Starbucks has become the "new" Denny's.

Submitted by Dave Harkins on Thu, 01/24/2008 - 10:59pm.

Every where I turned today, people were discussing Starbucks $1 cup test. In case you hadn't heard, Starbucks is testing a $1, 8 oz. cup of coffee (appropriately named "short", but it probably more appropriately defines the amount time in which they'll test it before canning the whole idea), with free refils, in it's Seattle stores.(MSNBC link). I'm sure those who want to soak up the Starbucks atmosphere and do a little social networking will love the idea that they now have a bottomless cup. Yet, will the carmel-mocha-latte crowd like the idea of the average joe swilling coffee and lingering much to long in their coffee haven?

The MSNBC article notes that Starbucks Chairman/CEO Howard "Shultz said he believes the company’s main problem was it lost its
focus on customers in recent years as it concentrated on growth. He has
downplayed the threat from a growing cadre of competitors, saying the
company has always faced tough competition."

That excerpt is pretty telling. Maybe they haven't lost focus on their customers. Maybe they just had the wrong customer. Think about it. Starbucks has built is brand on the carmel-mocha-latte crowd and their willingness to pay just south of $5 for a 16 oz. coffee-flavored drink. Now, in an apparent effort to drive new business and stem losses, they're going to abandon their core audience in and attempt to attract the value-concious coffee drinker who has hours to spare to get full value for their money. I can see it now, Starbuck's locations filled from open-to-close with 75-year-old retirees sipping coffee from the bottomless cup and reading every newspaper in sight. Hmmm. Perhaps aging baby-boomers are the "right" customer for the next 20 years.

This $1 coffee strategy just made coffee a commodity again. If you really want coffee, just coffee, you've been able to get if for around a $1 for some time. Heck, you could even get a 16 oz. coffee in Starbucks for about a buck-fifty (only 50% more cost but 100% more coffee than this great new deal). If you're paying a $1 for coffee in today's culture, you probably don't care about atmosphere or really too much about taste. But to the carmel-mocha-latte crowd, Starbucks and it's coffee drinks represent the elite of coffee lovers. It's a place to get away and relax with friends in a comfortable environment. No, they're not going to like it much when the new crowd shows up and takes their space and drinks $1 coffee. It'll kill the whole experience forthe Starbucks core customer, and it'll likley kill the brand that Starbucks has worked so hard to build.

On second thought, maybe that's realy Shultz's plan. If you put all together, cheap coffee, decent atmoshpere, opportunity to hang out all day sipping coffee, chatting with retired friends and reading the newspapers, it doesn't sound so bad. Denny's does very well with that strategy.