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Breakfast Wars: Battling for Market Share

LRW
Posted On  January 31, 2013
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The strategy set.  The campaigns planned.  You’re ready to conquer the market.  And then… invader.  That’s right, your competition has shown up and its war.  If you’re going to win the battle, you must understand the competitor and how the market perceives them because it helps you understand how the market perceives you.

But now what or as we like to ask, so what? You see the competitors’ advancement, do you flank them, take them on head to head?  It would be unwise to respond at all to the actions of a direct competitor because that would take your off track, off strategy. So you ask, “when should you react to the moves of the competition?”  Respond when they take a bite out of your business.

Your counter attack should leverage the key strengths of your brand, holding firmly to the important elements of your core strategy.  Let’s look to the war at the counter for a few lessons.

In 2009, McDonald’s rolled out its McCafé line to restaurants throughout the US, offering a bundle of beverage options at cheaper prices than Starbucks’ “luxury” drinks and supported with a heavy ad spend.  McDonald sought to be the go-to destination for a cup of Joe.  McDonald’s grew their coffee share from 2% to 6% in the first two years following the new launch.  The mermaid noticed and responded.

An easy way to thwart the attack from McDonald’s would have been for Starbucks to drop prices to grab back share.  Of course, this would fly in the face of Starbucks’ quality, premium image, so instead of lowering prices, they went looking for where the opportunities might lie in the changing competitive arena.

Starbucks met the challenge with new products and brand extensions.  Not only did they need to compete with McDonald’s, they had to contend with an economic downturn. So they launched a new, low-priced single-serve instant coffee, Via.  This gave them a lower price point offering without sacrificing their core espresso-based product lines. They also acquired La Boulange – a high quality San-Francisco based bakery offering premium bread, pastries and sandwiches – which fit well with Starbucks premium beverages.  Now people looking for their latte fix could grab a tasty bite too.

A few years later, Starbucks AND McDonald’s both enjoy success in the coffee market while giving consumers more choices at different price points.  Perhaps everyone is better off.

Questions to ask about your brand?

  • Do you know how competitors actions impact the way the market interprets you?
  • Do you have mechanisms in place to tip you off when a competitor is gaining momentum?
  • Do you know understand your brand’s capacity to stretch?
  • What will you do when a competitor tries to steal your cup ‘o Joe?

“Got Game?”

Starbucks, the king of coffee, acquired an unwelcome competitor in McDonald’s after the launch of McCafe.  Now McDonald’s offered premium coffee and hot food for breakfast – posing a threat to Starbucks.  Instead of fighting a battle of who has the better coffee, Starbucks saw this as an opportunity to grow its own sales by adding hot food options.  Consumers now benefit from two great breakfast options and both brands extended their capabilities.

Written by LRW
For 40 years, LRW has been asking so what?® to help our clients use market research to have significant business impact. Learn more about us at LRWonline.com.

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