Starbucks is one of the most recognized and biggest coffee brands in the globe. It started in the U.S. in 1971 and today has become the largest coffee selling firm in the world. This unassailed position is a result of careful deliberation by way of numerous strategies and careful and well thought out international expansion into key territories. Even with its higher than normal pricing, Starbucks is able to hold its head high up above the competition primarily due to the quality of its offerings and secondary due to the ambience offered at its stores. Starbucks lays a lot of emphasis on the coffee drinking experience as a whole and not just coffee drinking at its outlets that is a part of its success story.
A differentiating factor of Starbucks from other FMCG firms is its minimal advertising strategy. Starbucks banks on its high quality products and customer service to do the talking on behalf of the firm and word of mouth publicity is what brings a bulk of the customers to its outlets. Customer service is also top notch with their baristas specially trained towards offering superlative customer service. The firm also has an extremely streamlined distribution system that culls out best quality raw materials from various countries ensuring quality products at economical rates.
1.1 SWOT analysis of the organization and the importance of using SWOT analysis as a marketing tool
On the strengths front; it is the leading roaster and retailer in the world of brand speciality coffee as pointed out by Manize (2011). It possesses a strong brand image with a potent tagline ‘The Starbucks Experience.’ It is worldwide organisation having more than 16,000 outlets spread across 48 nations. Starbucks is famous for offering superior services and products. Customer loyalty is high as is quality control. The feel of the stores is upmarket resembling Italian coffee houses with apt interior design, artwork and ambient music. Strong competitors are few for Starbucks and market share and growth is really high.
Coming over to the weaknesses front; the coffee giant is too focused on the U.S. domestic market. High pricing is also an issue with all markets not taking kindly to it. The brand also carries a tag of being ‘American global’ which poses sentimental issues for people belonging to certain countries. This retailer also does not give a guarantee that the products sold through its various outlets are devoid of genetically modified ingredients.
Moving over to opportunities front: today’s customers are much less price sensitive than before which augurs well for the brand. Starbucks is able to change coffee’s negative image into a positive one. The group has robust financial support. There are also future opportunities to diverse into product areas other than coffee. Starbucks banks well on the aspect of fulfilment of self-esteem and the need to be loved and belonging to the community making it an attractive proposition for people and thus in turn enabling it to penetrate markets easier.
Rolling over to the threats arena; the global financial meltdown has brought down the spending tendency among people thus affecting Starbucks adversely. The retail giant also faces threats from alternate products such as colas, juices and teas. Coffee drinking is also increasingly being viewed as not auguring well for the health of people.
A SWOT analysis is a real potent marketing tool as it helps a firm and also its competitors to identify the differentiators that matter in effective marketing of services and goods as noted by Silva (2013).
1.2 Marketing objectives of Starbucks and how defining marketing objectives can help a business to develop marketing strategies. How does this contribute to the benefits of costs
The marketing objective of Starbucks is to fulfil its customer’s needs and requirements in the gourmet coffee niche as pointed out in the researchomatic website (n.d.). This leads to increased profitability for the firm as they are able to charge higher being in such a niche where the customers are willing to shell out that extra bit of money. Its marketing objective is also to provide its customers with the Starbucks experience that would make them enter the Starbucks cafes for the coffee, stay and linger due to the ambience and come back owing to the customer connection created as pointed out by Salehi (2011). Starbucks also aims to cultivate an image distinct from smaller coffee chains. The coffee retail giant also wants to lucidly communicate the commitments and values of their business to their customers and don’t want to rely on only their growth plans published in the media.
A marketing strategy is the game plan in achieving the marketing objectives as noted by Seltzer (2010). A clearly defined list of marketing objectives only can lead to such a game plan. A marketing objective can be defined as a purpose or mission on which the entire marketing plan will be based upon. Marketing objectives are really wider in scope than goals. The marketing objectives should possess a clearly laid down completion timeframe. For every year, a new marketing plan should list down desired achievements for that particular year. The marketing objectives should be consistent with and also note the priorities of the business as pointed out in the SmallBizConnect website (n.d.). The objectives should pour forward from the business’ mission statement, onto the financial objectives and to the remainder of the marketing plan.
Starbucks marketing strategy is built around cultivating lasting customer relationships by way of commitment and trust with its stakeholders. The coffee giant also develops a connection with customers by treating them like family amidst a friendly and inviting environment. Referrals work a lot for promotion of Starbucks by way of word of mouth as the firm invests little on traditional marketing methods and utilizes its stores as their promotional bandwagons.
2.1 Micro and three macro environmental factors influencing marketing decisions in Starbucks
The biggest macro environmental factor that has affected marketing strategies at Starbucks off late is the global financial meltdown. Recession has meant more and more people are reducing non-essential spending meaning reduced footfalls in Starbucks outlets that in turn have affected its bottom line adversely. This has forced Starbucks marketing decisions to make its brand look deliberately attractive as opposed to the earlier scenarios where the brand itself was a magnet for the customers.
Another macro environmental factor influencing marketing decisions at the coffee giant is competition. Competitors like McDonald’s and Dunkin Donuts were more cost efficient offering much better economical pricing and as a result had eaten away business from Starbucks as pointed out by Middleton (2009). In response, Starbucks took cue from such competitors and introduced breakfast and coffee combos for $3.95.
Yet another macro environmental factor affecting marketing at the coffee giant is the increased health consciousness leading to fast food outlets being branded as no go zones for the health savvy. Starbucks took a good PR initiative of publicizing the nutritional facts of all its beverages on their website to counter this trend to some extent.
On the micro environmental front, Starbucks has stepped back from its unhindered store expansion spree and instead is concentrating on further enhancing its already entrenched stores. Price is yet another micro environmental component that Starbucks is seriously looking into. Starbucks which until recently followed pricing that was much higher than other coffee outlets has made reduction in prices that makes it prices more closer to its competitors.
2.2 Segmentation criteria most applicable for Starbucks to use for their products in different markets.
The most vital segmentation criteria which Starbucks has to put it focus on, in my opinion, is the coffee and non-coffee segmentation. Although Starbucks currently offers teas and children’s beverages at it outlets, it has to further leverage on the demand for non-coffee beverages without offsetting its prime emphasis on coffee. This would help Starbucks leverage its market position in primarily tea drinking geographies like China and India. Since Starbucks does not indulge in much of traditional advertising, the emphasis on coffee is present mostly in its outlets only. Thus there is no harm in populating its menus further with more non coffee beverages that would convert more sections of population into the Starbucks fold.
Starbucks can also get over some of the health stigma associated with coffee drinking especially the outlet variety among the health conscious. Although Starbucks is offering more health oriented menu items it has to definitely introduce more such items, as on coffee it cannot go beyond a point in reducing the health risks. I would recommend Starbucks to introduce really healthy products like ones peppered with herbal ingredients. Starbucks can also educate its customers on daily calorie intake required and such basic and vital health information so as to offset the unhealthy stigma associated with coffee drinking. But one caveat here is the coffee giant should never indulge in false propaganda of advocating the health benefits of drinking coffee. Such a move would only backfire especially in this age of activism and super awareness.
2.3 Targeting strategy and positioning strategy
Starbucks is quite innovative when it comes to its product mix. The most striking product mix that appealed to me was its seasonal one. To cite an example, when it is Christmas time, red cups and ginger bread latte are put on menu as pointed out by Berman (2014) keeping in tune with the seasonal spirit. This kind of a targeted marketing works wonders. Starbucks should leverage more on this as a sense of urgency is created among the customers to pick up a seasonal product. To cite an example, a customer would most probably pick up a gingerbread latte knowing fully well that it will be months before the product will reappear on the Starbucks menu. This is a magnetic attraction for customers and Starbucks should really widen such product base. For example, Starbucks in my opinion could introduce latte Easter eggs during Easter season, so that again during Easter season it results in a buying spree from the customers thus ringing loud the cash registers. Starbucks can also widen such seasonal offerings by diversifying into non-religious celebrations too. For example, on Valentine’s Day the coffee giant could offer special beverages encapsulating the spirit of the celebration complete with cups that give out a message of romance.
2.4 How buyer behaviour affects marketing activities in different buying situations.
Today’s consumers are health conscious and coffee drinking especially in specialty chains has acquired a certain level of notoriety. This could severely affect Starbucks sales. Marketing managers should be wary of this trend. Buyers are thus ever more health conscious and the description of nutritional facts of different beverages offered by Starbucks put up on its site is a good start. I personally feel though there should be more done on this aspect. Sign boards could be kept at vantage points especially in flagship stores where there is a lot of space available as to how Starbucks cares for the health of its customers. Also the menu cards should incorporate vital health messages that are linked to coffee and other offerings from Starbucks.
Also it is time for Starbucks to reduce its ominous dependence on coffee and veer more towards other non-coffee beverages like tea. Although at present there are teas like tazo teas and other non-coffee beverages available, not much emphasis is laid on them. Perhaps, Starbucks is overly worried that it will take away the shine of their coffee emphasis which is their bread and butter. But with well though tactical marketing strategy, this can be very well achieved. Such an emphasis on non-coffee drinks will serve to increase further the market share of Starbucks and also help it gain a foothold and entrench in territories where coffee drinking is not much in vogue.
2.5 New positioning for a selected product or service
What I am proposing is a seasonal offering that can be introduced on Valentine’s Day. This product should be positioned for the youngster segment comprising of late teenage and early youth age brackets or the 16 to 25 age group. But for this positioning Starbucks should break free of its traditional anathema towards conventional advertising and should give coverage especially among media targeted at this age bracket like music television channels. Once this gains traction with sufficient popularity, Starbucks can again abandon traditional advertising. With a successful campaign such traction can be achieved in the first year itself. The positioning should give out messages relevant to the ethos of the Valentine’s Day celebrations. To cite an example, the message could be driven home that coffee can bring about intimacy that is a vital ingredient in romantic relationships. But this positioning is also a tricky one as some youngsters might find Starbucks too formally upright for a romantic tete-a-tete. On the other hand Starbucks cannot also afford to cater to this segment too much so as to upset the applecart of its usual clientele that is more family and corporate crowd oriented. So Starbucks should not push too far on this agenda but at the same time should subtly drive home the message that its outlets are good enough for romantic couples.
4.1 Marketing mix for two different segments of market in Starbucks.
One segment of market that I am proposing for Starbucks is the tea segment which I feel Starbucks can further develop on. On the product front here, Starbucks needs to look beyond its existing range of Tazo teas alone and concentrate on much higher quality tea of which there is no dearth. Starbucks can also market geographically specific teas onto certain countries and then tweak them to suit the palates of the instant coffee or drinks generation. To cite an example, Starbucks can tweak in such a way, the Darjeeling tea in its Indian outlets that takes care of the place aspect of the marketing mix. Pricing can be even more premium compared with Starbucks standards at select flagship stores for ultra-premium range of teas. For example, highest quality twinning’s tea of London cannot be dished out at even above average prices. Promotion for the tea range should be done subtly so as not to upset the apple cart of the bread and butter offering, coffee. More visibility should be accorded within menus and Starbucks official website for the tea offerings. The message should be subtly and gradually driven across that Starbucks is not only a coffee destination but also a tea one.
Starbucks can go even more upmarket with premium offerings at select locations like London’s West End. This addresses the product and place aspects of the marketing mix. But the product should be clearly segregated from the rest. Starbucks can even adopt a new moniker for these higher end offerings like Starwood hotel group has its luxury collection of hotels. This would shake off any apprehension on part of the discerning customer as to links with the lower end segment. Promotion for such stores should be done really discreetly and in high end circles like magazines targeted at the real upper segment. Pricing can be much higher than the normal Starbucks ones but care should be taken to grant the accompanying quality and exclusivity to match with it.
4.2 Differences in marketing products and services to business rather than consumers.
The biggest difference in marketing to business and consumers is that a buyer in business wants to buy as noted by Bly (n.d.). All businesses must often buy services and products that aid them in staying profitable, successful and competitive. A business buyer is well informed as opposed to a consumer on the particular product or service. Business buying is a multi-step buying process. Business products or services are much more complex than consumer ones. A business buyer purchases for his firm’s benefit and not for his own benefit.
Starbucks places overt emphasis on people as exemplified by the famous quote by its CEO, Howard Schultz “We aren’t in the coffee business, serving people. We are in the people business, serving coffee.” People form the crux of the business for Starbucks and this is the reason why all products and services at Starbucks are tailor made to suit customer tastes and interests. When Starbucks realizes any of its products are overpriced above its usual norm as evinced by the cold response from the customers or is not received well by its customers it either pulls them off the shelf or alters them suitably. The focus of the coffee major on sprucing up the ambience of all its outlets is also reflective of the emphasis put on the customer. In contrast, a product based organisation like Ford Motor Corporation does not have the same focus on the customer, rather it is the product per se that is the object of focus. In fact, in certain scenarios Ford has even totally neglected customer interests as evinced by the famous Ford Pinto debacle from the 1970’s. In this fiasco, Ford put emphasis on earning some quick money over even its customer’s lives. Although this might be an extreme example, it draws the extreme contrasts between a really service oriented organisation like Starbucks and a product driven organisation like Ford Motor Corporation. Although bottomlines are important for both firms, the way they are achieved are drastically different. The mode of Starbucks is a people centric approach while that of Ford is a product centric one.
4.3 How and why international marketing differs from domestic one
International marketing is complex and entails humongous amount of financial resources as pointed out in the differencebetween website (n.d.). Each country has their own set of laws governing business and any firm aiming to do business in another nation ought to be aware of them so as to abide by them. Tastes and preferences of consumers in different countries differ and as such marketing strategies must be made out to fulfil the needs of these consumers. International marketing entails more effort and time and is highly risky and requires really high level of commitment to be a success. In comparison, domestic marketing is much easier and convenient. Language barriers do not exist in domestic marketing and interpreting and obtaining data with regards to local consumer demands and marketing trends is quicker and easier to do. Risks are lesser in domestic marketing and it requires fewer financial resources. As part of their international expansion spree, Starbucks carefully finances and plans new stores across the world. The firm follows the ‘Starbucks everywhere’ strategy while expanding internationally. Store expansion is done at a frenetic pace globally so that local competitors do not have enough time in imitating the concept of Starbucks. Starbucks also follows a strategy of nurturing trained international managers who are multi lingual.
Outside of continental United States including Hawaii, the firm’s strategy is to license the franchises to a capable and reputable local company with the requisite retailing know how among the target host country so as to operate and develop new Starbucks stores as noted by Dholakia (2010). In certain stores outside the continental United States however, Starbucks is a joint venture partner.
Starbucks has got a strategy of entering important developed and emerging markets so as to diversify geographically as pointed out by Geereddy (n.d). This strategy has worked extremely well for Starbucks with successful operations now spanning sixty countries.
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CORPORATEINNOVATIONONLINE. (2011) Short profile of innovation in the corporate world. Retail industry – global market. Starbucks Corporation.[Online] Available from: http://www.corporateinnovationonline.com/wordpress/wp-content/uploads/2011/05/Starbucks.pdf. [Accessed: 10th July 2014].
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