Starbucks faces consumer economic pressures ... by advertising?

As the season finale of Grey's Anatomy was on last night (yes I watched it) I saw the aforementioned advertisement for Starbucks. I said WHAT?! This might have been the second advertisement I have ever seen for Starbucks, and the other one was most likely revolving either around the music side (when they did the big promotion about the music they sell) or possibly about the holidays.

But when you see a company that you are not used to seeing advertise, you have to wonder why they are doing it. Now, I am not sure how old the ad is, but it was added to youtube.com on May 12, with all the agency information on it, so I doubt it is that old.

I wanted to quote an article regarding Starbucks advertising strategy:

Ask any regular Starbucks customer how many Starbucks commercials they have seen in their lifetime and you are almost guaranteed to get a response of ‘one’ or ‘none’. That is not to say that coffee drinkers are now watching less television. Rather, the lack of Starbucks commercials highlights the company’s unique advertising strategy – don’t advertise.

Sure, there are one or two Starbucks commercials, but the company is hesitant to focus on traditional methods of advertising. “It really is about connecting with someone in a more intimate, experiential way that we think will have longer lasting ability to build affinity than a 30-second TV commercial or an ad,” says Senior Vice-President of Marketing at Starbucks Anne Saunders.

Instead of producing Starbucks commercials for the masses, the company chooses instead to focus on the customer’s in-store experience. “You can be extraordinarily successful as a business using what people would call non-traditional means,” says Saunders. “It’s expanded my notion of how important experience versus information or one-way communication can be.”

The average Starbucks customer visits the store six times per month while the heaviest 20% of customers go to Starbucks at least 16 times per month. Thus, company executives feel that improving the in-store customer experience is a much more effective means of advertising than via Starbucks commercials. Starbucks encourages the promotion of their stores as a ‘third home’, providing comfortable chairs for customers to relax and spend time in, playing music and providing outlets for people to plug their laptops into. So far, as Starbucks surpassed the 10,000 mark for number of outlets worldwide, it seems that word of mouth advertising has worked more wonders than Starbucks commercials might.

Credit: http://www.evancarmichael.com/Other/612/Starbucks-Commercials.html

But back to the blog. What does it mean when the unexpected is happening? Is Starbucks running in to problems? Opening too many shops on every corner and feeling the effects of people saving money and buying cheaper coffee because gas prices are so high? I would guess that a smart company like Starbucks is going to start advertising more when sales drop to promote themselves and try to pump up their sales in this difficult market right now.

In a recent press release from Starbucks (April, 30 2008) the company released second quarter fiscal 2008 results and announced long-term financial targets. The release's first three subheadlines read one after the other:

Q2 Results Reflect Consumer Economic Pressures as well as Transformation Expenses

U.S. Store Openings to be Sharply Curtailed; International Unit Growth to Accelerate

Robust Pipeline of Innovation; First New Beverages to be in Stores Beginning in Summer 2008


To read the full press release go here.