Starbucks – Affordable Luxury?
Posted by Jim | April 18, 2009 | Comments Off
Image via Wikipedia
Starbucks. For some, the word conjures up images of comfy chairs, smiling baristas and steaming lattes. For others, especially given the current economic conditions, it screams “overpriced,” “corporate greed” and “waste of money.” Over the years, Starbucks has worked hard to move its unique culture further into the mainstream (remember to call a “small” a “tall”). It worked equally as hard to increase sentiment enough that consumers were willing to pay a (rather substantial) premium for its products. While Starbucks has made a lot of money by selling the “Starbucks experience” to the average Joe, what happens now when Joe is out of work?
Since Howard Schultz returned to the role of CEO in 2008, Starbucks has developed new product offerings at an astounding rate. Many of these items, such as premium drip coffee and breakfast foods, have been directed primarily at the value-minded customer. It is no coincidence that both Dunkin’ Donuts and McDonald’s hastened their respective pushes into the growing coffee business during this time. The enormous marketing departments of each wasted no time in labeling their Seattle-based competitor “Fourbucks,” for the presumed average price of its drinks. As the economy worsened, Starbucks continued to take a beating in the media, with many an expert reminding consumers that one of the easiest ways to save a few bucks was to cut out the daily trip to Starbucks.
In early 2009, Starbucks began offering $3.95 “Pairings,” which included a tall coffee and a breakfast sandwich or oatmeal. While the company has not gone so far as to call it a “value meal,” the message to price-conscious customers is clear: we are affordable, we need your business. In-store advertisements and menus have also been changed to highlight lower-cost offerings. It may help make the company more competitive in the short-run, but how might this impact the Starbucks brand in the long-term? Can a company reliant on a premium image remain competitive by cheapening its product? When the economy does turn around, will Starbucks have trained its customers that it is “just another coffee place?” At what point does “affordable luxury” become too affordable?
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