Challenger Brand strategy (Part III – Beware of cheaper coffee)

“Are you going to say to your friend, ‘Let’s go meet at Dunkin’ Donuts?’ Are you going to say that? - Howard Schultz
“Are you going to say to your friend, ‘Let’s go meet at Dunkin’ Donuts?’ Are you going to say that? - Howard Schultz

Are you going to say to your friend, ‘Let’s go meet at Dunkin’ Donuts?’ Are you going to say that? - Howard Schultz

Howard Schultz didn’t mind a little provocation — the same way he didn’t mind a little controversy in his interview with CNBC that took place in February 2009 — in his rebuttal to competitors’ crossing line into his territory.

Led by CEO Howard Schultz, Starbucks launched a series of advertisements targeted at their rivaling competitor they consider inferior to themselves. What was the message? Right, “Beware of cheaper coffee.”

It’s a bit lengthy, but there’s two lessons at the end of this article so make sure you keep reading. I’m not sure if I’d still be writing about the challenger brand strategy in future but if it ended here, it’d make a good ending to the case.

Here’s the backstory.

In 2008, Starbucks were dealt their first blow when McDonald’s decided to poke its nose into the gourmet coffee business. Being the challenger brand, their positioning strategy has got to be about “challenging” the leader brand. But what is it about Starbucks that fueled the basis of this challenger proposition?

See, if a challenger brand fails to address a weak spot (or any spot, but finding the weak spot makes the challenger brand strategy all the easier) in the target brand there would be no solid ground for a “challenger” proposition.

McDonald’s knew, or thought they knew, which spot to hit when they ventured into the gourmet coffee business. Who’s a more obvious target than the market dominant Starbucks?

So, back to the question. Which spot to hit?

The snobbiness of Starbucks Coffee.

The what of Starbucks Coffee?

Yes. Snobbiness.

The Challenger Proposition: End Snobbery.

Just to make sure that its challenger proposition is clear enough, McDonald’s built is marketing campaign on a very focused premise — to remove the snobbiness from coffee.

What they really mean is, “to remove the Starbuckesque snobbiness from coffee”. You didn’t thought I were joking, did you? Here’s McDonald’s

McDonald's unsnobby coffee

Scroll back up and take a closer look. The message is specific and unmistakable. Why? Because there’s only one message. There’s no explanatory copy, descriptive text or navigational headings anywhere on the page. What it does have is a bold headline that says, “now serving espresso” beneath which a block of text. The only descriptive block of text that can be vaguely termed as the website’s slogan.

That exclusivity means a heightened level of emphasis toward the campaign’s message, the challenger’s message:
“No crazy names or sizes. No second language required. So hang out and have some fun.”

What Starbucks qualities are we talking about here? Pretentiousness.

By the way, if you think the yellow button that leads to its Drink Menu has its colour poorly chosen, argue your thoughts here: Unmatched colors for CTA buttons

Now one can argue that the whole UnsnobbyCoffee campaign is coming off too strong as a challenger brand setup to the gourmet coffee market. But wait till we see more of it in action. This challenger has not done sizing up the big brother, because they have also launched a “snobby coffee intervention” project as part of the campaign. “To do what?” You ask.

To tell the friends around them how they’re stupid, snobby, and wasting a lot of their hard-earned money for putting up with Starbucks.

Snobby coffee intervention

The challenger brand strategy: We’re a challenger, not a follower.

But what is it that McDonald’s is really challenging with its Unsnobby Coffee campaign?

See, if Starbucks have been spicing up its top of the line specialty range and McDonald’s, desperately trying to get a foot into the same market, would follow suit in terms of product offerings and pricing, the resulting outcome would have been more predictable.

Why? Because McDonald’s would not last the distance. McDonald’s would be a “follower” brand, like the billions of undifferentiated brands that were out day today. That’s not the idea because McDonald’s wanted to be the “challenger”.

Could they have resort to crafting a unique target audience, and become a “niche” brand instead? Yes, except that the niche brand strategy wouldn’t make sense to McDonald’s during that time of the gourmet coffee industry. That certainly isn’t the idea.

McDonald’s have got to be smarter than that. It decided that it would target the very same audience that Starbucks is after, and it will pitch on the premise of a mildly risky challenger brand strategy.

Has it drawn inspiration from Avis’ success against market leader Hertz?

Most likely not, but McDonald’s Unsnobby Coffee campaign was in many parts similar to Avis’ “We’re only second” campaign in their brand positioning. Both of them were the nearest competitor to their respective market leaders. Both of them were in full understanding of their market position, and more importantly, they knew a niche market would have no place in the business they’re in, whether that means the car rental industry or the gourmet coffee industry at that time. They were also cheaper, which is all very logical.

But where Avis’ challenges the market leader on the ground of service excellence and challenger’s effort (we try harder!), McDonald’s took a different approach. It wraps its core message not around itself but on the market leader, Starbucks.

See, when Avis adopted the challenger brand strategy, the promise was all about Avis. Better service, hygienic cars, shorter queue, and friendlier staffs.
When McDonald’s applied the challenger brand strategy, it was an all-out (or all-in, if we’re on poker instead of a competitive sport game), two-footed challenge on the market leader, Starbucks. It mocks the competitor’s value proposition, it ridicules its overpaying customers, it pokes fun at the snobbiness of Starbucks naming conventions and pretentiousness, calling them “crazy names and second language”.

Albeit the differences in approach, both were extending an invitation to their competitor’s consumers in comparably similar fashion. Both Avis and McDonald’s were making clear of their invitation,

“Since you deserve better, you should try us. Because we’re not a follower, we’re a challenger.”

Back to Unsnobby Coffee

Here’s a less-than-2-minute video that basically sums up all we’ve gone through so far. You got to watch the full clip to believe me when I said challenger brands are usually interesting to watch, more so when they’re down to a no-nonsense all out challenge.

You think it was entertaining? It was anything but entertaining when you’re on the receiving end.

slogan: the new grande

four bucks is dumb

Reacting to the challenger brand strategy: Starbucks hit back

“I think the way we deal with that is not to respond to something that’s that frivolous,” - Howard Schultz, CEO

Remember at the start of the article, we mentioned how Starbucks launches a series of provocative advertising targeted at their direct rival, one of which famously featuring the punchline, “Beware of cheaper coffee”?

First of all yes, these advertisements are mean and, maybe, just a little too gutsy for our taste.

I said our taste, but it wasn’t our taste that matters. When Starbucks snaps back, the company knew who the primary consumers of these advertisements would be. The series of advertisement, which began running on May 3 2009, were defensive and reactive. What McDonald’s, the challenger brand, has sought to destroy, it sought to restore.

That which Starbucks sought to restore, is the faith in an implicit guarantee about the Starbucks brand.

Suppose there are implicit benefits for paying more on a cup of espresso, and these benefits are justly priced, that would leave McDonald’s claims of its snobbiness and vulnerable.

By the same token, suppose these implicit benefits were obscure, the basis for Starbucks’ snobbiness will become just too apparent for any challenger brand not to have a shot at.

The vulnerability is a lack of substantive ground for Starbucks self-anchored, self-assumed standards. The shallow facade of brand image, which, by the way, is very likely the by-product of a surprisingly cultivated marketing farce.

The lack of substance, the pretentiousness, the over-promising coffee elitism, and the skin-deep brand equity are precisely what McDonald’s are banking on with their unsnobby coffee campaign. How did the campaign do? It was wildly successful and exceedingly satisfying.

“(The challenger brand strategy) taps into unpretentiousness, a core value of Washingtonians, to create a backlash against coffee elitism. It got Seattle buying McCafe, over-delivering trial goal by 173%.” - Winners Showcase, Effie Worldwide

Oh, have I already mentioned? it was also one of the five finalist for the Grand Effie and won the gold Effie award in 2009.

We wandered off a bit there. Back to that which Starbucks sought to restore, which is, as we were saying, the faith in an implicit guarantee about the Starbucks brand. That’s only the first lesson.

Coffee tastes like when you pour your heart into it

make sure you're at<br /><br />

The second lesson.

If you read a little deeper into the core message, you’d also probably notice how the campaign is carefully selecting its target audience.

Wait, what? An advertising campaign selecting its target audience?

You didn’t read that wrong. The campaign speaks in a fashion not unfamiliar to that of a shopkeeper to a regular local. When the shopkeeper says, “beware of a cheaper coffee”, you listen. You are his regular, and you are warned of a cheaper coffee, something you never really knew what it’s like.

beware of cheaper coffee

When the shopkeeper further warns you that “compromise leaves a really bad aftertaste”, you are further reminded never to compromise. You made a mental note that anything lesser than, or different from (hence Starbucks or nothing), your regular cup of gourmet coffee is a compromise.

Compromise leaves a bad aftertaste


If you are a usual coffee addict with a fair judgement of Seattle’s coffeehouses, picking a different brand from Starbucks isn’t, and shouldn’t be a compromise at all.

The chances are, you’re not any usual coffee addict. You selected Starbucks and only trusted Starbucks for your daily dose of caffeine. To pick anything else has now become a compromise.

Starbucks’ “beware of cheap coffee” assumes its target audience.
It assumes that Starbucks is the standard, and any derivation from the standard is a compromise.

Sounds oddly familiar? That’s what leadership brands like Starbucks are good at. They are iconic figures of the industry. They are representative. Anything else around them is just an embarrassing compromise.

I’ll end with a direct quote. Howard Schultz.

Are you going to say to your friend, ‘Let’s go meet at Dunkin’ Donuts?’ Are you going to say that? - Howard Schultz

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  1. […] to pick up coffee, a real-time ad bidding system can run in the background and a cleverly designed Mc Cafe advertising can be served right in front of you, telling you how it’s 200m nearer and having a 2 for 1 […]