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Are they talking about you at work?

Starbucks treat receiptStarbucks is giving out these receipts at breakfast — good for a discount on another drink after 2 pm.

Guess what happens? Everyone is walking around the office saying "Hey, anyone want a Starbucks coupon?"

I don’t know how much sales they’re getting, but I guarantee that each receipt is good for more than one word of mouth conversation.

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Comments

  1. Adam August 9, 2008 at 3:33 pm #

    Andy:
    I think you’re missing the point.
    1) It’s a tragedy for the marketing world that one of our icons has fallen. Starbucks got people to pay $4 for what they used to pay 50 cents for. They did this with WOM. But not WOM generated by gimmicks. And this receipt thing is a gimmick. They did it by creating a great product that people loved, demanded, spoke about… How the mighty have fallen. Now they’re playing cheap parlor games instead of reinvigorating their product.
    2) People don’t give away items they cherish to their coworkers. People are giving away these coupons because they don’t want them. That is not a good thing for a business.
    So sure Andy. People are talking about Starbucks at the office. And the message is that Starbucks is no longer valuable.

  2. QualityGal August 9, 2008 at 5:53 pm #

    Adam,
    I have to disagree. I’m not a coffee drinker, but if I was, I doubt I could afford a two-Starbucks-a-day habit. Neither my wallet nor my waistline would do well. I’m guessing that Starbucks does their most business in the morning. The fact that their promotion is valid only after 2:00 pm suggests I’m right. Most people are only swinging by Starbucks on their way to work. Starbucks wants more of them to swing by on their way home.
    The people who are bumming the $2 coupons from their coworkers are the ones who didn’t hit Starbucks on their way in to work. Starbucks is getting them in the door, making a sale they wouldn’t have otherwise had, likely on a product that isn’t doing as well as they’d like – their cold drinks. The next day at work, the people who bummed the coupons off from their coworkers say, “Thanks! That iced coffee was great. Have you ever tried it before? No? Me neither, but I might get another one… got another coupon?”
    People go to Starbucks for hot coffee, right? They might not even consider trying a cold drink without incentive. Once they do try it (and hopefully love it) they’ll be back for more, even after the promotion has ended.
    I don’t see how this devalues them at all, especially if it results in more foot traffic during the evening commute due to water cooler coupon swapping.

  3. Justin Kownacki August 9, 2008 at 8:38 pm #

    There’s a great debate about this topic taking place over on John Moore’s Brand Autopsy as well — http://brandautopsy.typepad.com/brandautopsy/2008/08/two-buck-bucks.html
    Moore, who’s an ex-Starbucks guy, has special scorn for this “giveaway,” but I see an upside as well. In this economy, you either adapt or become increasingly extinct.

  4. Andy Sernovitz August 10, 2008 at 7:31 am #

    I hear (and agree) with all your points about Starbucks. I sort of wish I had used a different company as an example, because there is a great work of mouth lesson hidden under the Starbucks mess.
    How could you get your customers to walk back to their office and tell everyone that they just went to your place of business?
    It could be a gimmick (coupon, cool bag, etc.) or something more substantial.
    But everyone should be asking the question.

  5. Adam August 10, 2008 at 1:14 pm #

    QualityGal:
    I hear you, but I’m still against this promotion. Let’s say your analysis is right, that the people who want these coupons are the ones who didn’t go to Starbucks in the morning. And maybe it’s true that now they’re trying drinks (iced) that weren’t doing well before.
    But think about why these people weren’t coming in on the way to work before this promotion and why these iced drinks weren’t doing well. Was it because they weren’t getting a coupon? I don’t think so. Coupons make sense when the product is unknown and the cost is high. You have to reduce the risk to the consumer of trial, so you cut the price to get them in the door.
    But Starbucks is very well known and even at $4, the cost isn’t that high. If you try something and don’t like it, you probably don’t have to take a 2nd mortgage on your house.
    The reason those people weren’t coming in the morning and the reason those iced drinks weren’t doing well is that the offering AT THAT PRICE was not compelling enough. But the coupon doesn’t fundamentally alter the value equation because it is temporary (hence a gimmick).
    The iced drinks are easy. If they are only worth $2 to consumers then that is what Starbucks should charge or they will not sell. So either lower the price, or make the product better.
    As for the people that weren’t coming in before and now will because of the coupon: Does Starbucks really want those people? If so, why not lower their prices to 1 cent? They will get many more people. Those people weren’t coming in because they didn’t perceive sufficient value. Again Starbucks has 2 options: 1) lower price or 2) improve the product. Both of those options are lousy. Lowering the price doesn’t make sense if you have a core group of consumers willing to pay the current price. And improving the product in the minds of the non-core consumers in this case will probably alienate the core consumers.
    You can’t be all things to all people. Starbucks had a good thing going. People – not all people, but enough – loved their product and were willing to pay for it. Starbucks should have focused on these people and continued to innovate appropriately for them. Instead, they tried to grow too much to please Wall Street. And they diluted what they stood for.
    What they should have done (and still should) is open another chain with a value proposition that is more appropriate for the consumers that need this $2 promotion to walk through the door.
    Not sure if I’m allowed to do this, but check out a post on my blog about couponing which I think is generally an awful way to generate sales. http://adam-1001words.blogspot.com/2008/05/will-you-pretend-to-love-me-if-i-bribe.html

  6. Sara August 11, 2008 at 11:03 am #

    I have to say, I usually wouldn’t hit Starbucks twice in one day. But since I had a coupon, I went back for an iced latte. I had a friend with me who also ordered a drink. Viola – incremental sales.
    I don’t think what they are doing is a gimmick. It seems more a promotion to encourage/reward loyal customers.

  7. Adam Schorr August 11, 2008 at 8:50 pm #

    Sara:
    You don’t have to reward loyalty with an externality. You reward it by being great the way you got the loyalty in the first place.
    And yes, these are incremental sales but they dilute your margins. Again, if they lower their prices to one cent they will have almost every American stopping in multiple times per day. But that it not a profitable business.
    They didn’t need to do this before. Now they do. What changed? I think what changed is they grew bigger than their loyal customer base. The added consumers that are outside of their core are inherently less loyal and so they need these promotions. But why dilute your margins this way when you can have such a thriving business with healthier margins? If they need to grow, open up a new chain. One that has lower prices and a value proposition more targeted towards these other consumers.

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