Category Archives: coffee

The pricing brilliance of Starbucks’ $1 instant coffee

Imagine you’re a marketing executive at Starbucks, caught between bloated retail overexpansion and a bad recession. Customers around the world are rethinking $5 cups of coffee. Dunkin Donuts and McDonald’s are chasing you; hell, they just put up paneled walls. You gotta bring prices down but don’t want to kill profits or erode your brand. What do you do?

Instant coffee. This week Starbucks launched an entirely new powdered-coffee product line, which will sell for $2.95 for a pack of three — putting the price of a single cup of Joe under a buck. The official line reported by WSJ is “the market for instant coffee is so big, particularly overseas, they can no longer ignore it.” Um, yeah. What’s really going on is Starbucks is having its cake and eating it too, by differentiating its new low-cost coffee product a mile away from the expensive custom brew.

The genius of this is it creates variable pricing for essentially the same product. Just as some customers show up at grocery stores with coupons and buy canned soup for 50 cents less than you do (if you are like us and too lazy to scout coupons), Starbucks now can reduce prices only for the types of customers who really want a bargain. The other lazy types (um, us) will still walk in and somehow believe the ground stuff behind the counter is worth $4 more than the ground stuff in the instant bag. If 90% of people think coffee tastes better when someone else makes it, Starbucks has in effect only lowered its prices for 10% of its customers.

Margins protected. Just add water and stir.

Photo: Jeff Kubina

Buy another cup, you cheapskate

CoffeeCompany in Holland wanted to sell more java to the hipsters pecking at laptops in its coffeeshops, so slipped a message into the WiFi log-in screen. Brilliant. And if someone asks the barista how to log in to the internet, he’ll answer, “Buy Another Cup…”

Many marketers spend big bucks trying to get consumers to come, and then fail to market to consumers as they enter the organizational experience. That’s like working hard to get a date and then forgetting to ask for a kiss. So ask your organization — what are the common touchpoints our new customers experience with us? And is it possible to gather information or provide relevant offers as they begin their journey?

Via Brandflakesforbreakfast.

Dunkin’ Donuts and the end of Microsoft Office

We’re not big fans of gift cards, but something at Dunkin’ Donuts caught our eye this morning: A sign on the counter promoting customized coffee cards. So tonight we visited the Dunkin’ web site and found we can upload photos to create personalized gift cards.

Not only is this a cool gift idea — imagine giving your friends coffee gift cards with your smiling mug, or better yet, goofy photos of your least favorite politician — but it also points out the web is the new software center. The Dunkin’ Donuts editing site, actually run by Cardways, allows a user to upload photos, resize them, move them around, squeeze the X and Y axis, and basically do layout work that back in 1996 required QuarkXPress and TrueType fonts on a high-end Mac.

Software is becoming unbound. Soon, when we all have portable internet devices, and when the wireless pathways online get fast enough, hard drives and local apps will go away. Back in the day, Quark had 90% market share for layout tools, but it’s fading as design becomes embedded in every offline and online program. Microsoft Office, with its beloved Word and Excel, is facing the same pressure today from Google’s free online apps. Software has taken a Buddhist cycle, slowly leaving the wheel of birth, suffering, death and rebirth on our laptops until it departs hard drives altogether and awakens in the online state of Nirvana.

The irony is this: The better software gets, the less consumers are willing to pay for it. But no worries, mate: We’ll always spend too much on coffee.