Philanthropic Consumption: Starbucks’ (RED) Campaign and What They Should’ve Done

litbonanza.jpgStarbucks has just launched a campaign. Here is a video and 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?

BTW: I recently 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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Scott got into UBC BASc and got out with a BA in economics and political science. He's interested in anything green and geeky. Now pursuing a career in marketing, trying hard to connect the dots.