Coffee wars: a good example of buzz marketing vs. integrated marketing

by Tony Fannin, president, BE Branded

I’ve been watching the coffee wars between Starbucks, McDonald’s, and Dunkin Donuts lately. What interests me is how tactics have been changing over the course of the “battle”. Starbucks has long been held up as the anti-advertising poster child, especially for entrepreneurs and small businesses. Often, I’ve been told that they don’t need to market. “If Starbucks can do it, so can I.” they said. Most of them has seen “buzz” as their holy grail, not unlike the new grail of social media. “All I need is free buzz and a lot of free social media and I’m set.” One of the main facts these businesses don’t take into account is that Starbucks does do advertising. By building 10 stores in a 20 block radius, at $40,000 a pop, they are using a mass of brick and mortar as their advertising vehicle. Not too many other businesses are willing to put $400,000 in “street marketing” per community.

Back to the coffee thing, here’s what I’ve been observing.

• Competitors have changed the marketing game. Starbucks used to be able to get by on buzz and word-of-mouth. Since McDonald’s has been getting into the coffee business in a big way, Starbucks has had to up their marketing presence. McDonald’s takes a no-prisoners attitude. They will swamp you with marketing dollars to gain mind-share and share of wallet. Their coffee push is no exception. They are gaining large chunks of ground on Starbucks and Dunkin Donuts. Starbucks has had to counter with a massive print ad campaign in publications such as NY Times and the Chicago Tribune. Over the last 3 months, Starbucks have taken out daily full or half page ads and bus advertising in major cities. They are also going to launch a full-scale marketing push (integrated marketing: online, traditional, street marketing) in support of their new VIA product. Dunkin Donunts has put extreme pressure on Starbucks as well by advertising in mass media such as print and TV.

• Basic retail principles still apply. Before, Starbucks didn’t have to discount or reward their customers. Everyone was happy to pay premium for the experience. Now with McDonald’s revamping their restaurants, lowering their prices, and doing what McDonald’s does best (value menus), it’s forcing Starbucks to play the fast feeder game. Starbucks now must compete on the retail level because they no longer are the only game in town with “premium” tasty beverages. Thus, a hand full of programs like the rewards cards, treat receipt, and buy 4, get one free, is becoming a staple at Starbucks.

• You’re never alone for very long. If you’re in a great niche and you’ve hit on a great concept, product line, or unique service, wonderful. Take advantage of it quickly because there is no such thing as a sustainable advantage in today’s business world. Technology has shorten a competitive advantage from a few years to months. If it’s a very profitable arena, you better believe the big boys will come in and compete in your sandbox. And they have more money for bigger toys and more of them to dominate the sandbox and eventually kick you out. (Some people call this the second-mover advantage). So, if you’re fortunate enough to become a category leader, the battle just got started. You’ll soon find how quickly competitors will join in. If you get stuck in your ways by saying that all you needed was buzz and social media to get the business going and built to the size it is now, you’ll soon find out how quickly that early advantage will disappear. Your competitors will be well funded and have the know-how of integrating their marketing might to dominate the category that you helped create.

You must remember, what worked last quarter, may not work this quarter. The market changes and new competitors makes it crowded. It will take more to be heard than it did before. Your mindset must be fluid and open to change and adapt your marketing approach to defend your market position. Don’t get caught in thinking that only a few tactics are relevant in today’s marketing world.


About Be Branded

Tony Fannin is of President of BE Branded, an integrated marketing firm who helps clients BE Somebody to their customers. If you aren't somebody, then you are commodity.

No comments yet... Be the first to leave a reply!

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: