Philanthropic Consumption: Starbucks’ (RED) Campaign and What They Should’ve Done
Posted: December 1st, 2008 | Author: scott | Filed under: Marketing, World | Tags: philanthropy, RED, Starbucks | 9 Comments »Starbucks has just launched a campaign. Here is a paragraph taken directly from the (RED) campaign website.
The much anticipated Starbucks Holiday beverages will turn (RED)™ from November 27 through January 2. Customers’ daily visit to Starbucks can directly help saves lives in Africa. For every purchase of a (STARBUCKS)RED EXCLUSIVE beverage – Peppermint Mocha Twist, Gingersnap Latte and Espresso Truffle – at participating stores in the U.S. and Canada, Starbucks will contribute five cents to the Global Fund to invest in AIDS programs in Africa. Additionally, in honor of the 20th Anniversary of World AIDS Day, on Monday, December 1, Starbucks will extend the five cent contribution to every hand-crafted beverage purchased at participating stores as a continued way to save lives in Africa.
Every company should be very careful when they do cause related marketing (CRM). Doing it wrong would be counterproductive. Here is consumers’ perception: “I pay $4 or $5 for your (overpriced) coffee, and you are only giving out 5 cents? That’s only 1%. I might as well donate money to charity myself!” (but probably end up forgetting it)
Now consider this: Starbucks is in a crisis mode now. Their net income has dropped 97% due to economic slowdown and store closures. Their operating profit margins is now at 0.6%, comparing to 10.2% last year. Yet they still decided to push this campaign forward. Some say it’s just a marketing ploy in an effort to boost sales and get good publicity. I don’t know. Maybe Howie really wants to help Africa, and he can, considering in 2007 their revenue was $9.4 billion, and even 0.5% of that in one month is $4 million.
But I think they got it all wrong. Starbucks should be helping customers to do the right thing, instead of asking customers to help them do the right thing.
People might have an unreasonable expectation toward Starbucks, and they can never be generous enough. At the same time, we probably don’t want to put our retirement fund in a company that donates 100% of its profit. Therefore, the responsibility for generosity should be placed on customers, not Starbucks.
So how could Starbucks do differently?
Starbucks can have their cashiers ask customers if they would like to donate their change. For example, $4.10 could be round up to $4.50 or even $5.00, that is 10% and 22% respectively. MUCH better than 1% right? Most people would do it. I mean, who doesn’t care about Africa, especially when we are asked to donate only few cents for the world’s most underprivileged.
This is an old tactic, and it has a few drawbacks. First, it might be too intrusive. Second, it will slow down the line because it takes time for cashiers to explain the whole thing. Third, it’s only good for a short period of time. Having it last too long could create donors’ fatigue. Lastly, it’s not effective in boosting sales.
So I have an even better idea. Why not issue a new line of Starbucks Card called “Round for the World” or something.
When you use this card, every time it automatically rounds up for donation. On the receipt it will say how much you have donated to date. You can register the card online to enter the hall of fame (of philanthropist / coffee addict) or vote on what projects to support. It could be a gift that carries more significance than a regular gift card. I am no accountant, but perhaps the interest of the unearned revenue from these cards could be donated as well?
Most importantly, this program would be on-going. It will be part of the Starbucks brand, and the center piece of the company’s social responsibility effort.
Of course, I am not just talking about Starbucks here.
Do you think this will work? Any drawback I overlooked? Other ideas?
Update [Dec. 7, 2008]: Just submitted the idea to Starbucks Idea website. I’m hoping it doesn’t get buried by suggestions about mug designs or installing fish tanks. So if you like the idea, go bump it up! I actually want to see this happen and not just talk about it. 
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For me, Starbucks got it all wrong. They think that in order for us to buy more Starbucks was to use this campaign especially around Christmas when people feel good about giving. The campaign is all about cultivating new market, Starbuckes knows they are in deep shit for their criticism on fair trade is heavily reflecting on their sales (http://www.tradingmarkets.com/.site/news/Stock%20News/2053245/). People are boycotting them for precisely this reason. So by releasing a relatively guaranteed-return-on-investment campaign, they think that their market will believe that they are helping the people in Africa. For me, they just simply jumped on the bandwagon without really doing what they promised, “sharing the world”.
I agree with you on what they should have done. Or maybe they should’ve just started the campaign by donating the hundreds of millions of dollar that would have cost to market it. I am sure that would stir up with a media frenzy, and I am sure I’ll be happy to blog about it and maybe even buy a cup of Starbucks simply because their name would give me that fuzzy feel-good feeling. But let’s face it, they’ll never pull out a penny unless pull out a dollar first.
http://www.nytimes.com/2008/10/30/business/30starbucks.html?pagewanted=2&_r=3&ref=business
Found this article addressing their issue on reviving their business.
http://www.brandrepublic.com/News/859949/Starbucks-focuses-community-RED/?DCMP=ILC-SEARCH
Starbucks Focuses RED
Great ideas~I think your take on this issue is more realistic.. Starbucks is not the only company that uses the current tactics.. these companies are not charities, but there have to be some symbiotic solutions that can maximize the mutual gains..
what’s worse i think is that usually those macdonald’s ‘loose change’ donation often becomes staff’s tips… makes ppl think why bother.p.s i love the commercial working w/ words only
@thelephant
Hey elephant. I don’t see anything wrong with them jumping on the bandwagon or cultivating new market. The point is mutual benefit. They should rightly earn more money by doing good things. The problem is that neither could be attained by their current tactics.
@Devin
I agree mutual gain is the key. Maybe other companies are using similar tactics, but Starbucks do face greater scrutiny because of their visibility and mediocre track record.
@karen
They do that? I hardly ever put change in the box. I always thought, “why would I give them money so that they could donate it in their name?” It’s quite interesting that in other parts of the world (outside of North America) McDonald’s have much better reputation.
i just think the (RED)™ campaign is too overrated….it’s funny how corporations like to use philanthropy to save their asses…like Gucci just came up with a series of ugly ass bags and claim it will help UNICEF. It’s just abuse. How much of the profits will actually go into helping these people? If it actually works then why are there so many Africans starving or dying of AIDS everyday??
You know what Starbucks do with the tips? The workers get it based on their working hours. So there’s no point for cashiers addressing customers to donate tips. Starbucks always say their drinks are priced higher because certain percent of the profit is donated to Africa or Latin America for schools and etc, the truth is, starbucks educate those kids to help them grow coffee beans!
@thinslicing
I don’t mind them using causes to promote themselves so long as they actually do something. In a way I think it’s the consumers who should be blamed. Consumers are not asking hard questions about corporations’ “efforts”. It’s a shame most people would have bought that cup of coffee with or without the cause associated. What’s worse is that they would have thought they’ve “done their part”. Corporations would only do something if their customers ask for it.
@licia
As much as we like to bash them, they are in a position to make a difference, just like WalMart. Let’s hope Howie and his pals can make some big changes; now would be a good time.
“As much as we like to bash them, they are in a position to make a difference”, that is exactly their argument into making us believe that it was plain good will. Trust me, anything written in a business agenda is never plain good will.