Wednesday, September 06, 2006

The high cost of not keeping your word

A couple of weeks ago, Starbucks gave some of their employees in the Southeast a special email coupon for a free iced coffee, good from August 23 through September 30th. Starbucks instructed their employees to share the email coupon with 'friends and family'.

In a move that everyone except Starbucks saw coming, the email coupon quickly spread far and wide. So far and so wide, that Starbucks decided to kill the promotion last week.

Obviously, Starbucks quickly realized that the promotion was spreading much further than they anticipated, and believed that honoring the coupon would result in giving out far more iced coffees than Starbucks had budgetted. How they didn't see this coming a mile off is another question. But in deciding how much honoring this promotion would cost them, I have to wonder if Starbucks considered how their NOT honoring the promotion would affect business?

Customer evangelists for Starbucks will likely 'forgive and forget' when they try to redeem this coupon and are turned away, but new or infrequent customers of the coffee chain will be much less forgiving. In fact, this move will literally empower these rebuked customers to market AGAINST Starbucks. How many people's first experience with Starbucks will be walking into a store with a smile on their face and a coupon for a free coffee in hand, and then being told that the store won't honor the coupon? How many of these people will be mad, mad enough to tell others about the experience? Exactly. I'm not sure what's more unbelievable, that Starbucks couldn't see that the original email would spread like wildfire, or that they couldn't see that news of their NOT honoring the email coupon, would also spread like wildfire.

But the news did spread far and wide, reaching the offices of competitor Caribou Coffee. CC has announced that they will honor the email coupons, from noon until 8PM, this Friday. Yikes. Now even those customer evangelists that might be inclined to overlook Starbucks' snafu, have no reason not to try out one of their competitors.

So the moral for Starbucks and other companies is, you have to not only consider the business cost of not keeping your word, but the ramifications that could arise if a competitor honors the promise that your company would not.


CK said...

I've been following this story a bit and it's indeed good that CC is honoring the snafu...but it makes this marketer think, if you're gonna leverage Starbucks' loss, why not honor it all day Friday? Surely the morning crowd would be the largest draw, no? Why only honor it 12-8pm? I understand that it's a "loss" in revenues...but what better opportunity to "gain" new customers? Why not wish 'em a TGIF morning brew? Much more compelling than dropping millions in advertising and CC could have invited the press for morning coffee, too (getting both PR & marketing out of it).

Kinda like the T-mobile promo that didn't fully leverage the opportunity, ya know?

Ann Handley said...

Well said, Mack. But this issue extended beyond the southeast, didn't it? I saw a sign apologizing for their inability to honor the coupons at the Starbucks drive-in window in Saco, Maine this past weekend.

And CK -- good points, although my guess why CC isn't honoring the coupons during the busy AM hours is so that their existing loyal customers don't get completely pissed off when their usual quick coffee stop becomes like the line to visit Santa on December 24th.

J.D. said...

*shakes head* Starbucks... To begin with, customers walk into that place already pissed because they're having to pay a small fortune for coffee. Then, you give them one glimmer of hope, one possible free item, and then you yank it away?

No no no no no no....

Mack Collier said...

Sis from what I have read, select employees in the Southeast only were given the heads up about the email coupons, and told to give them to 'friends and family'. Of course those friends and family members could be anywhere, so I'm sure the email quickly spread all over.