I have been all over Starbucks (SBUX) for over 2 years now, someday they’ll listen. After two years of scoffing, dismissing and mocking those who would suggest the notion of discounting, calling it “diluting the brand”, Starbucks is chasing McDonalds (MCD) and Dunkin Donuts down the food chain (pun intended).
Today’s Memo from Howard Schultz.
To: All Partners
Date: February 9, 2009
Subject: Value and Everyday Affordability – The Starbucks WayPartners,
During these tough times, customers need to know they’re making a smart choice when they come to Starbucks. That they’re getting the world’s finest coffee, delicious food made with quality ingredients, and an experience they can’t get anywhere else. But they also need to know we’re listening to them, and that we’re helping them by making Starbucks an affordable, everyday value. We have taken some time to understand how Starbucks can deliver more value in a way that is both consistent with who we are, and relevant to the day-to-day realities consumers are facing. It was time well spent. We have tested concepts, conducted research, and most important, listened to our customers. I am very pleased to report that we have arrived at a value strategy that will appeal to customers without compromising our commitment to quality.
On March 3, we will introduce a selection of new pairings at $3.95. They combine our most popular beverages with our most popular breakfast items – and we’ve added a few new ones as well. Our pairings lead with our hand-crafted beverages. They offer our customers more affordability at breakfast time – not a free extra they wouldn’t have ordered anyway. And they come with the Starbucks Experience each and every day.
This move is the right thing to do for our customers. And we can do it while maintaining our high standards in sourcing, buying and roasting the finest coffee in the world. Starbucks success over the years has been in delivering a level of taste, quality and authenticity based on the coffee beans we start with and the experience created by our partners. The majority of our customers are coffee lovers and we need to trust them to find value and quality at Starbucks over and above fast food purveyors and other coffee companies.
At the same time, we will do more to tell our story. I talked to a Partner recently who was frustrated by the persistent misperceptions about our value. He was urging the company to be more aggressive in responding to the mythical claims about the $4 latte. With your help, that is exactly what we are going to do.
Did you know, for example, that ounce for ounce; our brewed coffee is competitively priced vs. others in most markets, and in some cases, is lower priced? And did you know that the average price customers paid for beverages for all of 2008 was under $3? We will be providing you more facts like these over the coming weeks, so you have the ammunition to dispel the myth — with customers and friends, online and in conversation. We’ll also be adding new offers over time that combine everyday affordability with an emphasis on why Starbucks is a smart choice for customers – in tough times and in good times.
I look forward to sharing more with you about the value we bring to customers, and I thank you in advance for playing a critical role in telling the story.
Onward,
Howard
Problem? Yeah, it is now an admission that everyone who has said they were too expensive were right. Had they done this last summer they could have played it as a “helping out the consumer” motive. Now it just smacks of desperation as sales plummet and customers continue the two year exodus to the “competition” Schultz & Crew always denied existed.
How is the competition doing?
Yeah….good thing they aren’t competition for Ole’ Howard. Will the price drop help? NO. Why? Starbucks is in reactionary mode and has no direction and no soul. They no longer know who they are and what they stand for.
Until they figure it out, shareholders will suffer. What really needs to happen is for Schultz to go. Since the firing of Jim Donald last year, the return of Schultz has not lead to any better leadership or decision making.
Schultz returned promising a return to what made the brand great and almost every decision he has made since then has been counter to what Starbucks once stood for. Because of that, the brand is in shambles…
A fresh face is needed….or at least an original idea…
Disclosure (“none” means no position):Loing MCD, none
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