Starbucks intends to scale back on discounts, promotional offers, and coupons, according to a report by The Wall Street Journal. The coffee chain is well-known for its promotions, especially for users of its mobile app, but insiders say the company needs to slow down on these kinds of stunts. Not only does the company need customers to pay full price to maximize profits, it reportedly needs to reduce the pressure on employees that these offers cause.
The Journal’s story about Starbucks’ new strategy was published on Monday and confirmed in a follow-up by CNN on Tuesday. Reporters learned that this mandate comes directly from Starbucks CEO Brian Niccol, who took over as head of the company just last month. Niccol and his team reportedly feel that these discounts harm Starbucks’ image as a premium brand. Moreover, they have found that the discounts cause an immense strain on the baristas and other employees when customers come rushing in for a good deal.
To start this new trend, Starbucks reportedly intends to forego any major promotional discounts this holiday season. Instead, the company will invest more in advertising in the hopes of bringing customers in for its iconic signature drinks.
Starbucks ramped up its use of digital promotions about a year ago, according to CNN. The strategy worked to lure lapsed customers back to the store, but only for specific occasions. Some of the early discounts were steep, such as half-off coffees or buy one, get one free. Since then, promotions have become more frequent, but not always broadly applicable. For example, last month users got extra loyalty points for purchases on Tuesdays, and discounts on specific drinks if purchased on Saturdays.
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Despite these stunts, Starbucks has reportedly seen a drop in sales for the past two fiscal quarters. This was due to an overall drop in visits from customers aged 18 to 29, as well as fewer sales in the afternoon, according to research published by Bank of America. This lines up with overall consumer trends, as the U.S. continues to deal with serious inflation.
Niccol’s focus is on returning Starbucks to its roots as a “community coffeehouse.” He intends to overhaul the experience of staying in the cafe itself, drawing a greater distinction between “to-go” and “for-here” services. In a letter to employees last month, he wrote: “There’s a shared sense that we have drifted from our core. We’re committed to elevating the in-store experience – ensuring our spaces reflect the sights, smells and sounds that define Starbucks.”
