Will Consumers abandon the Mermaid for the Clown?

The worst nightmare of a premium brand is a value player entering into its space with an offering as good, if not better, at lower prices.

The question that begs to be answered is, will consumers abandon the Mermaid for the Clown? Most reports seem to indicate in the affirmative. McCafes now seem to have not just a cheaper speciality coffee drink, but one that also tastes better. This is what Maudie West, an 86-year-old resident of Kansas City has to say about the Iced Mocha at McCafe, "I just absolutely love them. They're much richer-tasting than Starbucks."

Now how does Starbucks take on such a competitor? Should it lower prices? Should it get better at its beverages? The answer to the former, No, the latter, Oh Yes! Does that mean Starbucks must never get into 'value' offerings? Not necessarily. It can, as long as it spins that business off as an offshoot of the 'original' Starbucks. This is so that the original equity remains intact. After all the recession ain't here forever.

Going ahead, will the going be tough for the Mermaid? You bet!