Starbucks, in an effort to weather the prolonged economic downturn, is seeking to now appeal to cost-conscious consumers.  I’m not sure that the back-and-forth between being a high-end “experience” vs. a low-cost cup of joe is going to really do them any good.  It seems like it might just confuse customers and they may lose the high-end folks and fail to convince others that their prices are low.

The Seattle-based company is training its baristas to tell customers that the average price of a Starbucks beverage is less than $3, and that 90% of Starbucks drinks cost under $4.

Corporate News: Starbucks Plays Common Joe — Coffee Empire Seeks to Seem Less Expensive in Recession. Janet Adamy. Wall Street Journal. (Eastern edition). New York, N.Y.: Feb 9, 2009. pg. B.3

The article above was from February.  More recently things have heated up in the “coffee wars” with McDonald’s seeking to strike when the poor economy favors a cost leadership strategy even more than when times are good.

Corporate News: As Profit Cools, Starbucks Plans Price Campaign. Julie Jargon. Wall Street Journal. (Eastern edition). New York, N.Y.: Apr 30, 2009. pg. B.3

Starbucks Ads Urge Consumers Not to Switch to Cheaper Coffee.  Julie Jargon.  WSJ.com.  May 1, 2009

Corporate News: New Ads Will Stir Up Coffee Wars — As Starbucks Touts ‘Perfect’ Cup, McDonald’s Promises an Affordable Lift. Julie Jargon. Wall Street Journal. (Eastern edition). New York, N.Y.: May 4, 2009. pg. B.7

In short, it is very interesting to see two powerhouse companies tweak their market position to try to capture market share and profits.  I think Starbucks has the most to lose here because just two years ago (as evidenced by some other articles I posted from 2007) they were seeking to reconnect with consumers that don’t just want coffee, but that want an “experience” with their coffee.

This recent goal of competing on price and what appears to be “coming down to the level” of McDonald’s may harm the earlier strategy.  It may work in the short term when the economy is in rough shape, but long-term the premium customers may go elsewhere.  Although where they would go remains a mystery since Dunkin Donuts is the other big player in the coffee market and they compete on price as well.  It should be interesting to watch how this plays out.