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Starbucks CMO Answers Our Questions About Advertising in a Recession (With Steep Competition)

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Starbucks (SBUX) is launching a multi-million marketing and advertising campaign “focused on the quality, value and values Starbucks offers” despite the fact that just yesterday the company reported abysmal Q2 earnings &#151 a 77% profit drop. We interviewed Starbucks CMO Terry Davenport about the coffee-n-more company’s breach into the ad game and more.

Matt: Given the recent announcement about Starbucks Q2 revenue, how committed is the company to this campaign and what do you hope it will do for your brand?

Terry: We’re very committed &#151 not just to the campaign, but to telling our story. Our intent is to remind customers of what they loved about Starbucks from the beginning, and what makes us different. The quality of our coffee, the third-place experience and social values that mean more to consumers today than ever before.

Matt: What are your expectations for this campaign going into the next quarter?

Terry: We are launching this campaign to tell the Starbucks story in our way using facts about our brand. As a leader in the coffee category, it is not surprising that other companies are looking to compete for our coffee customers. A few are making claims that just don’t add up. So its time for Starbucks to tell our story

Matt: During a recession, many companies cut back on ad spending. Starbucks is clearly not in line with that thinking. Why?

Terry: Let’s be clear: we do need to be prudent with our marketing spend, and we are. We’re optimizing what we have and using it in the most impactful ways we can. It goes without saying that the competitive environment is noisier than it has been in the past, and we need to ensure our voice is heard.

Matt: McDonald’s and Dunkin’ Donuts are also advertising a lot these days &#151 how is your strategy different?

Terry: We are launching this campaign to tell the Starbucks story in our way using facts about our brand. As a leader in the coffee category, it is not surprising that other companies are looking to compete for our coffee customers…So its time for Starbucks to tell our story.

It is important to provide the historical perspective. We know that having greater consumer awareness and education about coffee leads consumers to trade up to better quality and experience. We understand that mass market advertising can lead to trial. However, we also know that consumers will reject offerings that don’t meet their expectations. Therefore, our view is that increased visibility to brewed coffee and espresso beverages plays to our advantage.

Speculation that Starbucks is losing retail market share to competitors has been grossly exaggerated. It should be no surprise that a category leader like Starbucks would be faced with others wanting to take share; however, we’ve looked at markets where competitors have tested coffee adverting and one thing is apparent: our customers are not trading down. We are aware that the noise level is going to increase and we are prepared for that.

Says a Starbucks rep., “The campaign will build over time, and take advantage of multiple channels, both traditional and non-traditional, supporting all of the distribution points in our business. It will also be a validation for our customers &#151 and our partners &#151 of what Starbucks is all about.”

More:
Breaking: Starbucks Giving Away Coffee So You’ll Vote

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