Starbucks has begun scaling back its promotions and discounts, signaling a shift in strategy under its new CEO, Brian Niccol. Appointed in August,
Niccol is pivoting away from a heavy reliance on discounts and is instead focusing on enhancing Starbucks’ identity as a premium coffee brand.
The move comes after a challenging year for the coffee giant, with decreased sales in both the U.S. and China, and growing pressure from activist shareholders.
Niccol’s Strategy to Reinforce Starbucks’ Premium Position
To rebuild the brand, Niccol, formerly the CEO of Chipotle Mexican Grill, is making changes that emphasize handcrafted, high-quality coffee over widespread discounts.
“The strategy is, simply put, just making a couple of powerful choices, and then we’ve got to execute like crazy,” Niccol stated during an internal company forum in September.
This new direction aligns with Starbucks’ historic approach, which traditionally avoided heavy promotions in favor of maintaining a premium image.
The company recently scaled back its loyalty rewards offerings, shifting from buy-one-get-one deals and other discounts to more selective loyalty points bonuses on specific days.
The company’s leaders have indicated they don’t plan to run significant holiday promotions this year, opting instead to focus on seasonal drink advertising to attract customers.
Moving Away from Discount-Driven Traffic
Starbucks, like many other restaurant chains, has leaned on promotions throughout the year to bring customers back after several years of price hikes.
While these efforts did help recover some traffic, they also presented challenges for baristas and store managers, who reported difficulties in predicting customer volume and staffing needs.
Sara Trilling, Starbucks North America President, explained in an October strategy update that the company aims to give baristas more time to focus on service quality and accurate order preparation by reducing the frequency of promotions.
With this move, Niccol hopes to improve the in-cafe experience for customers, making the coffeehouse a place known for both great coffee and consistent service. “We will be the community coffeehouse known for great coffee,” Niccol told employees.
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Leadership Changes Under Niccol’s Direction
As Niccol settles into his new role, Starbucks has also seen significant shifts in its leadership team.
At least three top executives have departed, including leaders from Starbucks’ North American and coffee divisions.
Niccol is streamlining operations to ensure consistency across the brand and focusing on operational efficiency.
He has said that building a strong brand requires a well-defined process and clear communication with employees.
The decision to scale back promotions aligns with previous leadership philosophies. Howard Schultz, the former CEO and architect of Starbucks’ global expansion, often cautioned against excessive discounting, emphasizing Starbucks’ premium brand positioning.
The Impact on Starbucks’ Customer Base
With fewer discounts available, Starbucks may be hoping to return to its roots, catering more to customers seeking a high-quality coffee experience.
This pivot also reflects the company’s response to consumer feedback.
As prices rose in recent years, many customers voiced concerns about the cost of drinks, especially popular seasonal offerings like the pumpkin spice latte, which can cost over $6 for a basic grande in cities like Chicago.
In response to these concerns, Starbucks has used its app to manage loyalty deals and attract customers back into its cafes, especially during the slower traffic periods of late 2022.
In May and June, Starbucks heavily promoted deals through its loyalty program, offering discounts on bundles and special offers on drink purchases.
Although these efforts temporarily boosted same-store sales, they highlighted the challenges of sustaining customer traffic solely through promotions.
By dialing back the discounts, Niccol aims to position Starbucks as a premium brand once again, focusing on quality rather than volume.
The company believes that by emphasizing its core offerings—handcrafted coffee and a welcoming environment—Starbucks can maintain customer loyalty without relying on frequent discounts.
Looking Forward: Starbucks’ New Approach Under Niccol
As Starbucks scales back discounts, Niccol aims to elevate the brand experience and reinforce Starbucks’ role as a premium coffeehouse.
This approach, focused on quality rather than volume-driven promotions, signals a return to the company’s roots while aiming to strengthen customer loyalty over the long term.
As the holiday season approaches, Starbucks will emphasize its seasonal beverages through targeted advertising, rather than the extensive promotions it has run in previous years.
While the transition may challenge customers accustomed to frequent discounts, Starbucks hopes this strategic shift will allow the company to create a more consistent and enjoyable in-cafe experience.
For Niccol, the focus now is on redefining Starbucks as the community coffeehouse that customers turn to for exceptional coffee and a welcoming atmosphere, aiming for a long-term return to growth and brand stability.
