There is a lot of hubbub right now surrounding Starbucks. Specifically their breakout decision to pursue TV advertising this holiday season. As a brand known for approaching marketing in non-traditional ways, this drastic traditional move has armchair marketers swarming. Cause and Effect is when one thing (A), gives rise to an action (B).
What I see happening with Starbucks is what I call Because and Affect. Because we know “thing (A)”, it affects how we perceive action (B).
The BECAUSE: Combat negative same-store transactions. For the first time in the history of the company, Starbucks has reported negative transaction comps, fewer people coming into the door versus the previous year.
The perceived AFFECT: Starbucks has implemented unprecedented TV advertising.
Yes Starbucks is using TV ads to build awareness and drive traffic. But the real cause is less knee-jerk reaction and lacks scandal. I know because I worked in the Starbucks marketing department for nine years… In fact, I was responsible for managing holiday promotions in North America.
Here are the causes of the effect: TV advertising.
- A Christmas Retailer – While Starbucks has always called itself a coffee retailer, let’s be honest, they’re a cafe… except at Christmastime. During the eight weeks of the holiday season in November and December, Starbucks sells more non-coffee items than at any time of the year. Part of the goal of the marketing team is to drive awareness of Starbucks as a holiday gift-buying destination.
- New Fiscal Year – October is the beginning of Starbucks fiscal year. The momentum gained during the holiday season has typically set the base for the rest of the sales year. The stronger the better.
- Been Doing Christmas Advertising for Years – Tis’ the Season of Marketing Clutter. As consumers, we’re painfully aware of all the advertising “noise” during the holiday season. As marketers, we’re personally creating and combating it. So as not to be forgotten, Starbucks has traditionally executed advertising during the holiday season. They launch a holiday website, viral videos, sampling vans, run ads in newspapers, magazines, on the radio, on billboards, and launch special events.
- Different Marketing Leadership – Anne Saunders, head of Starbucks marketing, left Starbucks in May for a great job at Bank of America. With different folks at the helm, the marketing ship is being steered into new waters.
- Centralize/Decentralize – The marketing centralize/decentralize pendulum has swung to the centralize arc right now. The Starbucks in-house creative team is creating more than ever. Part of this shift would include moving field marketing dollars to spend on a national level. This would allow Starbucks to afford TV.
- TV Isn’t New! – I’m sure you’ve seen commercials Starbucks Double Shot?
If I had written the Holiday marketing plan for Starbucks for this year, it would have had something in it like this:
Break through the clutter during our busiest retail season to drive traffic to our stores. Reinforce Starbucks as a destination for holiday gifts. Leverage our consolidated marketing budget to support the limited-time offering of our traditional holiday beverages, Christmas Blend, Starbucks Card, and holiday merchandise.
By the way… have you seen the “Pass The Cheer” ads in question? Take a look. Do they look or sound like traditional, hard-hitting, fast food, cash-in-the-sales ads? They’re about people passing the cheer – celebrating the season of giving. What better way to show you care than to give someone a hot cup of Starbucks?
Starbucks reminds me of that well-meaning kid in school who did something to lose the trust of his teachers. Now whenever something goes wrong the Starbuck kid gets called to the principal’s office. (Even when others are being bad as well…) “But, we expect more from you Starbuck!”
I am motivated to write this post, not as a Starbucks fan, but as a concerned marketer. There is an important difference between Cause and Effect and Because and Affect. Perception has become reality. We marketers are responsible for managing these exact challenges.
*Poof!*
You’re now the head of marketing for Starbucks. Your job is to solve this. Knowing what you now know – how do you fix it?
Paul,
I wonder if Starbucks hasn’t become over-exposed, creating a backlash (not in its number of stores but in the amount of press/posts/etc.).
As you know, like you I am a former Starbuckian, and one of my responsibilities was executive speechwriting as well as internal brand building. Some of the executives, among them those who came with HS, were concerned about talking to much about the brand externally unless it was to promote its caring side. They preferred human story-telling to Advertising and what we might call traditional marketing. In my mind, except for announcing summer drinks, I think advertising is a huge mistake.
Furthermore, like many partners, I am one of those who felt then and still do that Christmas merchandising, with the exception of coffee accessories, is a mistake and harmful to the Third Place Coffeehouse Experience. That has always been contentious between Marketing and others within Starbucks, so I suspect you and I may disagree on that point.
One more point: I waited to comment to see how many readers would participate. As one, like John Moore, who occasionally posts about Starbucks, I have noticed a steep decline within the past year in the number of readers who click on Starbucks stories. Again, I think the business might be over-exposed, and we should leave the marketing to the stores and the ways they create great Third Place Experiences.
No great insights from me today, Paul. Just my two cents that these spots are heart-warming.
Paul – we go back, way back to the mid-90s days of marketing Starbucks. But my take is a little different than yours.
There is no perceived “affect” with Starbucks decision to spend millions of dollars on running national television commercials. This REALLY & TRULY IS UNPRECEDENTED marketing activity by Starbucks Retail North America. Starbucks has never spent millions of dollars to buy national media spots to support its stores.
For clarification purposes we need to separate out Starbucks Retail North America with Starbucks Joint Ventures. Starbucks “Retail North America” is the division within Starbucks that’s responsible for driving sales at its 10,000-plus North American locations. Starbucks Joint Ventures mainly pertains to its partnerships with Pepsi (bottled frappuccino, double shot, and iced coffee products) and with Kraft (Starbucks branded coffee sold in grocery stores).
The Starbucks Joint Ventures arm has been running nationwide television commercials since the early 2000s to support the bottled product sold in convenience stores and grocery stores. But the catch is those marketing dollars were spent by Pepsi and the goal was not to increase sales and traffic to Starbucks retail locations. Those spots were primarily designed to drive sales of the bottled coffee drinks at places OUTSIDE of Starbucks. Secondarily, because of the strong brand logo, Starbucks retail locations have no-doubt benefited from those commercials.
You managed the Starbucks Holiday promotions on multiple occasions. (For those reading this, Paul Williams was known as “Mr. Holiday” inside Starbucks because he was always given the responsibility to manage this all-important promotion.) You know exactly where the Retail North American marketing budget was spent. And as you spell out in your post, Starbucks has spent dollars on Holiday advertising many times before. But those dollars were REGIONALLY spent in key markets like New York City, Chicago, Los Angeles, San Francisco, and Seattle. Furthermore, those dollars were allocated to Print (major daily and alt. weekly vehicles), Direct Mail (specific zip codes near “flagship” Starbucks locations), Radio (spot schedule and promotional buys), and Out-of-Home (billboards and bus shelters).
Digging a little deeper – Retail Starbucks North America has run television commercials before either on a very local level (in the Pacific Northwest only) and an aborted spot campaign to support Frappuccino in about 1998. Those campaigns were small-time and inconsequential enough that it’s like those one-off television commercials never existed.
This move by Starbucks into spending millions of marketing dollars on running an expensive television advertising campaign has to be read as a direct reaction to slowing sales and negative customer traffic trends. As you point out, the Holiday promotion is mega-important to Starbucks. We’ve been a part of the discussions on how to ramp sales in Q2, Q3, and Q4 when the Q1 Holiday sales fail to meet expectations. Obviously, Starbucks believes now is the time to pull the trigger on using the mass media of television advertising to help ensure the company gets off to as strong a Q1 sales-start as possible.
You bring up a great point in that Starbucks leadership has changed. The old guard is out and the new guard is in. The new guard is full of smart businesspeople with a wealth of experience. But much of their experience is with traditional brands that have always relied on mass advertising to drive sales. The new guard doesn’t have the same experience the old guard had in spending marketing dollars not make fancier television ads but, rather to make better customer experiences.
I rambled here – sorry. But my point is simple: the move by Starbucks into spending marketing dollars on television commercials to increase sales and customer traffic at its stores IS INDEED a monumental departure for the company. It ain’t about perception. It is all about reality. And the reality is – Starbucks is a different business today than it was yesterday.
Lewis … I haven’t noticed any decline in traffic to Brand Autopsy for posts about Starbucks. My unscientific analysis tells me traffic has increased to these posts, certainly not decreased.
John,
You series with Paul received few comments compared to your earlier Starbucks stories. When I first started blogging 18 months ago, my Starbucks posts generate both high numbers of readers relative to other subject matter and more comments. That is no longer true, and that is based on real numbers.
The same is true here at the Daily Fix. There was a time when running a Starbucks story guaranteed comments. Today, with the exception of Elaine, we have three former Starbuckians commenting. Not exactly an indicator of tremendous concern or interest about whether Starbucks advertises or not.
Instead of running national television commercials, the Starbucks marketer inside of me would have offered FREE in-store Wi-Fi access at all Starbucks North American locations during November and December.
Message-wise, I would sync it with the “Pass the Cheer” angle as Starbucks is “passing the cheer” of free wireless access to its customers.
I’m sure this would get lots of play in the media as it’s a classic PR play. I’m also sure this would help to drive in new customer traffic and get current customers to come in more often. T-Mobile might not like it. However, I’m sure there would be a way to appease T-Mobile in order to make this tactic happen.
Offering FREE in-store W-Fi access during the Holidays would be the biggest marketing promotion I would implement (in addition to, of course, the Holiday signage, merchandise, and beverages).
John,
Great idea! I have always felt that marketing should begin and end with the Third Place Experience. Remember the mantra: Starbucks doesn’t sell coffee, it sells an experience.
BTW I only refer to my numbers regarding a decline in interest in Starbucks posts and my perception that your excellent series with Paul garnered fewer comments than your earlier Starbucks posts.
No comment.
A comment on the Starbucks spots: OK, maybe they’re heartwarming. But is anyone else channeling Jacqui Lawson? They play like her online greeting cards.
johnmoore: Completely agree on the free wifi angle…
Frankly, why don’t they offer it anyway? I can’t tell you the number of times I suggest Panera over Starbucks for a business meeting destination solely because of the free wifi.
Ann … my take on SBUX not offering free wi-fi is that they haven’t had to. Business has been strong enough that they could get by with pocketing some $$$ from the mainly corporate-types using the T-Mobile service and not worry about the loads of customers who aren’t willing to pay for wireless. However, free wireless at coffee spots has become a cost of doing business–ain’t no way to monetize it now.
Another way I think SBUX views their paid wireless service is that it self-selects customers. SBUX, it would seem, would rather have customers who can afford the wireless service than “freeloaders” who would use the wireless without paying for a beverage.
On a conference call with analysts some months back, I recall SBUX executives saying they had tested offering free wi-fi in a few markets and found that it drove in too many customers. Why is having too many customers an issue? Well, SBUX execs sad that the extra customer traffic put too much strain on the store operations resulting in longer wait times for customers to get their drinks.
Given all this hullabaloo about soft sales and a decline in customer traffic, sounds like Starbucks could use the “problem” of having too many customers. Sounds like freeing the wi-fi might help.
Thanks johnmoore for the perspective. Seems to me that you set a grouping of comfy chairs together… and your gonna get freeloaders, wifi or not.
That being said, Panera stores are usually much larger than Starbucks — so perhaps they can absorb the strain more easily?
Interesting debate.
I had just done a post about Starbucks decision to advertise which (sorry LG) generated a lot of commentary
If you’re interested in hearing what those on the agency side had to say, you can check it out here:
http://tangerinetoad.blogspot.com/2007/11/starbucks-goes-over-to-dark-side.html
If you’d rather not click, the consensus in a nutshell was:
*They’re a big ubiquitous brand, they might as well advertise
*The new ad campaign is pretty sappy and appeals to middle America more than to their traditional upscale audience.
*The “Glen” spot that Fallon did in support of the double shot espresso cans was one of the best TV spots ever made.
Paul.
I agree with your comments. Honestly I would “expect” more from Starbucks as well. In an environment in which more 1-2-1 contact channels are available this “back to the easy way out of TV” isn’t something very natural.
Track back!
I must admit i don’t like the starbucks ads much.
Could you please write something more about an importance and implementation process of the Internal Branding in Starbucks?
I chosed topic Internal Branding for my Bachelor Thesis and I decided that Starbucks will be a great example of the Internal Branding and it’s results.
Best Regards