As the financial quarter came to close, Starbucks came to face a set of new challenges in regard to promotions. After stock falling as much as 2.8% as a result of shares sold, according to Bloomberg, Starbucks CFO Scott Maw reassured investors that the company would be taking an entirely new approach to its promotional strategy, thinking more long term. Despite having revenues higher than projected, Starbucks has experienced a decrease in customer traffic across all regions as well as slower sales growth than most previously recorded. In regard to other metrics and financial benchmarks, Starbucks’ performance was average, leaving Wall Street disappointed.
So, what wasn’t working? Starbucks’ previous promotions strategy involved a general Happy Hour providing discounted prices on Frappuccinos, as well discounted food items. Chief operating officer Rosalind Brewer described these past strategies as relying too heavily on a “drumbeat of promotional offerings.” To combat this problem, Starbucks’ new promotional strategy, as global chief strategy officer Matthew Ryan describes it, “is something that is going to build over time, and it’s part of an ongoing shift in our marketing, from a short-term ‘one and done’ focus to a sustained platform, ongoing relationship focus with our customers.”
So, what exactly does this new strategy entail? According to Marketing Week, the company plans on personalizing promotions to each customer; all customers have to do is sign up for immediate digital contact in order to receive offers specific to that individual. This strategy has just recently been implemented, yielding positive results so far, resulting in incremental profits. A campaign has also just been launched in order to promote afternoon sales, focusing on a variety of new products as well as food pairings. Coupling this, the company plans to promote products that have a more general appeal to a broader consumer base such as Blonde Espresso.
So, if the strategy seeks long term, what are the primary goals? Brewer stated that Starbucks wishes to focus on “Digital relevance and the expansion of our digital relationship; innovation in both our products and our marketing activities; and an unwavering focus on the customer experience in our stores.” With a growing reliance on digital technology, consumers are expanding their interactions with companies to a variety of online platforms. According to the Starbucks quarter 2 fiscal year 2018 fact sheet, Starbucks Rewards members grew as much as 12% in the U.S., with members representing as much as 39% of U.S. based sales. In regard to Brewers previous statement, Starbucks realizes just that as it hopes to promote the continued growth of online platforms and interactions with customers, allowing for that more personalized experience. With only a fraction of time implementing these new strategies, things are looking fairly positive for Starbucks. However, whether these new strategies gain the effects of longevity, only time will tell.
From a marketing management perspective, here are some questions to think about:
- In regards to this new strategy, how exactly does Starbuck’s innovation of in-store menu items promote customer relationships?
- How does the demographics of Starbucks consumers play into this strategy?
- Given the fast-paced nature of technology trends, what must Starbucks consider in order to retain longevity with this strategy?