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

Advertisers seem to have made the same resolution this year. From Pepsi to Dunkin Donuts, top brands are launching new campaigns with a different, if not new, strategy in mind: focus on the positive. That’s right. Optimism is this year’s newest trend, and it’s going to be a lasting one.

In Dunkin Donuts’ new campaign, the company tells consumers “You Kin’ Do It!” The ads encourage everything from weight loss to completing everyday chores. In Pepsi’s campaign, agency TBWA integrated shots of the company’s redesigned logo in words promoting positive thinking, like Joy and Love.

“The economy has people rattled and consumer confidence is at historic lows and for a lot of people there seems to be no light at the end of the tunnel,” said Frances Allen, Dunkin’s chief brand marketing officer. The campaign, she said, is a “reminder just to keep moving.”

Coincidentally, when I opened my inbox yesterday, I saw a post from Harry Gold, CEO of Overdrive, encouraging the same optimistic outlook. Gold cited recent industry news as, surprise, a reason for online publishers to smile. As an advertising professional, and a genuinely optimistic person, I couldn’t help but agree with his reasons for remaining upbeat. The following are some highlights:

 As late as October 2008, 11 research firms and authoritative sources said online ad spending should continue to grow between 12 and 19.4 percent in 2009, according to data published by eMarketer.

 By 2012, Kelsey Group analysts expect the interactive share of global ad spending will reach 21 percent.

 72 percent of the marketers responding to a Forrester Research study in May 2008 said that even in a recession their online marketing budgets would increase or stay the same. And, The New York Times characterized online marketing and media as one of the “recession-proof corners” during a downturn.

 In December 2008, Mediapost reported: “WPP’s GroupM unit projects online ad spending will expand 10% in 2009, a marked dip from its 22% rate of growth in 2008, but still a double-digit rate of expansion amid a global economic ad recession…Despite the continuing slowdown in the expansion of the online advertising economy, its share of advertising budgets will expand significantly during 2009 as most other major media remain flat or decline.”

 Even if there’s a “slowdown” in online growth, online is still growing.

Just as consumer confidence took a hit in the end of 2008, industry confidence also suffered. For these reasons and more, including increased consumer acceptance and often dependence on online advertising, improved online content and ad products, and consistent growth in time spent online, interactive professionals should be optimistic about online advertising in 2009. I certainly am.

Rachel