Marketing Doctor John Tantillo’s Winner and Loser of The Week: Starbucks and Groupon

John Tantillo’s Winner and Loser of The Week

Brand Winner… And Loser…

 

Marketing Doctor John Tantillo’s Winner and Loser of The Week: 

 

Winner:  Starbucks 

Loser:  Groupon

                                    

           

WINNER: 

Starbucks seems to be making the right moves.  Let’s put aside their recent logo mis-step which saw them drop their name from their logo –something I hope they will reconsider.

Starbucks’ deal with Green Mountain Coffee Roasters is masterful brandsmanship.

Basically, Green Mountain Coffee, which has reputation for high quality beans, has agreed to make Starbucks the exclusive “super premium” coffee for its Keurig single-cup brewing system.

I’m not so sure this is good branding for Green Mountain Coffee since it eclipses their emphasis on their own coffee, but it is great for Starbucks.

Bottom line, Starbucks gets to sell the very popular Keurig machines in its own stores, but much more important, it gets to establish its coffee for a whole new market of consumers and underscore the inherent quality of its product.

This deal opens them up to “elevation by association” (GMC has a stronger coffee quality reputation) while also setting up a distribution channel (all of those repeated single-serves with their brand) that will continue to re-enforce the Starbucks brand and widen its scope.

All without spending a single dollar on advertising.

LOSER: 

Groupon, the online coupon giant, is seen as an unstoppable force and the next new model for marketing and advertising for both small and large businesses.

Please wait while I put my skeptic’s hat on.

A piece I read in the Times made me think about some core marketing principles that might just be being lost in all the excitement.

Allow me to quote this observation by Jay Goltz, a small business owner who had some experience with Groupon:

It’s been two years since I used Groupon at my frame shop. Few of the sales have turned into repeat customers, which is not typical of my business — we have a percentage of repeat customers. And that’s one reason I am concerned about the potential damage a daily deal can do to a company’s brand. The deals are a threat to what I call price integrity.

When you charge some customers full price and others half price, you make some happy and others unhappy. Worst of all, you make the wrong customers happy! The regulars are unhappy because they feel they overpaid; the discount customers are happy — but they’re probably not coming back because they’re used to shopping at half price. When you decide to do a daily deal, you are training your existing customers to wait for the next coupon. Does that sound like a recipe for success?

I couldn’t have said it better myself. 

Coupons are only effective if they build on the fundamental realities of your brand and business.  

If marketing is the science of satisfying the needs of your customers, then to employ a coupon without identifying those needs is madness, plain and simple.

As Goltz points out, his business is a repeat customer business whereas Groupon’s bread and butter are one-off promotions that drive traffic that is interested in discount sampling.   Talk about someone who really knows his customers!

Basically, these are two very different Target Markets.  This wouldn’t be a problem except for one important consideration: to meet the needs of the latter TM (the one-off’s) you risk offending your loyal customers.

It reminds me of what I once heard from my barber in the old neighborhood.  He wanted to improve business, but he ruled out discounting hair cuts for exactly this reason.  Never stray too far from common sense marketing.

Loyalty strategies work better in these kinds of businesses since you re-enforce the buying habits you want to re-enforce and strengthen the word-of-mouth that can be a powerful driver of future sales.  There isn’t anything quite like positive re-enforcement to encourage the behavior that you want as a business owner.  This is called the “law of effect” and it is the basis for all rewards programs.

Back to Groupon.  There’s no doubt that their approach can drive incredible traffic.  And sure, there have been stories of retailers overwhelmed by a flood of business.  But the question remains whether this flood is actually good for the long-term growth of a brand. 

The lesson here for all small business owners when executing a coupon promotion or any other kind of promotion is this: will the tactic hurt your brand in your current customers’ minds and what type of new customers are you likely to attract through the promotion?

After all, branding must be organic to your business and that means always keeping the totality of your customers in mind.  First ask, who are your customers without the coupons.  Those are the people who must shape your promotional strategies.  Ask them directly.  Observe behavior.  Reflect.  It might just be that old-fashioned referral incentives, not coupons, are the way to go.

And, remember, it’s always easier when you keep marketing and branding in mind.
 

TODAY’S TANTILLO TAKEAWAY
Always use your customers as the guide for your branding decisions.

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