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Starbucks risks running in poor taste

A knocked-over Starbucks cup

TEXT OF STORY

Steve Chiotakis: Starbucks shareholders meet in Seattle today. Now lately, the company's been cutting its business to the bone. It's shed jobs and started offering meal deals and instant coffee. One thing that's likely to come up in the gathering today is how making Starbucks look more like McDonald's will affect the company's future. Amanda Aronczyk reports.


Amanda Aronczyk: You'd think in a recession that anything you do to attract customers would be a good thing.

Matt Langley is the founder of Basis, a brand consultancy company. He says that's true, but only up to a point.

Matt Langley: What Starbucks shouldn't be doing, or really any company shouldn't be doing, is taking their own brand and devaluing it. And making their brand seem that it's now cheap and kind of a little tarnished.

Langley calls it "brand dilution." That's when customers come expecting a certain something . . . but find something else. He says people go to Starbucks for the experience: a personalized cup of coffee made to order. It's not supposed to be a value meal.

Nick O'Flaherty works for Wolff Olins, a branding company. He says there's a real danger in going too cheap.

Nick O'Flaherty: Next thing you know, Starbucks is down at the same sort of level as Dunkin Donuts and McDonald's.

O'Flaherty says once companies downgrade from premium, it's difficult for them to step back up.

The acid test for Starbucks: Will customers still be willing to pay $4 for a latte? When the recession ends that is, and when it comes without the oatmeal.

I'm Amanda Aronczyk for Marketplace.

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