In Canada, the three dominant players in the coffee shop category are Tim Hortons, Starbucks, and McDonald’s, each of which leads in different areas of the Marketing Mix Strategy – product, place, price, and promotion.
McDonald’s leads in the price/cost category – McCafé coffees are sold at a lower price than Starbucks or Tim Hortons coffees. Starbucks leads in the product/customer category – every order of hot coffee at a Starbucks is fresh brewed, and they have a more elaborate menu of beverages than either Tim Hortons or McDonald’s.
Tim Hortons leads in the promotion/communication category, advertising to a much larger extent than Starbucks and McDonald’s.
Tim Hortons has more stores across Canada than Starbucks and McDonald’s have combined, with 4,000 locations across the country. Starbucks follows with 1,600 stores, and McDonald’s has 1,500. Judging by these numbers, you would be forgiven for assuming Tim Hortons is dominating in the place/convenience category; however, there is more involved here than just store count.
A coffee shop chain can only dominate the place/convenience category in today’s market when they win in the “drive-through lane” aspect. Increasingly, patrons are forgoing the in-store sit-down experience for the convenience of a drive-through service
Coffee shop chains are applying a “pit stop” mentality to their drive-through customer experience. The goal is to get drive-through customers in and out of a location as fast as possible. A May 2018 survey that outlined the time it took from stopping at the order station to receipt of all ordered items varied between the three competitors, indicating that Tim Hortons took 3.38 minutes, McDonald’s took 3.98 minutes, and Starbucks took 4.44 minutes.
Drive-through times have replaced store count as the KPI that determines place/convenience leadership. This KPI is critical to overall sales. When drive-through customers see a line up at their coffee shop of choice, and they know that the line will move slowly, they are not likely to put up with the wait. They will drive down the road and look for another coffee shop where the drive through time is shorter.
It will be interesting to see how Starbucks fares in the place/convenience competition. Starbucks’ current strategy calls for drive-through service at 80% of its stores in the US and Canada. The dilemma for Starbucks is that they cannot prepare their complex coffee menu items as fast as other coffee shops can deliver their classic and straightforward coffee menu items. It will be challenging for Starbucks to simplify its coffee menu’s complexity, therefore proving difficult to improve its drive-through KPI significantly.
A few years ago, Tim Hortons made the strategic decision to increase the number of Limited Time Offers (LTOs) and the complexity of their food and beverage menus. However, their kitchens and prep stations could not deal with the variety and complexity of this change. Unfortunately, their drive-through KPI suffered, and their per-store sales declined. As a result, they are now reducing their LTOs and number of complex menu items to restore their drive through KPI.
The lesson in all of this is that no one company will be the leader in all four categories when it comes to the Marketing Mix Strategy. The priority of your Marketing Mix Strategy is sustaining your dominant marketing mix category. KPI metrics will reflect your relative strength in that category; however, you must keep an eye on the KPI metrics for your less dominant marketing mix categories to stay relevant amongst your competitors.
Next in the Rise Advisors Master Series on KPIs: KPIs & OKRs – How They Work Together.