Starbucks is Shooting Itself in the Cup

          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.

 

Comments

[Account Deleted]

The moment i read "To support the Via launch, Starbucks will be promoting a “taste challenge” in its own stores"

I has an idea Starbucks is make a stupid mistake...I Won't be better marketer than Starbuck's mgmt, BUT I KNOW WT IS RIGHT. I WONDER WHY THEY MAKE MISTAKES????

[Giant]

I have tried Via it's good for instant, but still tastes like instant. It's not going to fool people who enjoy good brewed coffee. at $1.10 per packet it makes a 8oz cup for $2 i can buy a 16oz cup of high quality brewed coffee? I can also grind my own beans at home and make a quality cup of coffee for about 50 cents. Who are they targeting with this? and how many can there be. Maybe it's a guy with lots of money who works in an underground mine 8 hrs a day who can't leave. All he has down there is a hot water tap and cup.

[microgaming]

Great post!! I think starbucks is losing his way here… instant coffee is not their business and I don’t think they will get a lot of customers with it. If I want to enjoy coffee at home I got much better coffee with a lower price. If I go to starbucks is to enjoy a beverage with my friends and spend some time there, actually I would buy anything if they didn’t brew coffee

[Marketing Plan]

Hi,

Yes today most of the businesses failed, because no one gave importance to learning; only having a good idea is not always enough. Learning is the everlasting process. Whatever big is your brand and name.

I totally agree with you, it is not necessary if you have a solid idea then you will succeed. There are so many things you have to look when you are introducing new product, just having an good idea is not enough, you need to have knowledge and strategies and proper strategy execution is far important then just having a strategy under your belt, and most crucial part is you have to craft yourself according to the needs of the market and without learning its not possible.
I personally like your post; you have shared good insights and experiences. Keep it up.

[John Verdano]

Laura, isn't Tide Stain Release the same story? They were always saying that "detergent alone is enough" and you don't need any additives and now they came out with such additive (Tide Stain Release)?

Any opinion on this snafu?

[Accounting Dissertation]

Blogs are so informative where we get lots of information on any topic. Nice job keep it up!!

[Dr Wright]

I gotta wonder about that. I dont want Starbucks instant. I am going for the experience, I can make good coffee at home for less. More money and less experience???

Dr Wright
http://www.wrightplacetv.com

[Tubosun Abioye]

Starbucks will simply attract new customers for this new low end product and loose old customers in its old high end product. Simple!

[Geoff Dillon]

Alot of the folks in line at your local Starbucks are buying anything but coffee. These are Starbucks' premium clients, who are spending $4 a pop on a "beverage", not a coffee. No matter how good Via is (or isn't) these folks will still be there.

While I think Starbucks will fail in getting people to believe Via is as good as brewed coffee, their positioning could convince consumers that it's the best by far among instant coffees -- which begs the question, is that worth anything to them? Will we see Via alongside Taster's Choice in the grocery store soon?

[Glenn Friesen]

Hard to believe, since their early branding was based around "the experience of drinking Starbucks coffee". After the introduction of chilled coffees in Vons and vending machines, and the new drive-thru Starbucks locations, I thought that the giant mermaid had done a great job killing that brand value. But now with the introduction of the instant coffee alternative, I'd say that my former opinion was ruled a little too early. A brand falling apart through extension? You tell me. What's apparent is that their about the product now, and not the service.

[Yaacov Weiss]

Starbucks campaign is sooo bungled, it’s astonishing. If this product is mapped to a completely different consumer occasion (as one commenter put it), why are they be having taste tests in their stores? All they’re doing is convincing loyal customers that it’s no longer worth coming in here!
-To coffee aficionado’s, which is Starbucks primary target, equating instant to freshly brewed is a sin. Why would they create a marketing campaign that rubs their primary target so wrong?
-Starbucks was built on the notion that the “coffee experience” is fundamentally more special than just plain coffee. Why are they now directly contradicting everything they always stood for?
-How does a modern name like “Via” synthesize with “Starbucks”. According to Starbucks website the name Starbucks is in honor of “the coffee-loving first mate in Herman Melville's Moby Dick, and because they thought the name evoked the romance of the high seas and the seafaring tradition of the early coffee traders. The new company's logo, designed by an artist friend, was a two-tailed mermaid encircled by the store's name.”
If they wanted to create a product for a different consumer occasion, then they should have made a campaign like “When there’s only time for instant, there’s Via” and keep instant as a lower tier option.

[Fred Tompkins]

I don't think you have done your research or even much thinking, Al. The price per serving of this Starbucks instant product is not much less than a 8 oz (short) cup of brewed coffee. An argument that Starbucks has created a much cheaper offering that will draw people away from its stores just seems wrong on its basic merits.

I think this is a product mapped to completely different consumer occasions than the retail experience. I would compare it to having California Pizza Kitchen pizzas in the grocery store. Or...another example--2 liter bottles of soda are priced very similarly to 20 oz bottles--go to your local grocery store and check it out. The soft drink companies make tons of money on the small packages. People simply have different shopping algorithms for different occasions.

People have proven that they will pay a premium for the overall retail coffee experience. I would bet that will not change--I would bet that if we check back in six months, you will be proven wrong. Perhaps embarrassingly so.

[Tom Wanek]

Well, at least they didn't name it, "Starbucks Instant Coffee"

[Jim Hayes]

Starbucks is generating media attention and foot traffic to their stores with the VIA promotion (seems to be working). The majority of people who order drinks at Starbucks do not order regular coffee so there really isn't a threat of losing anyone or diluting people's perceptions of the brand. It is possible to taste the difference but if you like McDonalds you probably won't be able to. The Italian Roast VIA does beat a lot of office swill served up in companies around the U.S. and VIA is perfect for camping trips and times where you can't actually head into a Starbucks, Caribou, or other coffee shop.

[Allan]

Spot on analysis.

I've been a big fan of Howard and the Starbucks brand experience. I thought his return to the helm would be a good thing for the company. If this strategy works, I'll be really surprised.

How do you transfer the whole store "experience" with the ambiance, baristas, and sights and sounds in a bag of instant coffee?

[Bill Cross]

Laura, I know you're not a big fan of licensing, but consumers understand the "at home" and "eating out" occasion as TOTALLY different. You don't just go to a Starbucks for Joe, you go for the ambience, to sit and read, or to have SOMEONE ELSE make your coffee. And while Via claims to be as good, I wonder (having never tasted it) if it's not a case of "nudge, nudge, wink, wink," with Starbucks saying it's AS GOOD, when in reality, it's never going to equal the in-store experience.

[mark rukman]

al you're missing the big picture here. starbuck's understands that it's not the most premium brew on the block, that more of it's sales will come from packaged goods eventually than will come from their stores. via is ensuring that it's quality. it's not cadillac's cimmaron, it's expanding user occassions and the type of consumer. and while we're on cars, mercedes makes a c-class, and e-class and an s-class, sure is the c-class a bit for strivers of course and it's a car for a younger buyer. when i see a 50 year old in a c-class, i think bit of a loser, couldn't afford what you really wanted, when i see a 30 yr old in a c-class, well i guess this is your first in a long line.

starbuck's is getting smart and building their business

[greg]

Errr, "latest"? It's been out for six months already.

The only difference is that they are now trying to renew marketing interest in it by pushing it out to markets they didn't care enough about the first time around.

Odd that we're talking about it all over again after hashing over it six months ago. I suppose by that fact, their marketing strategy is working.

[Arthur Charles Van Wyk]

Brilliant analysis as always.

Starbucks, being a mega brand, should look at expanding thru innovation and not extension.

Same company. New brand. Same distribution channel. New customer.

That's what the approach should be.

[www.facebook.com/profile.php?id=580332546]

When I saw Starbucks come out with Via, I knew that you would be posting on this topic.

Starbucks is doing to itself what Cadillac did to itself in the 80s by introducing low-end Caddies to grab market share. All it did was help Lexus & Mercedes solidify their market leadership at the high end.

What they fail to understand is that there is no more market share to grab under the same brand using the same advertising and distribution methods they have been using.

Diluting the brand may bring in a few more people, but it will also drive loyal customers away.

I tried Via. As Jay Leno recently said," 'Via' is an ancient word for 'Sanka'", and I agree.

[Erik Johnson]

My thoughts exactly...

http://marketinglawsdaily.com/blog/2009/09/30/starbucks-instant

The Clover is the new coffee option that should be advertised. Great post!

[twitter.com/MP_PriceCom]

instant what?!? bull. focus on the brand and everything will take care of itself. i can't believe starbucks is losing focus AGAIN "via" product.