I’m worried about Starbucks.
Companies like Dunkin’ Donuts and McDonald’s have long gone after the upscale coffee purveyor, positioning themselves as offering similar quality products at more affordable prices. There was a time when Starbucks wouldn’t have given these competitors a second thought. They were merely fast food, while Starbucks was “the third place”–a 360-degree, five-senses experience that represented an entirely different category.
But with the economy now in the tank, Starbucks is in the tank right along with it. The company is suffering from the dual effects of losing its focus in recent years and consumers’ current reluctance to part with four bucks at a clip. McDonald’s, on the other hand, is doing just fine, leveraging the frugal economic environment as a way to introduce people to their new and improved coffee product.
With its launch of instant coffee, breakfast meal deals and loyalty cards, I’m concerned that Starbucks is allowing its competitors to reposition it, legitimizing their claims as acceptable alternatives and forever altering the playing field. Instead of holding on to its identity as “the third place,” Starbucks may become “just another place” to get coffee. The company’s short-term decisions to shore up sales could be doing long-term damage to the brand’s value proposition—damage from which Starbucks may never recover.
In my book, I speak of the dichotomy in which struggling companies often find themselves, being blind to the need to evolve on the one hand or changing strategies too frequently in search of a silver bullet on the other. The advice I give is to refrain from wholesale changes until you can carefully assess from where the problem is coming. If the troubles are borne of a temporary tectonic event–no matter how bad it is–it’s probably better to find a way ride things out.
The economy will one day recover, and many people will again seek out experiences that don’t involve tile floors and plastic chairs. While some will always zip through the drive through looking for a cheap caffeine fix on the way to work, others will once again relish the opportunity to linger someplace special. Whether Starbucks can continue to fulfill that need is largely up to the decisions the company makes in the weeks and months to come.