POV: For Starbucks, WoM Is Not Enough

WASHINGTON After shunning such a move for years, the decision by Starbucks to roll out a national television ad campaign to build brand awareness is the latest sign that the 30-second spot isn’t likely to die out anytime soon.

All it took was a slowdown in sales transactions at its U.S. stores to show Starbucks the limitations of word-of-mouth marketing.

Viral buzz may be great for building awareness of a new brand, but some greater media heft is needed once that brand hits maturity.

It will take more than buzz, brand ambassador programs and local marketing to keep Starbucks on top when you consider what the competition is up to. McDonald’s is poised to introduce a new line of espresso drinks next year. Dunkin’ Donuts introduced lattes and other Italian brews that it promised it could deliver cheaper and faster back in 2004 with ads that read: “Latte for every Tom, Dick and Lucciano.” And Dunkin’ Donuts has hardly been shy about its ad spending, dolling out $130 million on U.S. ads last year compared with the $25 million Starbucks spent, per Nielsen Monitor-Plus.

Starbucks has certainly been trying to keep the buzz alive without TV by becoming a cultural arbiter, peddling everything from books to CDs along with those grande lattes. As Starbucks Chairman Howard Schultz has said in published reports, “At our core, we’re a coffee company, but the opportunity we have to extend the brand is beyond coffee; it’s entertainment.” In fact, the company has an entertainment division, with an office in Seattle and another in Los Angeles.

So Starbucks has become the place where you can pick up a copy of Khaled Hosseini’s best-selling novel The Kite Runner or the latest CD from former Beatle Paul McCartney. McCartney joined the Starbucks label, Hear
Music, in March, after ending a 40-year relationship with EMI’s Capitol
Records. When McCartney released an album in June, it sold 500,000 copies by early August, according to Nielsen Soundscan.

Producing movies is not out of the question, Starbucks has said. It has even sponsored two all-day events, one at the Sundance Film Festival and a second in New York where one-act plays and spoken-word performances were among the cultural fare offered.

But for all of its carefully orchestrated image based on the Italian barista experience designed to appeal to what it considers its core audience, the well-educated 42-year-old with an income of $90,000, the company had to cut its earning and sales-growth projections for next year. Mix TV ads into this elitist brew and Starbucks could run the risk of diluting its local neighborhood coffee shop feel. (Starbucks CEO Jim Donald said in published reports that the company had no plans to increase coffee prices again after raising them twice in the past year.) But it’s facing the cold reality that author Emanuel Rosen warned of in 2000 when he published The Anatomy of Buzz: Creating Word-of-Mouth
. In the book Rosen said, “Very few products can rely on buzz alone.” Even Rosen, who understands the value of buzz, also knows that “a good ad can get people talking.”

That hasn’t stopped many in the marketing industry from losing their heads over the digital promise of buzz. When the Word-of-Mouth Marketing Association met last year, its message to marketers was don’t bother with paid advertising; the discipline is obsolete. Naturally, at this same industry trade group’s third annual summit, Patrick Quinn, president and CEO of PQ Media, gave a speech saying marketers are expected to spend more than $1.35 billion this year on word-of-mouth. And according to PQ Media projections, this category will grow to more than $3.7 billion by 2011.

The reasons given for this growth include a decline in consumer use of traditional media, a consumer shift towards digital alternative media, and the fact that consumers are increasingly less engaged with traditional media.

I have no problem with marketers who consider alternatives to traditional advertising. What I do think is foolish is when marketers completely toss out the old ways before the new methods have proven their worth. Word-of-mouth marketing is not yet the DVD that replaced the VCR. There may come a day when traditional media becomes obsolete. But we are not there yet. And marketers need all of their tools when times get tough. Just look at Starbucks.

Wendy Melillo is an Adweek contributing writer and an assistant professor in the School of Communication at American University. She can be reached a wmelillo@adweek.com.