This week McDonald’s launched its much-anticipated $100 million offensive onto Starbuck’s turf with it’s “McCafe Your Day” campaign. TV, radio, online, sponsorships, promotions, PR, and (of course) Twitter are among the tools McDonald’s is using to achieve its foothold.

While the creative is somewhat predictable and poorly executed, the McCafe campaign will work through sheer force of arms. It will run heavily throughout the summer and will ultimately extend into 2010 and beyond. After having successfully test-marketed the concept, McDonald’s is announcing in no small way that its cappuccinos and lattes are here to stay. With smoothies and frappes on the way.

What is Starbucks, the pioneer of “the third place,” to do in the face of this attack? Unfortunately, its first move was the wrong one. Starbucks has let McDonald’s determine the rules of engagement by responding in kind.

Launching a campaign of its own with full-page newspaper advertisements featuring long copy and headlines such as “It’s not just what you’re buying. It’s what you’re buying into,” Starbucks is assuming a defensive posture. That’s mistake No. 1.

Starbucks isn’t just a coffeehouse, it’s a concept. It’s not something to be explained, it’s something to experience. It’s not an argument, it’s an aesthetic. McDonald’s has a good case–”we’ve got fine products, reasonably priced, at really convenient locations”–and Starbucks shouldn’t attempt to compete at that level. Starbucks’ appeal has never been about the rational, and now is no time (in fact it’s the worst time) to try to make it so.

What, then, should Starbucks do? First, recognize that McDonald’s is going to take its share. There’s no way to avoid it. Starbucks mustn’t try to protect every last inch of ground at the cost of sacrificing the brand. Second, launch a counteroffensive–not into the teeth of McDonald’s strengths, but on its flank.

There’s a derisive saying in our business: “Excuse me, but your strategy is showing.” With its new tagline, “It’s not just coffee, it’s Starbucks,” the company’s strategy is as visible as a teenager’s boxer shorts. Don’t say it, Starbucks, show it. Don’t make your advertising about you, make it an extension of you. Leverage your emotional and aesthetic strengths–strengths that McDonald’s can’t touch without ceasing to be McDonald’s. Let the other guy do the boring, rational stuff, while you leverage the much more powerful emotional dimension.

Much in the same way that Target has found an emotional sweet spot that Wal-Mart can’t touch without ceasing to be Wal-Mart, Starbucks can occupy a place that McDonald’s is unable to. But the company isn’t going to get there through force of argument.

For years Starbucks had a sweet spot pretty much all to itself, but those days are over. The company must redefine (re-focus, actually) itself to compete in a world where monsters like McDonald’s and Dunkin’ Donuts want what it’s got. The other guys will take their share, but there’s no reason why Starbucks can’t continue to be the coffee king. As long as it acts like one.