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Starbucks as a global coffee company which also consist of coffee house chain. The American based company has its headquarters in Seattle, Washington. The company was started in 1971 and in over 40 year of business, the company has become a big global player because of its aggressive expansion approach. The company earned revenue of around 15 billion US dollars in the financial year 2013. The company currently operates in more than 60 countries and is known for its premium brand of high quality coffee and excellent service worldwide. The Unit 2 Starbucks Marketing Principles Assignment focuses on the marketing principles applied by Starbucks to become a global success in such a short span of time.
Definition: According to the Chartered Institute of Marketing, Marketing is defined as “Marketing is the management process responsible for identifying, anticipating and satisfying customer requirements profitably” (Wilson, 2011).
American Marketing of Association defined marketing as an activity which process a message and deliver it to the customers who value the customers, client, partners and society.
SWOT analysis on Starbucks will help identify the marketing process of Starbucks in detail (Jones, P.):
Starbucks and Integrated Marketing Communication: Integrated marketing communication approach is one where all the phase of marketing such as marketing and promotional activities, advertisements, direct or online marketing, developing public relations, etc. all work together rather than working differently. In order to be ahead of its competitors, Starbucks has been able to use Integrated Marketing strategy to great effect. Some important highlights of their strategy are: loyalty program for existing customers, My Starbucks Idea program used to take customer feedback through online, use of social media for involvement of people, launching Starbucks Cares which advertise customer safety features, rewarding people through morning coffee or using mobile application, sending postcards to customers on their birthday, etc (Shimp, 2013).
Starbucks Marketing Strategy:
Product Differentiation: The key marketing strategy adopted by Starbucks to as a result of its SWOT analysis is product differentiation. The company use differentiator such as product mix i.e. selling various varieties of products offering customers ample items to choose from and even customize it (Moon, 2003).
Supreme Customer Service: The Company with its high quality and supreme customer service has been successful in establishing itself as premier brand which makes it unique from its competitors (Moon, 2003).
Alliance and merger: Starbucks believes in merging and acquisition of companies rather than following franchising approach. Teavana, Bay bread, Evolution Fresh are some key acquisitions done by the company in order to follow Product Development approach (Jianfei, 2014).
Geographical Diversified: Starbucks another strategy which makes it different from others is its approach to set business in developed as well as emerging markets and implementing it successfully.
Marketing Audit of Starbucks: Analyzing the last seven years of Starbucks performance, it can be seen that from 2008 till 2011, the company saw a sudden drop in its sales and the revenue was dropped by nearly 10% because of the global economic recession that hit the world. However, the company started to show improvement with growth of around 13% in the year 2012 and the company earned the revenue of 15 billion dollars in the year 2013. The year 2012 was impressive for Starbucks in terms of return on equity and return on assets which increase by 29 and 18% respectively. However, because of Starbucks terminating their agreement with Kraft foods resulted in litigation charge, the company experienced high operational cost.
A market oriented company is one which comprises of one or more departments which analyze the consumer tastes and preferences, their buying behavior, factors affecting their purchasing and their current as well as future needs and then sharing the information across the company to design new strategies in order to meet those requirements.
Key benefits in Starbucks which is a market oriented company are:
Costs of Marketing in Starbucks:
Starbucks invests minimum amount in TV advertisements or on internet which helps the company to save on lot of marketing cost which is used by such promotional activities (Partridge, 2011). The company rather invests in cheaper mode of publicity like using social networking sites for marketing, mouth to mouth marketing, opening stores in clusters, etc (Harris, 2014).
In international arena, Starbucks makes sure that their shops are based on local theme and offer local food to attract more people living in those areas. The company does a thorough research on buying patterns of its local customer and offer products based on those researches. Thus, Starbucks make sure that it reach out to common masses in a subtle and unique, cheaper manner thus saving on the cost on marketing to great extent (Schultz, 1997).
Macro environmental factors of Starbucks can be better understood with help of PESTEL analysis (Morais, 2014):
Micro environmental Factors affecting Starbucks can be understood with help of Porter Five Force theory
Segmentation is an important aspect of marketing mix used by the organization. In case of segmentation, companies classify the people or group of people based on certain filtering criteria which helps the company to formulate marketing strategy targeting those people. Some key segmentation criteria used by organizations are (Lin, 2002):
Segmentation in case of Starbucks:
Starbucks uses Psychographic segmentation to great extent. The company analyzes the changing behavior of consumer and its lifestyle and based on that it introduces new and innovative ideas as per their requirement.
Starbucks has recently started targeting people who are not hardcore coffee drinker or avoid having coffee by introducing new diversified products like tea, juices, health drinks, summer drinks, etc.
Starbucks also uses geographical segmentation and demographic segmentation to considerable extent. Starbucks open shops which is highly visible and appealing and accessible to maximum number of people. The company also opens shops in cluster in a small area to give a fake feeling to its customer about its existence everywhere. The company also presents different products for different age groups.
Targeting strategy is the next step after segmenting the market based on one or more than one criteria. Targeting process involves understating the importance and benefits of each segment and based on the study entering into one or more than one segment to gain maximum benefits.
Firstly, Starbucks target people with middle or high income level. The main reason for targeting high income level people is the high price of products sold at Starbucks. Since the company believes in selling high quality coffee, it comes at a price which is not affordable for people with low income levels.
Secondly, Starbucks target people with low age group like twenties, thirties and forties. Starbucks target low age student and mid twenty people through new innovative ideas like technological advancements and making their shops environment similar to student’s hang out place or to study while sipping coffee. The company offer appealing drinks to people lying in the age group of 25 to 45 and making it an intermediate place between work and home.
Thirdly, Starbucks focuses on mostly professional or office going people who like to have a quick refreshing time at their shops while going from office to home after hard day at office to freshen up and swing their mood. A cup of coffee with soothing environment helps them to feel charged up and relax their body. Starbucks make sure that the coffee served by them is of best quality to impress its customers. It also provides other healthier drinks and beverages to accommodate people who are health conscious or avoid drinking coffee.
Some key areas which show how buyers have affected the marketing activities of Starbucks in different buying situations are:
The last step after segmenting, targeting and analyzing the buying behavior of its customers is to position your products. An organization needs to position its products in such a way that there is a clear difference between the company and its competitors operating in the same food chain.
On a perceptual map, Starbucks position can be understood by the following figure:
Perceptual Map showing positioning of Starbucks in the market (Czinkota, 1997)
Thus, it can be seen that Starbucks is known for selling high quality products which are high on prices. However, Starbucks soon realized that the transactional marketing approach is being converted into relational marketing during the late 90s. Starbucks quickly adopted that approach as customer relationship not only satisfies the customer but bring delight to the customer. Sometimes, customer gets more than what he or she is looking for which is a significant step in retaining your customer.customer relationship not only satisfies the customer but bring delight to the customer. Sometimes, customer gets more than what he or she is looking for which is a significant step in retaining your customer.
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Thus, Unit 2 Starbucks Marketing Principles Assignment concluded that Starbucks have been a success story in its domestic market working on its own values and competencies which differentiates the company from its other rivals in the market. The company has been able to use the Segmentation, targeting and positioning approach well to keep up with its customers. Starbucks also uses marketing mix strategy well to improve on its customers in the domestic as well at international arena. The company needs to grab the opportunities that are available to it by entering into new markets and making most of the increasing purchasing power of people in developing nations of Asia.
Czinkota, M. R., & Kotabe, M. 1997. A marketing perspective of the US International Trade Commission's antidumping actions—an empirical inquiry.Journal of World Business, 32(2), 169-187.
Doyle, P. 2009. Value-based marketing: Marketing strategies for corporate growth and shareholder value. John Wiley & Sons.
Favaro, K., Bomberger, T., & Meer, D. 2009. Five rules for retailing in a recession. Harvard Business Review, 87(4), 64-72.
Gamble, P. R. (Ed.). 2006. Up Close & Personal?: Customer Relationship Marketing@ Work. Kogan Page Publishers
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