Starbucks Big Winner on Election Day

Latte liberals might be expected to stop by Starbucks on election day, but more people than usual visited. Starbucks offered free coffee on election day, and probably made a profit on the deal. Advertisng Age reports:

John Moore, a former Starbucks marketer, estimated that between 12% and 15% of customers are drip-coffee drinkers, and that each of the company’s 7,100 locations serves about 800 people a day. Those figures would set a conservative giveaway estimate at 568,000. Starbucks’ cost per cup is about 30¢, according to several executives familiar with the matter, which would put the cost of the giveaway at about $170,000.

Muffin with that?
However, about one in every five or six Starbucks customers buys food, executives said. If that held true during the giveaway, and each of those people spent even $2, the company could have made money on the promotion. Starbucks has said 75% of its sales are beverages sold in-store, and most of the remaining 25% are food sold in-store.

An executive familiar with the matter estimated the “Saturday Night Live” spot could have cost as much as $350,000. But the value of coverage relating to the giveaway — from The Wall Street Journal, CNBC and Newsweek, to name a few — as well as rampant blog chatter likely superseded the chain’s investment. Many of those organizations, including the Journal, posted the Starbucks commercial along with their stories.

The giveaway tactic also boosted the company’s buzz rating, according to Brand Index. Starbucks’ positive buzz rating jumped from 25% on Oct. 31 to 51% on Nov. 5. “This was a strong and well-timed promotion,” said Ted Marzilli, senior VP-brand group at Brand Index parent YouGovPolimetrix, in an e-mail. “There has been huge interest in this election (as measured by the voter turnout) and likely a lot of positive word-of-mouth, particularly given that the promotion ran on Election Day (a workday), when many people could spread the word to their colleagues.”

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4 Comments

  1. 1
    swag says:

    Such a big winner that yesterday they posted a 97% decline in quarterly profits.

    If that’s winning, what does losing look like?

  2. 2
    Ron Chusid says:

    That is totally irrelevant as to whether the plan to give away free coffee on election day was a success.

  3. 3
    swag says:

    Sorry, every promotion and “buzz ranking” you get is a pointless exercise unless you can ultimately tie it all back to profits.

    It seems a bit disingenuous for Starbucks to crow about their promotional success while their profits are vaporizing, their customers are making their competitors profitable instead (e.g., Peet’s Coffee & Tea has posted two consecutive strong profit growth quarters the same time that Starbucks has tried to scapegoat the economy), and the promotion itself was deemed illegal by many state AGs and election offices for “bribing people to vote or not with the promise of free goods or services”.

    That to me says at least 97% failure.

  4. 4
    Ron Chusid says:

    Sorry, but there isn’t a shred of logic to your arguments.

    Starbucks made a profit on this particular promotion, which really makes all your arguments irregular. You also make some rather significant factual errors.

    Starbucks was not crowing about their promotional success. This was a third party, Advertising Age, finding it to be a success.

    This was about a specific promotion in the fourth quarter. Profits in the third quarter in a bad economy say nothing about whether one particular promotional effort was a success in the fourth quarter. You cannot measure an effort in the fourth quarter based upon profits the previous quarter. Besides, a particular promotional effort could still be a success even if overall efforts are not successful. What matters is not any absolute number for profits but whether profits are higher than they otherwise would have been if not for the marketing effort. Nobody is billing this single act as being the sole factor which determines their profits for the quarter (especially for the quarter before it even occurred). Comparisons to profits of other companies are also irrelevant as to whether this particular marketing effort was successful for Starbucks.

    As soon as some states questioned the illegality of the promotion as originally stated, Starbucks changed it to give free coffee on election day to everyone who asked. This also has zero bearing on whether this particular effort was a success.

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