Wednesday, July 22, 2009

Starbucks: Improved Food and Nighttime Coffeehouses

Yesterday, Starbucks gave away free pastries with the purchase of coffee - - if you stopped by from 5:30am - 10:30am and enjoyed this free goodness, wOOt! - if not, next time. The free pastry effort was run in accordance with their "real food, simply delicious" campaign that claims "because we serve the best coffee in the world, we're raising the bar on our food" or so "our coffee cake can sit next to our coffee with pride."

Why does this campaign work?

Food previously = OK. Now, better?

Historically, Starbuck's food has been average to poor in taste and nutritional quality, and certainly for its price. However, often it is purchased out of convenience (you are buying coffee and you are hungry). Yet this type of impulse (or desperate buy) may have been more likely a year ago. Because the economy stinks, and many are saving their pennies, perhaps some are turning their hungry stomachs away from the glass cases and settling for less (food). With this campaign of improved food quality, this self-denial may be out ruled by the dual working forces of a grumbling stomach and a rationalizing mind, some now telling themselves they are getting better quality food for their hard earned dollars and before you know it, voila! a blueberry scone may be on the receipt.

Coffee cake wants to be in the cool club with the coffee!

Starbucks signaling that they are improving the quality of their food to be on par with the quality of their coffee draws attention and reinforces the quality of their...wait for - making it more or less the standard to be. In addition, Starbucks admitting that they are aware their food items are less than good calls attention to a weakness, and recognizes that it could be better. This admittance of their flaws in a way humanizes their historically "we do no wrong" corporateness, and in turn potentially makes them more likable. They even go as so far as to openly admit they are listening to their customers and are recognizing and delivering what they want to hear: “it’s great that an industry leader like Starbucks is listening to customers and providing healthier options, while also being transparent about the ingredients in its more indulgent offerings. People want food that tastes delicious, but the definition of ‘healthy snacking’ is changing. People are asking what goes into their food, not just whether it is low-fat or low calorie,” says Keith Ayoob, Ed. D., R.D. at Albert Einstein College of Medicine. Taking the "I'm not perfect and want to be better for you" corporate mentality does go a long way. If, of course, it is believed to be true and genuinely benefit the consumer.

What else has Starbucks been up to lately? As this Advertising Age article describes, Starbucks is trying to go back to its roots with a cafe concept, an "inspired by Starbucks coffeehouse" serving alcohol, new food choices, and live entertainment. "Evening revelers can find beer, wine, new food choices, the occasional film screening and a variety of live entertainment, including music, acting and poetry reading."

Here's why I think this could work on a small "test" scale but not across the board...

When Disposable income is down, Disposable income really is down.

Nationwide unemployment rates are high (9.7%). The Starbucks following itself has slowed due to saving pennies so launching a nighttime version of Starbucks with most likely the same expensive stigma doesn't make sense. While many studies have shown that in a recession people like to reward themselves with small luxuries (quality chocolate, movies, even giant Cheetoes), I doubt this should be weighed on too heavily. At the end of the day, people will make choices for their small luxuries and not indulge in everything.

Who is Starbucks aiming these nighttime coffeehouses at? They already have a loyal morning following...

For many Starbucks customers, it is a reliable, friendly place to get coffee on a regular basis. You know the quality you are getting so creativity is not required. Starbucks has noticed that its foot traffic in the evening is considerably slower than the morning or afternoon and in turn is trying to change this with more of a nighttime atmosphere. In the morning and afternoon reliability is usually important because you want a good place to pick something up quickly, or a place to get work done, or meet a potential new employee or a friend, all the while knowing what your experience will be. In the evenings, however, people tend to be more creative, and want to try new things. Getting a regular following who will be willing to wind down every night over a Starbucks glass of wine or beer will probably be more difficult than a crowd who just wants to wind up in the morning without too much thought.

So while Starbucks does have "a core group of consumers for whom the brand is central in their lives" with the budget for it everyday, who else is Starbucks aiming this nighttime coffeehouse at?

As noted in the article, Scott Bedbury, founder of Brandstream and former Starbucks marketing chief, noted that one of the primary benefits of such a concept is maximizing profitability per square foot. Starbucks has been known for its real-estate savvy since day one, but locations generally go dormant after dark. Adding an evening occasion is likely to boost profitability for appropriate locations, particularly if they serve alcohol. He said the concept could be Starbucks' next Frappuccino. Yet what is interesting is that while the Frappuccino opened up a whole new clientele for Starbucks - non coffee drinking adults, adults with a particular sweet tooth, kids, summer travelers, international lovers of the "cool American way" - I am not sure I see the parallel with an alcohol serving nighttime establishment. Serving beer and wine is not innovative in the same way a Frappuccino is.

At the end of the day, if Starbucks is trying to test out a new concept with a small batch of stores - this actually may be a good idea. Most companies try new things all the time to stay cutting edge. And if they can expand themselves and bring in more revenue without a huge amount of output, also, a very smart decision. But if they are trying to do more, and implement this across the board, I doubt the forces will be with them.

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