Posted by Christopher Stevenson
Starbucks is scared of low-priced competitors. Concerned that McDonald's and Dunkin' Donuts are invading its space, Starbucks is testing $1 drip coffee (with free refills, no less) in its hometown of Seattle. Given, it's only a test, but it indicates that the coffee giant may be losing sight of its target market. Starbucks fanatics aren't in it for drip coffee; they like their drinks personalized. (Grande, one-third decaf, triple shot, sugar-free vanilla, hazelnut double pump, soy, light-whipped cream, extra hot white chocolate mocha, anyone?) Will offering drip coffee at a price competitive with the coffee you can get at McDonald's really help bolster Starbucks' declining revenue and bring in new customers? I doubt it. Not when the people they are targeting with a price decrease can get a cup of coffee with similar quality at the local gas station (like Madison, Wisconsin's PDQ).
Starbucks isn't the first company to try to lift sliding revenues by implementing a scattershot marketing plan. Tweeter, once the darling of high-end electronics in New England, decided to expand across the country and take on the giants like Best Buy and Wal-Mart with low prices and entry-level components. Bad idea. They've filed Chapter 11 and have begun retreating to their niche market with "Consumer Electronic Playgrounds," stores that look like model homes and display different high-end components in each room.
I'd challenge anyone to point out a company that is successful long-term without knowing its target market. You can't serve everyone. Those that try, fail. Do you know your target market?
UPDATE: Mary Arnold, CUES' VP/Publications, reminded me of Denise Wymore's recent post about McDonald's recent decision to build coffee bars in their restaurants. Hmmm, McDonald's is moving toward Starbucks. Starbucks is moving toward McDonald's. Is it a match made in heaven or regression to the mean?
