Newswise — Starbucks is targeting cash-strapped consumers with its announcement this week that it will begin offering discounted breakfast "pairings" of drinks and food items, but a University of Indianapolis marketing expert says the move could further diminish the coffee purveyor's premium brand.
Reduced consumer spending is forcing difficult choices across industry categories, says Larry DeGaris, associate professor of marketing at UIndy.
"It's crucial for premium brands to remain true to themselves in difficult economic times," says DeGaris, a brand consultant whose recent clients include Pepsi, Allstate, UPS and Bank of America. "Price discounts for premium brands are a way of raising a white flag of surrender. You're admitting that you're not worth what people have been paying, and once you cross that threshold, there's no turning back."
Shortly after the Monday announcement, Standard & Poor's downgraded its outlook on Starbucks from stable to negative.
Although Starbucks has yet to discount prices on its drinks, DeGaris says the $3.95 breakfast pairings, combined with drive-through windows and discount cards, suggest a myopic focus on short-term sales while sacrificing long-term brand health.
"Starbucks is all about the coffeehouse experience " it's more about the break than the coffee," he says. "Starbucks has let Dunkin' Donuts and McDonald's frame the debate in terms of price, when they should be talking about value. A rough economy is all the more reason to pamper yourself when you can. Surely, a little peace of mind is worth an extra dollar fifty."
University of Indianapolis student Jenny Simac say she turns to Starbucks for customized drinks she can't get anywhere else. "When I want a simple cup of coffee, I go to Dunkin' Donuts," she says. "As a college student, I'm on a tight budget, but sometimes I crave Starbucks' caramel latte with the vanilla bean topping. It's more expensive, but it's worth it."
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