Notes and Thoughts on Grocery 2.0

For years, Seattle-based Starbucks coffee company was praised for building its brand without heavy advertising. While the strategy proved successful in a booming economy, Starbucks’ recent financial woes, store closings and layoffs have left many questioning whether, ultimately, that decision to refrain from expansive marketing may have propelled the company’s decline.

In a comparison of Dunkin’ Donuts and McDonald’s coffee advertising strategies, Optimedia’s Antony Young outlines how two competing brewers positioned themselves against Starbucks and grew their market share in a down economy. Dunkin’ Donuts focused heavily on television, public relations and its web campaign. McDonald’s focused more on regional advertising and nontraditional media, such as product placements.

Dunkin spent about 15% of its total media budget online, developing a website Dunkinbeatstarbucks.com and serving ads across several sites.

Young concludes that Dunkin’s approach to use heavy broadcast was efficient, but typical. The exception, he says, was Dunkin’s “strong push online, which was a definite strong point in Dunkin’s communication plan”. McDonald’s, a traditional TV advertiser, departed from the company’s typical media buy to focus on local strategies, which, according to Young, paid off.

Advertisers can learn two things from the 2008 coffee wars.

One is a simple, but not always obvious lesson: the number one brand in a category cannot maintain its position indefinitely without continued innovation and effective communication. Starbucks’ blind faith in the superiority of its product, its subtle communication efforts and its cult following, coupled with its expansive growth strategy, alienated the company from many consumers, who no longer recognized the brand as the trendy, grassroots coffee it used to be. The down economy, when consumer purchase behavior had begun to shift continuously, was an especially bad time for Starbucks to lose focus on its brand position.

Two, brands can no longer afford to emphasize traditional broadcast advertising over online and regional efforts. In a diverse media mix, multiple channels often complement each other, but the focus should be on where consumers are most engaged. Dunkin’s website encouraged consumers to “Learn the Truth” through Dunkin’s story and “Spread the Truth” via e-cards sent to “less fortunate Starbucks friends”. Ads directed users to the site where they spent invaluable time interacting with the brand. These online tactics gave Dunkin’ a competitive advantage in a high-margin market.

To read Young’s entire analysis, click here.

Rachel