Starbucks' first-ever Groupon coupon crashes site

Did Starbucks' Groupon cup runneth over? The first time Starbucks tried Groupon, it got a good news, bad news joke. Good news: The campaign is going over extremely well. Bad news: the site has crashed and they are now angering a lot of customers and prospective customers.

The coffee chain's first-ever daily deal offered a $10 gift card 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 but 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.

The other issue 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 every-day Starbucks regulars might have been gobbling up the half-off gift cards. 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 it will deliver new customers as opposed to the installed base.

Of course, Starbucks will learn that answer the slow way, by seeing if a lot of new faces start showing up clutching these Groupon coupons. But the numbers unfortunately suggest an enthusiastic installed base. Groupon is generally effective on suggesting something to a prospective buyer who would not likely have ever tried it on their own. Therefore, the target audience here is coffee enthusiasts who would be open to regularly buying Starbucks drinks, but who have either 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 the drinks were half off.

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

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

For more:
- check out this article
- see this report
- read this piece
- check out this analysis

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