Starbucks and the Bell Curve

February 10, 2009  

It was just announced that Starbucks is now selling a coffee and breakfast for under $4. It’s true.  According to CNN You can get a 12-ounce coffee with a breakfast sandwich or roll or a 12-ounce latte with either oatmeal or a coffee cake.

According to CNN, “the move may be…targeted to drawing back business lost to more cost efficient retailers like McDonald’s and Dunkin’ Donuts.”

This is another examples of the “squeeze” of the players in the middle of the bell curve.  If you are not familiar with it, read  my articles on the bell curve of innovation.  Dunkin’ Donuts (DD) is a great example of a coffee shop budget brand.  As they expanded their offerings, they started to compete (at least in terms of coffee quality) with Starbucks.  Although some think of Starbucks as a premium coffee, most real coffee snobs (and I know quite a few of them) turn their noses up at Starbucks.  It has always been in the middle of the bell curve.   In the past, the middle of the bell curve was a great place to be.  No longer.

Last week I did a speech for the beverage division of a large food company.  This division is largely comprised of “make at home” coffee products, including instant coffee.  Business is booming.  They now have easy to use coffee, espresso, and latte machines.  These products represent an emerging “budget” entry.  For a relatively low cost, these machines produce a high quality, single hot drink with little effort.  There are no messy powders (uses simple capsules), no grinding, no cleanup.  Accessibility at its best.

I realize that Starbucks is more than coffee, it is an experience.  Unfortunately, today, people are less likely to pay for these experiences if other alternatives exist.

Are your products/services getting “squished?”  Can you make them more affordable?  More accessible? This may be the key to survival in this market.

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2 Responses to “Starbucks and the Bell Curve”

  1. Karl Staib - Work Happy Now on February 15th, 2009 9:28 pm

    I guess Starbucks has no choice, but if I have $4 to spend on food I don’t think I would choose a coffee and cake. I wonder how this will work out for them.

    My guess is that it will help a little, but not enough to make a big difference.

  2. Starbucks Fights Back | Business Innovation Speaker and Consultant Stephen Shapiro on March 2nd, 2009 3:41 pm

    [...] my previous blog entry, I discussed the struggles of Starbucks and how the innovation bell curve predicted this. Their early response to increased pressure from McDonald’s and Dunkin’ Donuts was to [...]