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Will Starbucks ads fill a tall order?
The world's dominant coffee retailer launched a national television advertising campaign Friday called "Pass the Cheer."
Some Starbucks watchers said it would have been better to go with "Lower the Prices."
The Seattle-based company began the campaign one day after revealing that customer visits to U.S. outlets fell -- something that had never happened before -- in the quarter ended Sept. 30. Starbucks said there was no connection.
One of the new animated TV ads, by Portland-based agency Wieden & Kennedy, shows a man sitting on a chairlift as snow falls around him. The lift stops and the man finds himself facing a reindeer, with which he shares a mug of steaming coffee. The phrase "Pass the Cheer" appears on the screen alongside an image of Starbucks' Christmas blend.
A Starbucks holiday website ( www.itsredagain.com) also carries a "Pass the Cheer" theme, inviting people to "share your story with the world" by writing about gestures of goodwill. Among the posts Friday was one from an 11-year-old girl about how good she felt giving out sandwiches to homeless people and one from a Starbucks store manager thanking his employees for giving him a mug.
The ad campaign is designed to "capitalize on our brand awareness while driving new and existing customers into our stores," Chief Operating Officer Martin Coles said Thursday during a conference call.
Coming four months after Starbucks raised its prices by an average of 9 cents a drink, the ad campaign coincides with a credit crunch that has crimped some spending styles -- at a time when the company's stock has been depressed. Shares of Starbucks, which fell 90 cents Friday to $23.20 , have dropped 41% in the last year.
Many Americans are cutting back on affordable luxuries such as fancy coffee beverages, said Howard Penney, an analyst with Friedman, Billings, Ramsey & Co. And as customers curtail their visits, Penney and others said, Starbucks should be offering promotions.
A touchy-feely ad with a winter theme won't lure people back, they said, because it doesn't offer any incentive.
"People are becoming very price-conscious," said Alan Siegel, chairman and chief executive of branding strategy firm Siegel & Gale. "Without making any kind of an offer, I'm not sure Starbucks is addressing the problem."
In fact, coffee lovers have more choices these days. McDonald's Corp., for instance, said this week that it would soon add upscale coffee drinks, including frappes, to its menu.
And some people are abandoning coffee altogether for energy drinks and other alternatives, which they can buy at grocery stores, service stations and other places where they are less likely to encounter lines, said Jeff Klineman, editor of industry magazine Beverage Spectrum. "Convenience is huge."
Starbucks has had a lot of success charging a premium for something that doesn't have to be so expensive, said Sharon Zackfia, an analyst with William Blair & Co. in Chicago. Now, it "has a real opportunity to distinguish itself from the masses. That's really what the advertising offers them a chance to do."