Starbucks reported today that their earnings rose to 24 cents a share from 16 cents and bested the expectations analysts who were seeking per-share earnings of 19 cents. What's at the heart of this positive news for Starbucks?
According to the Wall Street Journal article, the profit was "aided by cost cuts." (Starbucks Swings to Profit, Aided by Cost Cuts - WSJ, 7/22/09) Well, I submit that the article my be more aptly phrased as "Aided by Marketing." Marketing appears to have played a significant role in helping Starbucks hold their own against an economy that's running from even the smallest luxuries en masse, competitors that are offering cheaper "me too" products in the specialty coffee department and the general 'cocooning' behavior that's keeping Americans at home and out of their favorite 'third places.'
Mr. Schultz said the company has benefited from its own marketing campaign, which has included print ads and communication with consumers using social media Web sites. Last week Starbucks became the most popular brand page on Facebook with more than 3.5 million fans.
In fact, I would argue their are four elements in the marketing equation that have contributed to their "resurgence" in the last year:
- Starbucks' crowd sourcing of consumer ideas via their My Starbucks Idea site - With thousands of ideas submitted, thousands more votes on this ideas that followed, and a few actual innovations that have made it into stores that have provided genuine benefit to Starbucks consumers, this is one of the things that has kept me personally loyal to the brand
- Their intelligent use of data through the Starbucks cards and the vast email database - While Starbucks didn't really have much of a "loyalty" program to speak or until the Gold Card (yes, I have one), they've built a great email database that they've used as recently as this week with the "free pasty with a drink purchase and this email" campaign. One only had to look at the sheer volume of empty pastry containers and the large stack of emails at my local Starbucks to see the email is a steady staple in their marketing plan that's working for them.
- Starbucks made waves with social media - They currently have the largest Facebook group (3.5 million users) of any of their competitors.
- Finally, Starbucks has stuck to their knitting using traditional marketing - Using vehicles like print ads and (seemingly) more prolific and effective in-store marketing, while integrating them into the overall digital strategy to reach customers at all ends of the spectrum, Starbucks has truly "met people in their medium" to ensure that no customer is left behind.
More to the point, even competition has helped Starbucks to carve out a stronger position in the coffee market.
In recent months, Starbucks has faced increased competition from rivals including McDonald's Corp. and 7-Eleven. McDonald's recently launched a national marketing campaign behind its McCafe specialty coffee drinks.
Rather than hurt Starbucks, Mr. Schultz said the added attention has helped his chain. "It appears that the various marketing campaigns, and all the media coverage about coffee, has created unprecedented awareness for the coffee category overall, and has actually had a positive result on Starbucks business," he told analysts.
While I admit, this is a complete outsider's view of the situation, I submit that as a daily customer, who better to see the effects of their marketing that us! I further submit that Starbucks' marketing efforts have done as much for them, maybe more, than any of the cost-cutting and operational efficiency plays that they've made over the past year.
This story illustrates what marketers all over the country know and Schultz said it himself in the article when he said "No company can save themselves to prosperity." Exactly! Prosperity comes from being competitive, engaging in smart marketing, crafting a holistic strategy and a driving that strategy to execution. Me, I'll take marketing over cost cutting any day!
