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Posted by Doug Davidoff

Feb 9, 2009 7:00:04 AM

When all creativity is gone, when any new idea for value creation is lost, the answer appears - discount.  News that Starbucks is launching its first value meal is the final nail in the Starbucks coffin.  It is time for Howard Schultz to step down.  For the group from Seattle that made "triple shot, grande, skim latte" sound normal to admit defeat.  As a longtime fan of Starbucks, I am (unfortunately) not shocked by the announcement.  Starbucks has been falling down the discount trail for some time.

Check out the article in USA Today - it's a great lesson for any business owner/executive of how to contribute to your own problems.  Some of my favorite excerpts, with my commentary in italics.


  • The food and drink "pairing" program, which Starbucks actually refuses to call a value menu, rolls out March 3.  The only thing worse than a premium brand discounting is trying to spin their way out of it.  The company that used to pride itself for treating its customers as intelligent must think we've gotten really stupid.

  • The move — something CEO Howard Schultz vowed he would never do — comes at a time when the coffee giant is spiraling down.  No comment necessary.

  • Starbucks, once the model of the New Economy, has been concurrently hit hard by three powerful forces: a recession, changing consumer habits, and growing competition from fast-food chains.  The article overlooks the fourth - and most important force:  Starbucks inability to stay true to what made it powerful and special in the first place.  You can blame this on the recession, competition or consumers, but the reality is this is a problem made by Starbucks for Starbucks.

  • The move by Starbucks is glaring evidence of how retailers and marketers have been forced by the economy to rethink game plans and long-held strategies.  The move is not evidence of how the economy is changing strategies - it's evidence that when you stop creating value, you start to kill your business.

  • Additional price-cutting is expected at Starbucks soon.  Enough said.


Starbucks was a great story.  They did something special (and polarizing) for a unique group of people.  For years, they were as focused on Who their customers were as Apple is.  They didn't kow-tow to their competition, they practiced customer-centered innovation.  They grew aggressively and carefully.  Then they believed they were the cause of their success.  They forgot it was their customers who granted them what I call a Demand Creation Monopoly™.  They stopped doing what made them successful to begin with.  Then, when they realized they were in trouble, they acted in the very same way as companies they used to displace by trying to shortcut their way to success.

In today's economy (and frankly in every economy we will see in the future), the recipe for success is clear - serve a unique set of customers uniquely well.  Anything else will bring failure - sooner or later.

Topics: Performance, B2B Sales Strategy