Sunday, December 14, 2008

A Cup of Recession Joe

Marketing Analysis (6 of 6)

Denis spoke about how factors outside of your company’s direct sphere of activities have to inform and effect your marketing decisions. I came across a good example of this today reading about how McDonalds is aggressively targeting Starbucks in the US coffee market. I am unsure if the same is true over here in Ireland yet. Even up to earlier this year I would have been surprised by the thought that McDonalds could compete effectively in the same market space as Starbucks and appeal to the same target markets.

Lets look at the marketing factors in play here. Given the deteriorating Irish economic environment, people are either looking to rationalise their discretionary spending or, if they have been laid-off, they are having to abandon it. In this climate it is difficult to justify spending five of six euros for a Christmas Gingerbread-Topped Triple-Strength Mocha With Whipped Cream. So everyone is increasingly in the market for a price-sensitive morning coffee. OK, so Starbucks could theoretically make changes to their prices, but a substantial part of their marketing message is still the theme of ‘The Third Place’ – in essence the idea that you are paying premium for the environment, the service and the sense of place that is uniquely Starbucks. So getting into any downward pricing spiral will either damage their brand or really start to reposition it in people’s minds. On the other hand, McDonalds never makes any claims to providing a wonderful environment, but they have proved themselves pretty adept and nimble at successfully adapting to market changes over the years. They now sell a surprising amount of salads and have had their McCafe offering in play for a number of years.

Operationally, once you start selling espressos and mochas to attract in the customers who are open to migrating away from the Starbucks and its ilk, you are faced with an issue of educating your existing customers who have been used to ordering black coffee or white coffee (or perhaps a Latte if if they are feeling particularly adventurous). That poses another marketing challenge. I have found the online component of this campaign: This site mostly works as customer education: training McDonald’s existing customers to understand the variations of coffee the company is now selling. I presume these marketing messages are mirrored in-store, but I have not been State-side to investigate.