Tuesday, May 5, 2009

Starbucks comes up short on new campaign

Starbucks has arrived at an important crossroads. Dunkin’ Donuts made a dent in its market share, Wall Street turned up its nose, and now McDonald’s is gunning for more of its business. The company has responded with a new internet, print and in-store campaign that it says will be a long-term story of its values and social conscience.

At a basic level Starbucks gets credit for playing its strong cards and for creating a set of messages that enable customers to feel good about their continued allegiance when their wallet is straining. It is admitting that customers are being wooed by a powerful competitor. But as an overall customer strategy it lacks the power necessary to meet such a huge challenge at such a tough time. Here’s why:

Retention: This is not an effective retention strategy for Starbucks. The reason current customers might defect to McCafe for their coffee is because it’s cheaper and more conveniently located. If the company used its social media community and email subscriber list to remind current customers of its current locations, new openings (though there aren’t many of those) and even their non-coffee inventory, that might serve as a retention strategy. Appealing to values in a tough economy should be bolstered by a straight competitive response.

Acquisition: Starbucks has an acquisition problem. It’s closing stores, it’s fighting a huge competitor, and it’s expensive. What kind of customer is going to start going to Starbucks and buying its coffee? It has to wonder whether it has reached a critical mass with customers. This campaign is a decent shot at appealing to potential customers, but it doesn’t address the overall acquisition strategy void at Starbucks. The company needs to come up with some new offers for its current customers, and become creative with new offers to attract new ones.

Loyalty: It has always done well with loyalty programs. Starbucks has blended incremental spending, with free goods with a social option (donate purchase percentage to charity). I like the fact that it has chosen this crossroads and this campaign to pop its social concerns. It appeals to the emotional aspect of customer loyalty, which is a favorite topic of analysts and academics but rarely executed. But it could have added some caffeine to its loyalty program at the same time. It comes back again to a more creative and aggressive set of offers. A new loyalty offering does not have to be anti-thetical to the values campaign.

Engagement: Big ups for engagement strategy here. As it was first defined a few years ago, engagement was meant to be the intersection of media and customer strategy. Starbucks is playing very effectively on the reason people paid more for their product in the first place, and it’s playing on the good vibe it creates socially. If this campaign succeeds in holding McCafe at bay it will be because customers stayed engaged with the values of Starbucks.

Metrics: Here’s the big problem. Starbucks customer impact will be tough to measure. It is foregoing customer satisfaction measurements and increases because the campaign isn’t aimed at that. It’s also not aimed at sparking new business. I have a hard time figuring out how new tools such as real-time purchase data and customer interactions will validate this effort.

I have to admit I’m rooting for Starbucks. But they need to bring the big guns right now, and I don’t think this is enough. Your thoughts?

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