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Starbucks’ First-Ever Groupon Coupon Crashes Groupon’s Page

Written by Evan Schuman
March 26th, 2013

Did Starbucks’ Groupon cup runneth over? The first time Starbucks (NASDAQ:SBUX) tried Groupon (NASDAQ:GRPN), on March 22, it got a good news/bad news joke. Good news: The campaign is going over extremely well. Bad news: Groupon’s page for the promotion crashed, angering a lot of customers and prospective customers.

The coffee chain’s first-ever daily deal offered a $10 giftcard for $5. The site indicates that more than 100,000 people purchased the coupon, but—like every other crash—there’s no way to know how many tried to purchase the coupon and couldn’t. Without knowing that figure, it’s hard to deal with the fundamental philosophical issue: Did the crash make the campaign do more harm than good? If 100,000 prospective shoppers saw the order, but 800,000 were frustrated by the crash and potentially alienated, the popular campaign isn’t necessarily a good thing for Starbucks.

“It definitely shows that there was excitement around the offer,” said Linda Mills, Starbucks’ senior manager of global brand PR. But will that excitement add any meaningful value to Starbucks?

The other question for Starbucks—which applies to all Groupon campaigns—is that there’s no way to differentiate a current Starbucks customer from a prospective customer. If the orders were being placed overwhelmingly by existing Starbucks customers, what benefit did Starbucks get? In most Groupon cases, that answer would be “maybe it’s making them come back to buy more than they otherwise would have.”

The problem with Starbucks is the very real scenario that its regulars might have been gobbling up the half-off giftcards. If so, nothing at all is changing other than Starbucks making a lot less money from those orders. The idea behind a test like this is not to determine if a Starbucks coupon would be a popular item. It’s to see if that coupon will deliver new customers, as opposed to the installed base.

Of course, Starbucks will learn that answer the slow way, if a lot of new faces start showing up clutching these Groupon coupons. But the numbers, unfortunately, suggest an enthusiastic installed case. Groupon is generally effective in suggesting something to a prospect who would not likely have ever tried it on his or her own. Therefore, the target audience here are coffee enthusiasts who would be open to regularly buying Starbucks drinks—but who either have never heard of Starbucks or had no intention of going there, for whatever reason. And it’s the subset of that group who would overcome those reservations if it’s a half-off opportunity.

That last group exists—people who knew of Starbucks but hadn’t gone. The problem is that if the coupon flips them, then the reason they most likely hadn’t gone was because they felt Starbucks’ prices are much too high. Those people will come in with a half-off coupon and then they will never be seen again.

Seems like the crash may prove to be the least of this campaign’s problems.


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One Comment | Read Starbucks’ First-Ever Groupon Coupon Crashes Groupon’s Page

  1. Bob Skattum Says:

    All good points made … and something that all merchants should consider when chasing the “daily deal” phenomenon. I believe that they also tested a similar deal at Google Offers recently, so perhaps SBUX is evaluating different channels to see which performs “best”. What continues to amaze me (I am dating myself a little here)is that what is perceived by many to be new from a marketing and business building perspective is simply an updating of the printed coupon books that were sold by various organizations as fundraisers or as localized advertising … offering a free appetizer/dessert, Buy One Get One, percent off second purchase, etc. at local establishments. I always felt that these discounts often amounted to an all out effort to build traffic and gross revenues at the expense of profits. As you point out, without a good database of past customers (or clear ability to delineate new from old, best customer from occasional visitor, etc.), it is very difficult to determine if these are new customers or you are just rewarding your current customer base and eroding profits.

    That said, given SBUX tremendous scale, marketing savvy, and stored historical data from users who have actually registered/used Starbucks gift cards in the past, they should have a leg up on the analytics. It shall be interesting to see if the results warrant a repeat.

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