Starbucks 1

Starbucks Corporation

Marketing Analysis

By

Syed Izhar
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Introduction:
Starbucks Corporation is an international coffeehouse chain based in Washington,
U.S.A. With more than 16000 retail stores in 49 countries, Starbucks is by far the
largest coffeehouse chain in the world. According to Starbucks annual report 2009;
number of company operated stores are 8,832 while licensed stores are 7,803, making
the grand total to be 16,635. Starbuck, surprisingly is the brain child of two teachers
and a writer; Jerry Baldwin (English teacher), Zev Seigl (history teacher) and Gordon
Bowker (writer). However it gained great grounds when Howard Schultz took it over
in 1987.

People not just visit Starbucks for coffee; they visit to enjoy the atmosphere.
Customers are able to socialize, read, study or enjoy music while drinking coffee.
Starbucks strategically positions each store with hopes of matching the specific
location, helping to create a unique atmosphere.

Marketing Strategy:
Marketing strategy is a plan which consists of product development, promotion,
distribution and pricing approach which hopes to achieve a firm’s marketing
objectives with in specified frame of time. Like any other company Starbucks aims to
increase its profits, to achieve this goal Starbucks use variety of strategies which has
made it the market leader.

Target Market:
Target market consists of set of buyers who share common needs or characteristics
which a company decides to serve (Kotler & Armstrong). Starbucks at launch adopted
undifferentiated marketing strategy (when firms ignore market segmentation and
targets whole market with one strategy). However at more specific level we can say
that, Starbuck’s target market is middle and high income workers, with a desire to buy
premium products. Schultz’s vision of Starbucks was that of ‘Third Place’ i.e. a place
between home and work for people to gather, interact and relax and all this not for
just a cup of coffee, but to enjoy the unique atmosphere. So Starbucks is more than a
coffee shop, it’s a complete experience. To provide this unique experience
consistently they need to keep two things in mind. Firstly to provide this experience
Starbucks needs, a well trained, a well groomed human resource. Secondly it needs to
focus more on outlook and environment of it stores and need to upgrade them from
time to time.

Positioning:
Positioning is how consumers perceive a product or service and this perception is
based upon attributes such as price, quality, product class, application, etc. (Kotler &
Armstrong). So after deciding on target market companies need to design strategies as
to how they want their product or service to be perceived by the consumers. Starbucks
positioned it self as a premium product in coffee industry by setting high standards,
introducing new and innovative products and focusing on higher standards of
customer services.
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Marketing Mix:
Marketing mix is the combination of product, price, place and promotion. Famously
known as 4 Ps of marketing.

Product:
Starbucks positioned its products as premium. To keep the promise of premium
quality they need to have good relations with the suppliers, to provide highest quality
of coffee and other raw materials needed. They also need to have well trained staff to
provide excellent customer services along with the premium quality products.
Starbucks had taken quiet a few steps in this regard such as; using nonfat milk, buying
premium quality coffee from Ethiopia, Kenya, etc., and developing new products
through joint ventures. All these show importance of ‘quality’ at Starbucks.

Price:
In simplest words price is the monetary value of products and services. Price is
psychological tool used by marketers because customers generally have the
perception of ‘high quality high price’. Starbucks charge high price and their position
is justified because in return they keep their promise of high quality product and value
added customer services. ‘If you keep your promise, customer will keep you!’ (Kotler
& Armstrong)

Place:
Company’s products or services are delivered to customer through distribution
channels. Marketers have to decide on the place of these channels. Starbucks has the
advantage of having best quality stores throughout the countries they are in. personal
relationship with customer is vital for them.

Promotion:
Promotion is the communication link through which seller manipulate buyer’s
purchase decisions. Starbucks use event marketing as a promotional tool. Starbucks is
never found on billboards and TV adds. They focus on word-of-mouth and letting its
high quality products speak for it self.

SWOT Analysis of marketing strategy of Starbucks:

Weaknesses:
• More than 75% stores are in US. They need to exploit the opportunities in
other countries by using strong brand name they have developed with time.
• More than 85% revenues come from U.S. This calls for more brand awareness
and promotional activities outside U.S.
• They need to have more and more of TV adds so as to reach every corner of
the globe.

Opportunities:
• Healthy food. People are becoming more health conscious these days, so
Starbucks can target that niche.
• Take advantage of the presence in different countries of the world by
recognizing more markets in which they are not currently present. Like for
example they are present in a country A and country B is neighboring country
of country A then they can use the cultural similarities of country A to decide
on the investment in the market of country B.
• More Co branding and joint ventures (as it is already doing with big names
like Pepsi).
• Increase the Starbucks merchandizing line. This is promotional tool used by
most of the companies in the world to create brand awareness and support
brand loyalty.

Threats:
• Quality is not a sustainable competitive advantage.
• Fluctuating coffee prices and availability of coffee due to rising trends of
export quota and protectionism.
• Competitive coffee shops, fast food chains and restaurants.
• Volatile nature of coffee market e.g. whether conditions, political conditions
in the countries producing best quality coffee.

Conclusion:
The main objective of ‘Marketing’ is to build profitable customer relationship, i.e.
good relationship with customers which help companies to be profitable. To achieve
these marketing goals a strategy is laid down, which first of all determines, what are
the needs and wants of customer? Are these needs or wants explicit or implicit? Has
any one else identified these needs or wants before us? How can we cater these needs
or wants in a better way (more profitably) than competitors? All these questions seem
simple but answer to every one of them has lots of dimensions to cover.

Starbucks is developing new products to ensure further market growth, for this reason
it is developing products for non-coffee drinkers. Starbucks strategy to attract
customers is not only by providing quality products and excellent services but also
varieties of flavors customers’ desire. Starbucks strategic goal is to increase market
share of the non-coffee drinker; they have begun by introducing an extension of a
product line targeted to this segment. To ensure market growth, Starbucks
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Frappuccino line has been extended to include 3 new flavors; Double Chocolate Chip
Crème, Vanilla Bean Crème, and Strawberries & Crème. While entering a new
competitive market Starbucks must compete to retain brand recognition of its core
(competitive) products and increase awareness of its new product line.

For Starbucks main competitors are ‘Dunkin Donuts’ and ‘Krispy Kreme’. Both of the
competitors use pricing strategies to compete with Starbucks. Local coffee shops and
coffee brands are also their competitors in that segment. Their other competitors (for
extended product line) include fast food chains like ‘McDonalds’ and ‘Burger King’.

“We aren’t in coffee business, serving people. We are in people business serving
coffee” – Howard Schultz.
Starbucks is the market leader by providing a series of variety of products, at its well
decorated stores, through well trained employees and workers, without compromising
on quality at any cost. Starbucks has created a value for people’s money and had built,
and is building, brand value through customer relationship.

Recommendations:
Starbucks should concentrate more on its advertisements. Although marketing
expenses seem big but the results they generate are even bigger. Advertisements are
part and parcel of brand development. Coke (by using promotional campaigns and
advertisements) has the brand value of $67.5 billion; this goes to show how important
brand development and brand awareness is. Starbucks use events to promote its
products, which is a good technique in B2B marketing but Starbucks being in
category of B2C should use other marketing channels to promote its brand. Starbucks
rely more on ‘word of mouth’ promotional technique, which demands them to be at
their best all the time. A ‘good word of mouth’ helps in promoting a brand, in same
way a bad word of mouth can damage brand image severely, so that’s not a very good
idea to promote the brand through one technique only. In nut shell Starbucks should
use other marketing channels to promote its brand so that it can retain market
leadership and grow further.
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References:
1. Boyd, H., & Walker, O. (1990). Marketing Management: A Strategic
Approach. Boston: Irwin.
2. Kotler, P., & Armstrong, G. (2004). Principles of Marketing (10th ed.). New
Jersey: Prentice Hall.
3. Starbucks Case Study
4. Shimp, T. (1997). Advertising, Promotion, and Supplemental Aspects of
Integrated Marketing Communications (4th ed.). Fort Worth: The Dryden
Press.
5. Starbucks website.http://www.starbucks.com
6. Dalrymple, D., & Parsons, L. (1986). Marketing Management: Strategy and
Cases (4th ed.). New York: John Wiley & Sons.