Thursday, February 5, 2009

Would You Like Fries With Your Frappuccino?

Is Starbucks getting ready to pander to penny-pinchers and bargain hunters?

Recent reports indicate that as the recession drains profits, Starbucks Corp. is hoping to stop the bleeding with its own version of a "value meal".

In its fiscal first quarter report last week, Starbucks same-store sales — a key performance indicator — dropped 10 percent. And the battle for market share is heating up with both McDonald's and Dunkin' Donuts jumping into the specialty coffee area with various offerings catering to those who want to enjoy their morning brew without busting their budget. Afterall, for the price of one regular priced Starbucks coffee you could get an entire breakfast meal at the Golden Arches'.

This dilemma - maintaining brand integrity versus profitability - poses an interesting challenge for a Starbucks brand battling to survive the economic pressures being placed on customers like Glen:

Starbucks Chief Executive, Howard Schultz has told investors that "several breakfast pairings" will be unveiled at "attractive" prices in the very near future.

But does the concept of a Starbuckian "Value Meal" seems like a disastrous step toward devaluation of brand equity?

Is it better to stay focused on high end coffee connoisseurs or be stuck in the middle of mass market players like McDonald’s and Dunkin’ Donuts?

What would you do if you were Howard?

"We built the Starbucks brand first with our peoplle, not with consumers - the opposite approach from that of the crackers and cereal companies" HOWARD SCHULTZ

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