I was enjoying a coffee at 9am this morning at Caffe Nero and had a thought about consumer spending in relation to coffee (amongst other products and services). My thoughts relate partly to Starbucks introduction of their rewards card and the fact that Starbucks are having to find other ways to add value to the customers purchase and experience of their brand and products.
Consumer spending has dropped especially on products that are not deemed essential or do not add enough value to their lives to make it worth it. Competitors to Starbucks such as Caffe Nero and Costa Coffee are already in a fine position in my opinion. I believe that their product offering is so much better than Starbucks. The atmosphere of the Costa and Caffe Nero shops are more authentic and enjoyable, making for a much better, value added, product consumption experience.
In my opinion Starbucks have become wise to this and realised that the product is very ordinary – thus the reason for introducing the add extras as part of the rewards scheme. Starbucks is a coffee which appealed to the masses because it is ordinary, whereas coffee lovers who are after that better experience and greater quality coffee (which is generally stronger) opt for Caffe Nero and Costa.
Neither Starbucks, Costa or Caffe Nero actually ever compete on price, but more so through talking about their products and brand heritage, in order to create that cut through and differentiation, which then leads to loyalty through experiencing the brand and product.