Extreme Ads Makeover – Starbucks

In this series of “Extreme Ads Makeover”, I will be tearing down ads of Starbucks and having them completely remodeled to have better targeting and ROI.

Check out more ad makeover case studies such as Lexus, Chanel, Chase Bank, Amazon, Starbucks, Nike, Target, Home Depot, and Nature Made.

About Starbucks

• Starbucks has over 32,000 stores worldwide and serves 100 million customers each week.
• In 2022, Starbucks reported $32.3 billion in global revenues, a 13% increase from the previous year.
• Starbucks’s annual revenue for 2021 was $29.1 billion, a 23.57% increase from 2020.
• Starbucks’s gross profit for the year ending December 31, 2022 was $22.313 billion, a 5.52% increase year-over-year.
• Starbucks’s gross profit for the twelve months ending June 30, 2023 was $23.829B, an 8.88% increase year-over-year.
• Starbucks’s revenue is the total amount of income that a company generates by the sale of goods or services. The vast majority of Starbucks’s revenue comes from the sale of beverages.
• In Fiscal 2021, beverage sales were $18.32 billion, whereas food products accounted for $5.05 billion.
• Customers: Starbucks serves over 100 million customers occasions per week across over 33,000 stores globally. In the US, nearly half of all adults visit Starbucks every 6 months.
• Stores: As of 2021, Starbucks had 33,833 total stores globally, with 15,444 stores in the US. They plan to grow stores by 7% annually.
• Market Share: Starbucks holds over 40% of the US coffee shop market. Globally their market share in specialty coffee is over 32%.
• Loyalty Members: Starbucks Rewards loyalty program has over 26 million members in the US alone contributing over 50% of sales.

About Starbucks’s marketing agency

• Starbucks has appointed We Are Social as its EMEA strategic and creative agency. The global agency will lead a three-year contract for Starbucks.
• We Are Social will be responsible for developing social strategy and brand campaigns that are “connected to culture”. They will target Gen Z and millennial audiences.
• Starbucks also works with Gershoni Creative Agency. Gershoni is a creative agency that builds brands. They use a cross-disciplinary approach that combines strategic insight with design thinking.
• Starbucks’ marketing and creative teams develop strategies for all customer touch points in stores and online. Kyndra Russell is the senior vice president of marketing. Brady Brewer is the chief marketing officer.

About Michael Nguyen – CEO of Produce Results Agency, aka the “Extreme Ads Makeover” Host

Since 1999, Produce Results Agency has helped clients double assets from $5ooM to $1B and generated 4000% ROI for a regional bank turning their $66K marketing budget to $2.8M in revenue.

In this post, I will perform an ad audit on Starbucks ads, analyze what’s missing from the ads, come up with new ads, and eventually validate those new ads by running paid traffic on my own dime to see how new ads perform.

I am using Meta Ads in this case study but the same principle applies to other mediums such as Google, Youtube, Programmatic Ads, and short forms.

Table of Content

1. Ads Audit

2. Gaps Analysis

3. Ads Makeover

4. Validate New Ads

5. Insights/Takeaways

6. Next Steps

Ads Audit

Promoted Product: Starbucks September Thurs-Yays Promo – Buy One Get One FREE (BOGO)

Landing page: https://www.starbucks.com/rewards/mobile-apps/

Facebook Ads: 

Ad Set #1 (link)

Ad Set #2 (link)

Analysis

What I like:

• Message-Creative matched: The message for each creative is matched. For example, the message “Fall for all! ? September ThursYays are here—buy a fall drink and get one free, every Thursday in September from 12 p.m. to close.” is direct, formational, and benefit-driven. Also, the message matches with the creative.
• Creatives are matched 100% with brand identity and the quality of the image is spot-on.

Room for improvements:

• Usage of catchy words: The phrase “Fall for all!” is catchy, but it might not be immediately clear to everyone. The term “ThursYays” is a play on word, but it might confuse some readers who aren’t familiar with this slang or play on words.
• Emotional Appeal: The ad could benefit from a stronger emotional appeal. The current ad doesn’t tap deeply into the emotions of the reader. Emotions like anticipation, excitement, or the cozy feeling of fall could be emphasized more.
• Call to Action (CTA): While the offer is clear, a direct CTA of “Learn More” is soft compared to more relevant CTAs such as “Grab yours now!” or “Don’t miss out!” which can motivate immediate action.
• Limitations and Exclusions: It’s essential to clarify any limitations or exclusions upfront to manage customer expectations. For instance, is the offer valid for all drinks or just specific ones? Is there a limit to how many times a customer can avail of this offer?
• Similar to many other cases from “Extreme Ads Makeover”, there’s only one control ad for this “September Thurs-Yays” BOBO promo. The more visits Starbucks get, the more likely sales increase because customers can buy other things besides coffees while they are hanging out at the stores.

Effect on Ad Performance:

• Reduced Engagement: Without emotional appeal or a clear value proposition, the ad might not capture attention or resonate with viewers, leading to lower engagement rates.
• Lower Conversion Rates: Without urgency or a clear CTA, viewers might not feel compelled to take immediate action, leading to lower conversion rates.
• Less Memorability: Without strong visuals or emotional triggers, the ad might be less memorable, meaning consumers might not recall the brand or offer later on.
• Broad Targeting: Without specifying a target audience, the ad might reach individuals who aren’t interested in the offer, leading to wasted ad spend.
• Lower Click-Through Rates (CTR): Without a compelling reason to click, viewers might just scroll past.
• Lower Conversion Rates: Even if they do click, they might not be as motivated to purchase without clear value, differentiation, or emotional resonance.
• Less Retention: Without a clear connection or reason to remember the brand or offer, even those who click might forget about it shortly after.

The boring “feature/benefit” ad will soon hit the following limitations:

Lack of A/B Testing

• Limited Insights: With only one ad, you won’t be able to perform A/B tests, which are essential for determining what aspects of the ad are working and what aren’t.

Targeting Limitations

• Missed Opportunities for Segmentation: Different ad sets can target different customer segments. A single ad may not be as effective across all segments, missing out on some potentially lucrative opportunities.
• Reduced Personalization: Multiple ad sets allow you to customize messages based on user behavior, geography, or other demographics. A single ad will be less personalized and potentially less effective (more on this below when I do an ad makeover)

Creativity and Message Fatigue

• Ad Fatigue: Over time, the same ad is likely to become less effective as users get tired of seeing it. Multiple ad sets can help mitigate this effect.
• Limited Creative Testing: Having multiple ads allows for testing different creative elements like headlines, images, and call-to-actions. A single ad limits this flexibility.

Risk Management

• Higher Risk: If your one ad doesn’t perform well, you don’t have other ad sets to fall back on. This all-or-nothing approach can be riskier.
• Budget Allocation: With multiple ad sets, you can allocate more budget to higher-performing ads. A single ad does not offer this flexibility.

Optimization Challenges

• Limited Learning: If your single ad isn’t performing well, it’s harder to pinpoint what exactly is going wrong. Multiple ad sets can provide you with more data, making it easier to optimize.
• Inability to Leverage Platform Algorithms: Many advertising platforms use machine learning algorithms to automatically allocate budget to the best-performing ads in a campaign. With just one ad, you can’t take advantage of this feature.

Data and Analytics

• Limited Data for Analytics: Having only one ad will provide you less data, reducing the reliability and validity of your performance metrics.

Attention:

If you had multiple product lines and currently ran paid ads, there’s a 97% chance that you had less than 3 ads based on my experiences of remodeling ads from Lexus, Chanel, Chase Bank, Amazon, Starbucks, Nike, Target, Home Depot, and Nature Made.

Maybe you are perfectly okay with one control ad and burn your ad budget without ROI.

But if you would like to have a second-opinion ads critique so that you can see the gaps and areas where you can extract MORE juice out of your ads, click on the link below to have me critique your ads.

Gaps Analysis

The Landing Page (see link )

Starbucks’ most loyal customers are people aged 25–40, who account for almost 50% of its customers. This age group is usually of a higher socioeconomic status. Starbucks’ other big market target is young adults aged 18–24, who make up about 40% of Starbucks’ buyers.
The average age of a Starbucks customer is 42 years. Starbucks’ customers are typically highly educated and in a high income bracket, earning an average of over $90,000.
Starbucks’ target audience is primarily tech-savvy, with a range of ages from 22 to 60, including a growing number of teenagers

Ads Makeover

Here’s the disease that most marketing agencies and businesses running paid ads:

“They think they’ve tested 20 ads but they really just tested 2 ads 10 different times.”

Headline Options

1. “Tech-Savvy Coffee Lovers, Your Perfect App is Here! ☕️?”
2. “Double the Fall Delight Every Thursday with Starbucks® App!”
3. “Elevate Your Starbucks® Experience with Just a Tap!”
4. “Stay Ahead, Order Ahead! Dive into the Starbucks® Digital Experience.”
5. “Unlock Exclusive Rewards & Offers with Starbucks® App!”
6. “From Your Screen to Your Cup – The Ultimate Starbucks® Journey!”
7. Tired of Mediocre Coffee Apps? Get the Real Deal with Starbucks®!”
8. “Jealous of Exclusive Rewards? Join the Starbucks® Elite!”
9. “Dare to Experience Coffee Like Never Before? Challenge Accepted!”

Body Copy Options

1. “Hey there, modern coffee enthusiast! Dive into a world where your favorite brew meets cutting-edge tech. With the Starbucks® App, every Thursday in September is a treat. Buy a fall drink from 12 p.m. to close and get another on us. Exclusive for our U.S. Starbucks® Rewards members. Download now and let the rewards flow! ??”
   • Models Applied: Relationships (Your customer), Imagery (Visual, Auditory), Time (Present), Capability (Can, Does, Do), Proof (Credibility – Powerful Associations), Numbers (Dates, Periods of time), Language Devices (Alliteration, Rhythm), Locations (U.S. stores).
2. “Sophisticated, educated, and always on the go? Elevate your Starbucks® experience with our app. Order ahead, pay seamlessly, and enjoy BOGO fall drinks every Thursday this September. Your coffee journey, redefined.”
   • Models Applied: Relationships (Your customer), Imagery (Visual), Emotions (Feelings: anticipation, joy), Time (Present), Capability (Can, Will, Does), Proof (Credibility – Powerful Associations), Numbers (Dates), Language Devices (Metaphor).
3. “Starbucks® meets tech innovation! For our discerning customers aged 22-60, here’s an app tailored for you. From exclusive offers like our September ThursYays to tracking your rewards, it’s all at your fingertips. Dive in now!”
   • Models Applied: Relationships (Your customer), Imagery (Visual), Emotions (Feelings: anticipation), Time (Present, Future), Capability (Can, Will, Does), Proof (Credibility – Powerful Associations, Believability – Display of knowledge), Numbers (Ages, Dates), Language Devices (Alliteration).
4. “Young adult or seasoned professional, the Starbucks® app is your digital coffee companion. This September, let’s make Thursdays special. Buy a fall drink, get one free. It’s our way of saying thanks for being awesome!”
   • Models Applied: Relationships (Your customer), Imagery (Visual), Emotions (Feelings: joy, gratitude), Time (Present), Capability (Can, Will, Does), Proof (Credibility – Powerful Associations), Numbers (Dates), Language Devices (Alliteration, Rhythm).
5. “From the bustling streets of New York to the serene landscapes of Oregon, our U.S. Starbucks® Rewards members get a special treat. Every Thursday in September, buy a fall drink and your next one’s on us. Experience it with our app!”
   • Models Applied: Relationships (Your customer), Imagery (Visual), Time (Present), Capability (Can, Will, Does), Proof (Credibility – Powerful Associations), Numbers (Dates), Language Devices (Alliteration), Locations (Landmark, City, State).
6. “Starbucks® isn’t just a coffee; it’s a lifestyle. And for our tech-savvy aficionados, we’ve brewed the perfect app. Order, pay, earn rewards, and enjoy special offers like our September ThursYays. Cheers to innovation and great coffee!”
   • Models Applied: Relationships (Your customer), Imagery (Visual, Auditory), Emotions (Feelings: joy, anticipation), Time (Present), Capability (Can, Will, Does), Proof (Credibility – Powerful Associations), Numbers (Dates), Language Devices (Alliteration, Metaphor).
7. “Had enough of those lame coffee apps that promise the world and deliver nada? ? It’s time to switch to the Starbucks® App. If you’re looking for a real coffee experience, then this is it. But be warned, once you go Starbucks®, there’s no going back. Don’t let defeat by subpar apps get you down. Rise above!”
   • Models Applied: Emotions (Anger, Defiance, Disgust), Types of Statements (Condition), Future (Warning), Language Devices (Slang, Tragedy), Shame (Defeat).
8. “Green with envy seeing others enjoy exclusive Starbucks® perks? If you want in on the action, it’s time to level up. Warning: This ain’t for the faint-hearted. Dive into a world where coffee meets luxury, and leave those tragic coffee experiences behind. No more FOMO, only the best brews!”
   • Models Applied: Emotions (Envy, Defiance), Types of Statements (Condition), Future (Warning), Language Devices (Slang, Tragedy).
9. “Think you’ve seen it all in the coffee world? Think again. If you dare to challenge the norm, the Starbucks® App is your weapon. But here’s a warning: it’s not for those who settle. Say goodbye to those tragic moments of coffee disappointment and step into the Starbucks® revolution. Don’t be defeated by mediocrity!”
   • Models Applied: Emotions (Defiance, Disgust), Types of Statements (Condition), Future (Warning), Language Devices (Slang, Tragedy), Shame (Defeat).

Validate New Ads

This is where the rubber meets the road as I am going to validate ad concepts from the previous step by running paid traffic to see which ad concepts would resonate most with the customers.

Here’s how I set the adset on Facebook

• Budget: $10 Lifetime
• Product/Service: BOGO campaign
• Targeted audience: Target with interest in Starbucks – All Audience 25-40 – Texas
• Placement: News Feed
• Optimization: Optimized for Traffic

Here are all the 9 ads being launched.

Fast-forwarding 24 hours to let the ads run.

Here’s the results

Campaign Numbers:

• • Ad budget: $14.19
  • Total Impressions: 2,337
  • Total Reach: 1,965
  • Total Clicks: 171
  • Cost Per Click (CPC): $0.08
  • CTR (all): 7.32%

Ad results

Summary

1. Reach and Impressions:
   • ‘Headline 6’ has the highest reach with 548 and the highest impressions with 638.
   • ‘Headline 4’ has the lowest reach and impressions, both being very close at 9 and 10 respectively.
2. Frequency:
   • ‘Headline 9’ has the highest frequency at 1.21, meaning on average, the ad was shown a little more than once to each person.
   • ‘Headline 5’ has the lowest frequency at 1.04, which is close to being shown once to each person.
3. Amount Spent:
   • ‘Headline 9’ had the highest amount spent at $4.02.
   • ‘Headline 4’ doesn’t have an amount spent mentioned, but among the others, ‘Headline 8’ had the least amount spent at $0.61.
4. CPM (Cost per 1,000 Impressions):
   • ‘Headline 1’ has the highest CPM at $7.34, indicating it’s the most expensive ad per 1000 impressions.
   • ‘Headline 8’ and ‘Headline 5’ have the lowest CPMs, both being slightly above $5.
5. Link Clicks and CTR (Click-Through Rate):
   • ‘Headline 3’ has the highest number of link clicks at 50 and a very high CTR of 10.99%.
   • ‘Headline 5’ stands out with a whopping CTR of 33.93% with 38 link clicks, making it the most effective ad in terms of engagement.
   • ‘Headline 1’ has the lowest link clicks at 1 and a CTR of 1.06%.
6. CPC (Cost per Link Click):
   • ‘Headline 5’ has the lowest CPC at $0.02, making it the most cost-effective ad in terms of link clicks.
   • ‘Headline 1’ has the highest CPC at $0.69.
7. Ad Performance:
   • ‘Headline 5’ stands out as the most effective ad in terms of engagement and cost-effectiveness for link clicks.
   • ‘Headline 6’ and ‘Headline 3’ also perform well with high link clicks and CTRs.
   • ‘Headline 4’, despite having the lowest reach and impressions, has a CTR of 20%, indicating that 1 in 5 people who saw the ad clicked on it.

In conclusion, while ‘Headline 6’ reached the most people, ‘Headline 5’ was the most effective in terms of engagement and cost-effectiveness for link clicks. It’s essential to consider both reach and engagement metrics when evaluating the performance of ads.

Analytics

• Winning Ads: 
• If the goal is to get maximum reach and impressions, ‘Headline 6’ is the top performer.
  • Headline: “From Your Screen to Your Cup – The Ultimate Starbucks® Journey!”
  • Ad Body: “Starbucks® isn’t just a coffee; it’s a lifestyle. And for our tech-savvy aficionados, we’ve brewed the perfect app. Order, pay, earn rewards, and enjoy special offers like our September ThursYays. Cheers to innovation and great coffee!”
    • Blades Applied: Relationships (Your customer), Imagery (Visual, Auditory), Emotions (Feelings: joy, anticipation), Time (Present), Capability (Can, Will, Does), Proof (Credibility – Powerful Associations), Numbers (Dates), Language Devices (Alliteration, Metaphor).
  • Total Impressions: 638 
  • Total Reach: 548 
  • Clicks: 26
  • CPC: $0.14
• If the objective is to get the most clicks at the lowest cost, ‘Headline 5’ stands out.
  • Headline: “Unlock Exclusive Rewards & Offers with Starbucks® App!”
  • Ad Body: “From the bustling streets of New York to the serene landscapes of Oregon, our U.S. Starbucks® Rewards members get a special treat. Every Thursday in September, buy a fall drink and your next one’s on us. Experience it with our app!”
    • Blades Applied: Relationships (Your customer), Imagery (Visual), Time (Present), Capability (Can, Will, Does), Proof (Credibility – Powerful Associations), Numbers (Dates), Language Devices (Alliteration), Locations (Landmark, City, State).
  • Total Impressions: 112
  • Total Reach: 108
  • Clicks: 38
  • CPC: $0.02
  • CTR: 34%

Takeaways/Insights

So in this thorough case study, I extensively analyze, examine, and audit Starbucks’s ads relating to the BOGO Promo campaign, then come up with new ad ideas based on 17 analysis “lenses”, and finally validate ad ideas by running them through paid FB traffic to determine the winning ad.

• Coffee drinkers don’t like dramatic ad angles, especially using the “Shame” model. I am glad to find this out using a data-driven approach rather than guessing.
• The similarity between ad #5 & #6 is the approach of straight-to-the-offer and telling users what the offer is and how they can get it. That’s why it works so well.
• For a simple product like coffee, the “shame” angle doesn’t move much of the needle.
• Having only one control ad can seriously underperform your entire campaign because of the lack of A/B Testing, targeting limitations, ad fatigue, risk management, and optimization challenges.
• Having multiple analysis “lenses” is the foundation to come up with ad ideas addressing customers’ needs, wants, objections, pains, and frustrations. Without additional analysis “lenses”, you are more likely to get “stuck” with boring and mediocre “features & benefits” angle.
• Ideas & creatives are the name of the game.
• I’d recommend Starbucks create more ad angles for each of its products. The path of “Extreme Ads Makeover” doesn’t stop and should be continuously evolving with the market.

What-If Revenue Impact Analysis

• What If Starbucks went ahead and doubled down on ad #5 (Headline: “Unlock Exclusive Rewards & Offers with Starbucks® App!”) with the lowest CPC,  what would be the revenue impact?
• Let’s make some assumptions:
  • According to a 2023 survey by Premise, the average Starbucks customer visits the store six times a month (72 visits/year).
  • The average order value (AOV) for Starbucks is around $6 and Starbucks’ profit margin for the quarter ending June 30, 2023 was 12.45%
  • The average spent/user = 72 visits * $6 = $432 => Starbucks profit = $432 x 12.45% = $54
  • Double down on ad #5 by increasing the number of clicks to 1,000,000 clicks (Cost = 1,000,000 clicks x $0.02 = $20,000)
• Let’s calculate the potential revenues
  • CTR of ad #5 is a whopping 34% (it means for showing the ad to 100 people, 34 people would show interest and click on it).
  • At 1% conversion rate, 1,000,000 clicks x 1% = 10000 visits
    • Revenue = 10,000 x $6/visit = $60,000
    • ROI = 200%  ($60,000 – $20,000) / $20,000)
  • At 2% conversion rate, 1,000,000 clicks x 2% = 20,000 visits
    • Revenue = 20,000 x $6/visit = $120,000
    • ROI = 500%  ($120,000 – $20,000) / $20,000)
  • At 3% conversion rate (1/10th of the CTR), 1,000,000 clicks x 3% = 30,000 visits
    • Revenue = 30,000 x $6/visit = $180,000
    • ROI = 800%  ($180,000 – $20,000) / $20,000)

Next Step

• Double down on the winning ad and amp up the budget on it because I’ve done the homework for you, all you need is to increase the ad budget.
• I share with you the 17 proprietary models I used to create ad ideas. While those 17 models appear easy for me because I’ve used them to generate thousands of ad ideas, for you, generating ideas may not come easily. That’s why I want to introduce the…
• “Second Opinion” Package

If you are a 7-figure business owner and already run paid ads and need someone to critique your ads for a potential makeover, go ahead and order my “Second Opinion” package.