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With new product developments, promotional product bundles, and new store designs, Starbucks is brewing up a lot of change. To maintain the value of its brand, it needs to tweak its marketing strategy and thus succeed in the modern economy.

Starbucks must cut costs by $500 million by the fall of 2009. Because it is more expensive to attract new customers, the company is turning to retaining existing customers; through its store opening and new product efforts in recent years, it already has a loyal customer base. Yet fewer customers are coming in the afternoons and weekends; the almost universally known Frappuccino has suffered the worst drop in sales.

In response to consumer cutbacks and the struggling economy, Starbucks also is suggesting customers might need some promotions, like coffee and breakfast pairings for $3.95—$1 less than if the products were purchased individually. If customers want to brew their own, less expensive instant coffee, they can purchase VIA from Starbucks for less than $1 per packet or cup.

Finally, it is reimagining stores, opening the first prototype in downtownSeattle, not far from its original Pike Place Market location. The new design features more sophisticated stores with wood décor and environmentally conscious design using recycled materials. The menu focuses on traditional coffee drinks and, in rather swanky fashion, does not list the prices. High-end coffees made on the Clover brewing machine also escape price listings. Disposable paper menus are available for the customers to view if they, perchance, desire to know the price of their purchase. This new store type tries to generate an ambiance similar to that of the original coffeehouse.

Discussion Questions:

  1. What changes is Starbucks making to its strategy?
  2. How is Starbucks maintaining or reinforcing its brand?

Janet Adamy and Nick Wingfield, “Starbucks to Present Recession Strategy,” The Wall Street Journal, March 17, 2009.