Business Strategy Consulting – About that Starbucks offer you received in your inbox yesterday:
Here’s some business strategy consulting anyone can use. And… this is gonna be good, so pay attention.
There are a couple of different components that go into crafting an offer. And you need to consider both of them, because having one without the other is like having a brand new Corvette and a full tank of gas, but not having the keys to start the engine — kind of a waste, in other words.
Whenever you make an offer, your offer has to be both understandable, and… it has to be irresistible.
First, your offer has to be clearly presented. With RARE exception, no one, in ANY marketplace… is going to spend more than a few fleeting seconds trying to understand what they have to do, or what they have to go through… for you to take their money.
I know, from your perspective you might be thinking, “Hey, why aren’t they thinking about what they’re GETTING, instead of what we’re taking from them?”
And frankly, I don’t know the answer to that question any more than I know why my kids listen to other adults say the same thing I say, but ignore me when I say it.
However… it’s the same reason why, when your doctor says, “You have high blood pressure,” your first reaction isn’t, “Wow, what a great opportunity for me to clean up my diet and start exercising!”
Because, the second thing is, your offer has to be compelling enough so people will take action.
And as I said a few seconds ago, if both of these things aren’t present… you’ve squandered your opportunity to make a sale, or to get your buyers to do whatever your call to action is.
Which is what Starbucks did when they sent out this e-mail yesterday, that said, “Buy a drink before 11a.m., get half off another after 2 p.m.”
For starters, this is just too freaking complicated!
You start thinking about 11 am and 2pm… what do these two times have to do with one another?… WHY these two times… I don’t want coffee every three hours… I feel a little pressured to get back there so quickly… What kind of drink?… Are those cherry sodas I like, included… and so on.
And it’s also NOT very compelling: What does half-off mean in dollars and cents?… How much time does it take me to get from my office to Starbucks to save half, and is this really worth it?… I deserve more than half-off if I’m going there twice… and so on.
I was quite surprised to get this. (Well, not really, lol)
However, if they’d have said something like, “Buy your first coffee before noon… and your afternoon or evening coffee’s on us.”
This is INCREDIBLY easy to understand.
The psychological division between “noon” and the rest of the day is organically sound and extremely easy to process. And, there’s also a “common sense” angle to this that makes sense.
(I know… why consider “common sense,” when so few people have it, right? Well, the truth is, when it comes to money… people often get smart — quickly. So you need to consider it.)
Getting one coffee free is also a worthwhile offer for people who are Starbucks fans, and… the value is easily measurable.
It’s also probably worth stopping by the restaurant a second time, for a free coffee.
Now if you happen to be a Starbucks marketing executive, and you’re thinking, “Yes, but that Garber guy is an idiot. If we give away the second coffee completely free, it’s costing us money. At least, when we charge half-price, we’re making ‘something.’ With his plan, we get absolutely nothing.”
And if that’s what you’re thinking, Mr. Starbucks marketing wizard… au contraire — you are… dead wrong.
First, sure… some people will come back in the afternoon for free coffee only.
But… MANY won’t.
The breakage on this thing is going to be HUGE. Meaning, tons of people will go in there in the morning, with the best of intentions of coming back… and simply never make it.
It’s like gift cards and frequent flyer miles — everyone buys them or earns them or gives them with the best intentions, but there is a TON of unused miles and gift card balances lying around out there.
If you don’t believe me, just Google it.
Second… obviously a certain percentage of people who come into Starbucks to get their free coffee will also buy some other unhealthy sugary food, which is exactly what you want, if you’re Starbucks.
Because 100% of these sales, are sales Starbucks would otherwise be missing had these folks not bothered coming back in.
So the question they need to ask themselves here, is… for the cost of a cup of coffee (And what is that – less than 25 cents probably, when you add up all the fixed and variable costs associated with the purchase?)… is it worth it to get an extra $4-6 in product sales on average?
For me, this is an easy “Yes,” but what do I know?
Perhaps there are other things going on I don’t know about…
And lastly, the BIG issue they missed is this: How many MORE people will respond to this offer in the first place, if the offer is basically BOGO (buy one, get one), versus… “Buy a drink before 11a.m., get half off another after 2 p.m.”
I bet the difference in response to this would be SO huge, Starbucks would probably wind up doing this once a week — making every Wednesday the BOGO day or something like that, until its effectiveness wore off.
Anyway, when you’re crafting an offer, make sure you consider that your offer has to be both understandable, and… it has to be irresistible.
O.K., that’s it — now back to my Stumptown Holler Mountain Blend.
Now go sell something, Craig Garber
P.S. Want more information about crafting offers? There are over 14 pages of hard-nosed info in here
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