In the ’80s and early ’90s the specialty coffee category was just that—totally new. But for customers to be attracted to the new experience, they had to know about it; for customers to appreciate the category’s leading brand, they first had to appreciate the category. Without widespread consumer acceptance of the specialty coffee category, there would be no Starbucks brand to promote.

We can laugh now, but 15 years ago the specialty coffee category was virtually unknown beyond a few coffee connoisseurs. Most of us had never sipped a cappuccino (much less pronounced it) or savored the rich, bold flavor of a single-origin coffee like Sumatra. Most of us drank canned coffee and we liked it (okay, at least we tolerated it).

Before Starbucks could get customers to appreciate and admire its unique brand of coffee, it had to educate them to first appreciate and admire the specialty coffee category. So Starbucks set forth on its mission to educate customers on (1) what the specialty coffee category is, (2) what specialty coffee does, and (3) what specialty coffee aspires to be.

Starbucks promoted what the specialty coffee category is through teaching customers the appreciable differences between canned coffee and specialty coffee. The defining difference, shown especially in early marketing materials and employee training tools, is in the bean itself. Starbucks coffee uses only 100 percent high-quality arabica beans, while canned coffee uses inferior, lower-quality robusta beans. Arabica beans only grow at higher elevations and flourish in the shade. Because they’re grown higher, they take longer to grow, which partly accounts for their full flavor. Arabica beans can be dark-roasted to bring out an array of fuller flavors. Robusta beans, on the other hand, can grow in low elevations in full sunlight. Partly because robusta coffee trees grow quickly, they produce uninteresting, milder tasting coffee than do beans from arabica coffee trees. Plus, robusta beans can’t be dark-roasted without becoming burnt and extremely bitter tasting. Fast-growing beans roasted lightly means that costs can be maximized but at the expense of flavor—and maximizing costs (not flavor) is what the canned coffee companies do best.

The specialty coffee category is all about arabica beans. While coffee brewed with arabica beans costs more, the payoff is all in the taste. Starbucks could educate its customers about the differences of their coffees, but only through taste could the customers really ever begin to appreciate specialty coffee and what it could do.

Starbucks promoted what specialty coffee does by having customers taste the difference through sampling. One sip of a freshly brewed cup of Arabian Mocha Sanani and customers immediately knew that this coffee was different from what they drank out of a can—this was coffee they actually liked. And after sipping the slightly sweet, roasted nuttiness from a handcrafted caffé latte, customers knew this was something they wanted to experience again and again.

Starbucks showed its customers that coffee could be good, downright enjoyable. It promoted that specialty coffee aspires to be the uncommonly good “everyday coffee.” Yes, its cappuccinos and lattes could be viewed as occasional treats, but it is the dark-roasted brew—the “regular” coffee—that could and should kick-start any morning and cap off any evening.

Starbucks shared its pride in its product with customers willing to learn about the specialty coffee category. By promoting the category and creating customer preference for higher-quality, better-tasting coffee, Starbucks became the recognized category leader. After all, a business is not defined by its brand, it’s defined by the “category” company it keeps.

Leading Questions …

TRIBAL TRUTH 7
There’s a High Price to a Low-Price Strategy

Building a powerful brand is one part substance and one part emotion. One part science and one part art. We must remember that this is all we do, particularly in our consumer communication.

SCOTT BEDBURY
(internal Starbucks presentation, Seattle)

EDLP is an acronym for Every Day Low Prices. It’s a pricing strategy in which companies consistently offer low prices instead of yo-yoing their prices from occasionally being sale-priced to be being priced-to-sell every day.

The retailer most associated with the EDLP pricing strategy is Wal-Mart. And for good reason, they are masters at bringing low prices to market. So masterful that Wal-Mart accounts for nearly 8 cents out of every consumer retail dollar spent in the United States.1 So masterful that 93 percent of all American households have purchased something from Wal-Mart in the last 12 months. 2 So masterful that Wal-Mart makes $20,000 profit each minute of every day despite working with the slimmest of margins. 3

It’s no question, people flock to Wal-Mart for its low prices.

But people also flock to Starbucks, and Starbucks is nowhere near being the low-price leader when it comes to coffee. In fact, Starbucks has never lowered prices, and it doesn’t intend to either.

Healthy profit margins, such as the 90 percent-plus profit margin in every coffee beverage Starbucks sells, afford a company the opportunity to create dynamic customer experiences.