience that brought down the exclusivity and allure of the Starbucks brand. This will be fascinating to watch over time.

John Hyman, Overseer of Order, Zen Marketing Inc.

Curiosity is a powerful motivator for shoppers at retail. It is curiosity that gets them in the door, down the aisle and then turn the corner.

This Starbucks promotion is going right after consumers' curiosity gene. It is so unnerving that anyone could claim that instant coffee could taste as good as brewed and that someone with the coffee authority of Starbucks says it, the statement demands to be validated.

I personally plan to go to Starbucks this weekend to find out what all the fuss is about and to satisfy my curiosity.

It takes a new experience like this to really stimulate shoppers and get them into the store. So what can other retailers do to create extraordinary, mind-blowing experiences that build overpowering curiosity in shoppers? Gap tried to do it with their new 1969 Jeans program. I have not as of yet satisfied my curiosity about these jeans...but I expect I will. Bravo to Starbucks, because I have been a huge skeptic about instant Starbucks.

Pamela Danziger, President/Founder, Unity Marketing

Consumers have changed--Via fits the new mindset about our coffee preferences. Nice to get to Starbucks when convenient, but it becomes a pricey habit for some. Finding a more portable substitute makes sense if the value + quality is recognized by the consumer. Who else but Starbucks could pull this off--bold, value driven, right move for now.

Anne Bieler, Sr. Associate, Packaging and Technology Integrated Solutions

Fascinating roll of the dice. Starbucks redefined 'coffee' when the major manufacturers were asleep at the switch. This appears to be exactly the same game plan. Should be fun to watch how it all plays out.

Kevin Price, President, The Market Performance Group, Inc.

I think this further shows that they are not as cool as they used to be.

John Crossman, President, Crossman & Company

I went to Starbucks today to try their new brew. It seems I was the only one in line to ask for "the taste test" sample. Everyone else ahead of me and behind me was ordering their "usual."

It seems like a great marketing idea, but the sign inside my Starbucks only said to try the taste challenge. It never said the tall coffee was free or "'on us" at Starbucks. The clerk or barista seemed a little clueless as to the offer.

That's a missed opportunity at point of purchase. It seems to me that consumers would have to have read the newspaper ad or otherwise seen the taste offer in print somewhere before they entered the store to know it was an opportunity to try to a new brew at Starbucks for a few days at no cost.

I thought it tasted pretty good but it wasn't clear to me how much consumers might save if they order instant vs. regular Starbucks. That's a marketing opportunity yet to come.

Odonna Mathews, President, Odonna Mathews Consulting

If they convince everyone that their instant coffee is as good as or better than their regular coffee, and they sell instant coffee in a multi-pack, aren't they going to risk losing impulse sales of other pastries, etc, if they drive people away from their stores? It is not like instant coffee is a big category, so they are not replacing other instant coffees, they are replacing their own drip coffee.

I admit it...I don't get this strategy at all.

Joel Warady, Chief Marketing Officer, Enjoy Life Foods

One thing I haven't heard anyone mention is the target demographic. The trend in coffee among today's coffee drinkers is a fresh-brewed (brewed being a key word here), made-to-order drink. However, there are a lot of older coffee drinkers that prefer instant coffee. I've watched my parents drink stuff out of a jar for years, and in moments of desperation have done it myself once or twice. But with people living longer and this generation seemingly not giving up its coffee, there is a real opportunity to gain significant market share among this age group.

John Lofstock, Editor-in-Chief, Convenience Store Decisions

Search RetailWire
Follow Us...
[Image of:  Twitter Icon] [Image of:  Facebook Icon] [Image of:  LinkedIn Icon] [Image of:  RSS Icon]

RetailWire's
Getting Started video!

View this quick tutorial and learn all the essentials...

RetailWire Newsletters