A Marketing Spill on Starbucks' Hands

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The temptation to try to reel in penny-pinching consumers is certainly understandable. Starbucks' sales are off, and it's closing hundreds of stores. In this environment, it only makes sense that people must be looking to save a buck or two at every turn—that cash matters more than cachet. But whenever an executive "tries to impose what he considers rational on an apparent irrationality…he is likely to lose the customer," Drucker cautioned.

This is precisely the danger for Starbucks. While the company may attract some folks with its new approach, it could alienate just as many—or more—who feel as if Starbucks has compromised its character. What Starbucks should do, even in this downbeat economy, is to keep prices where they are and focus instead on retaining its fast-fading luster.

Where's the Affordable Luxury?

Part of what has always defined Starbucks, after all, is that customers could go there and feel like they were indulging—without actually breaking the bank. It gave them a "sense of affordable luxury," as Joseph Michelli put it in his book The Starbucks Experience. Yet by openly reminding them just how affordable it is—and discounting on top of that—Starbucks stands to rob them of this pleasure.

"The aim of marketing is to make selling superfluous," Drucker wrote. "The aim of marketing is to know and understand the customer so well that the product or service fits him and sells itself."

Perhaps most puzzling is that Schultz seemed to grasp this not long ago. In February 2007 he issued a memo to senior managers, warning that the company's rapid growth had led to "what some might call the commoditization of the brand." Noting how so many things had changed over the previous decade—from the manner in which Starbucks roasted its coffee to the way it laid out its stores—Schultz expressed concern that its thousands of locations lacked "the soul of the past" and felt "sterile." He then called on his team to "evoke the heritage, the tradition" of Starbucks. Just a year ago, as he reclaimed the post of CEO, Schultz again talked about reigniting "the romance, warmth, and theater" that Starbucks once provided.

Maybe if Schultz won't heed Peter Drucker's words, he should try listening to someone else: himself.

Rick Wartzman is the director of the Drucker Institute at Claremont Graduate University.