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Unit 4 Marketing Principles Assignment - Starbuck Coffee
Diploma in Business (Marketing)
Unit Number and Title
Unit 4 Marketing Principles - Starbuck Coffee
The concept of Marketing is a very important for business to be competitive in the market. The concept of marketing varies time by time. Now a day, in the concept of marketing company sells its idea, product and services depends on the need of the present and prospective customer. In the other word, we can say that the organisation makes the products according to the needs of the customers or consumer and then sell it. The Starbuck coffee has different flavour in coffee for the different age group and makes changes in its flavour time by time. To get a clear view of marketing process, I am taking the Starbuck cafe as an example to understand the concept of marketing and will show the SWOT analysis and will define the objective and the various term of marketing. The star buck’s first coffee shop was at Seattle, Washington in1971. Till today, it has approximately 2372 stores across 62different countries.
1.1 Explain the various elements of the marketing process
Starbuck offers a wide range of hot and cold beverage and some packed item like sandwiches, burgers and pastries. Starbuck always is putted on the first rank by the coffee lovers. Starbuck is one of the famous coffee houses in the US and UK and Starbuck is the only example among the coffee houses in which it is get to see the introduction of a new product is according to the right customer of the right age group. And it is fully aware of what to introduce in the market at which time (Wang, 2007). There are various elements of marketing in which Starbuck work as a king like these are consumer behaviour, customer orientation, marketing environment, customer satisfaction and promotional activity. In the Starbuck, customer gets a feel that he or she is very special for him the cafe. And it always offers a value added services to their regular customer with a full satisfaction and great taste. Starbuck never spent a huge amount of money on the promotional activity instead of this it believes in brand positioning and mouth to mouth publicity. To explain the marketing process of the Starbuck it is important to go through the SWOT analysis.
SWOT analysis: SWOT analysis is a marketing tool which is use to find out the assets and liability of the organisation and also explain the opportunities and threats present in the market.
For an organisation SWOT analysis is very crucial because only with the help of swot analysis the organisation may get the real threat and opportunities present in the external market and strength and weakness in their internal organisation. SWOT analysis is a first step of marketing for any product of organisation. Marketing is basically depends on the organisation’s assumption and the competitor’s calculation (Jobber & Ellis-Chadwick, 2012).
Marketing objective of Starbuck: Marketing objective is outcome of the marketing activity and it is accomplished through the various marketing plan. To set any marketing objective, the organisation should be very sure that it should be realistic and specific. A clear objective always carries a strong marketing strategy. The marketing objective of Starbuck is to attract the more customers and get customer loyalty and provide them more satisfaction then other competitor.
1.2 Evaluate the benefits and costs of a marketing orientation for a selected organization
Marketing orientation is process in which the market research is conducted by the organization to anticipate the exact need and the wants of the customer of the targeted market and then make the product accordingly so that they can fulfil the need to satisfy the customer. Starbuck conducts such type of research after a small time period to find out the change in the taste of customer. Starbuck also maintain a highly customer relationship and make feel them very important to the cafe. For an example: around 2012 in UK started approach in which if a customer visited their coffee shop and ordered coffee then they also asked their name and wrote their name on coffee cup and when the same customer came to their shop again, they wondered that local staff of Starbuck still remembered their name (Armstrong &Cunningham, 2012). This type of approach is very useful to maintain the good relationship between the customer and the organization. With this approach of Starbuck the customer got a personal feel.
Starbuck is very good in providing value added services or benefits to their customer with the help of marketing orientation . Because of market orientation, Starbuck always plans such type of offer through which it can easily attract the good number of customer at small time period which is beneficial for customer and organization as well. The numbers of the competitors are also increasing in the market; market orientation process makes Starbuck to focus on the building a long term relationship with their customer by identify the new change in the behaviour and the expectation of the customer so that the cafe can beat the competitions. Besides this, there are many benefits that Starbuck have through market orientation. These are as follows:
- Helps in increasing the sale of the coffee offered by Starbuck.
- Helps in getting the exact need of customer so that Starbuck can produce the same flavour of coffee.
- Provide friendly working environment to the organisation so that the employees can feel satisfaction.
- Helps in improving the revenue of the cafe.
- Stable the performance of new product offered by company.
As described, the market orientation provides the various benefits to cafe by satisfying the need of the customer. In lieu of these described benefits, Starbuck has to pay a huge amount to the process of market orientation. So the cost factor of market orientation is very high. The cost associated with the element of market orientation is as follows:
- The money spent on the research and survey to find out the exact taste of coffee.
- The money spent on the group discussion among the expertises of market.
- Cost associated with conducting the internal meeting.
3.1 Explain how products are developed to sustain competitive advantage
No matter how big or popular a brand has become, it will always face the competition in the market from the new products and from the new companies in the market. But there is always a competitive advantage of an established rand is that company does not have to put much effort to gain the confidence of the customers as they are already happy with the previous products of the company. In case of Star Bucks, company has the trust of the customers, but even then, when a new product is developed, company has to define a strategy to sustain the competitive advantage (Thorson & Duffy, 2011). Company has the competitive advantage but the new product of the company should be developed to sustain that competitive advantage. For example, when a customer tries the new coffee product of the Star bucks, he should feel that it’s even better than the earlier products of the company.
Hence, the improved quality of a new product while developing that product is always essential to sustain the competitive advantage. Star Bucks also has to make sure that the previous feedbacks of the customers are considered and implemented during the development of the product. As discussed above that Starbuck’s store in Japan is a good example of competitive advantage. When Starbuck has decided to open its store in Japan then it focus only on the non-smoking zone to gain the competitive advantage as no other company started its chain in non-smoking zone. The Starbuck has got the huge brand recognition from here. And in Taiwan also, to beat the competition it has launched first ready to drink coffee.
3.2 Explain how distribution is arranged to provide customer convenience
A distribution channel is the way in which the company product reaches to the end user. A typical distribution channel of any product is provided in the below figure.
It is clearly seen that the distribution starts at the highest level, i.e. at the manufacturer and finish at the customer, i.e. end user. But in between these 2 levels there are many other levels such as the broker, wholesaler, retailer and home delivery salesman. This is kind of a chain and every product has to go through this distribution channel. Although, there is a new distribution channel, which is redefined by the e-commerce or online shopping. In this kind of distributor channel, customer is directly connected to the manufacturer and buys the product directly from the company through online shopping which is delivered to the customer at his home either by the company agents or courier service.
The distribution strategy adopted by Starbuck to provide the customer conveniences are as follows:
- At first time, Starbuck opened its first store at airport (very prominent location) for a reason that the consumer can taste the coffee while waiting for flight.
- After that Starbuck went to shopping mall to give enjoyment to customer while they are shopping, and then force the customer to get the coffee only by a click that means online.
- Starbuck choose the location where it can get the most of the customer and the customer can get Starbuck so it opened its stores near colleges, office and posh area of cities.
3.3 Explain how prices are set to reflect an organization’s objectives and market conditions
Most of the people would say that the prices of a product are set by the manufacturer of the product, but this is not entirely true. It is really the customer and the competition in the market which sets the prices of Star Bucks products. Since, Star Bucks is a big brand, it allows company a bit advantage while setting up the price of a particular product. The company could sell a product on the higher price than their competitors are charging for the same product (Hawkins & Mothersbaugh, 2009). The reason again is the brand and the customer’s trust and loyalty to the brand. But it does not mean that company could set the prices much heavy to earn the extra profit. In this case, the customers would like to try the product of other company and if he likes it and the price is very cheaper than the Star Bucks’ product, company will definitely loose the customer. This is why Star Bucks has to be very cautious while setting up the prices of their products. The pricing strategy which Star bucks use in setting up the prices is the premium pricing strategy. In this business strategy , Starbuck set the price of the product high as it is perception of the targeted market that the high price means high value and quality of product. The premium pricing also increases the competitive advantage and brand awareness for the company.
3.4 Illustrate how promotional activity is integrated to achieve marketing objectives
Promotion activities are of great importance for every product in the company, but when it comes to an established brand like Star Bucks, the promotion becomes easier as there are people who already know the brand and when go to a store for shopping, they ask the product by its name. But still, Promotion is required as company keeps launching new products and to make the customers aware of the new product promotion is required. Starbuck cafe is one of those organisations which use the quality of its products as it promotion. Starbuck offers the best quality of product and believe in mouth to mouth publicity. They believe that the best promotion of the product is done by its customers. Even for new country and new stores they never use any international campaign and even construct the store very fast and do the promotion with the help of this store “Starbucks everywhere” (Yu, 2013).
3.5 Analyse the additional elements of the extended marketing mix
The marketing mix is a 7 P’s process:
- Physical environment
The first 4 Ps of marketing are already discussed in the previous sections of the paper and now the additional three will be explained which are People, Process and Physical Evidence.
People: Although the people are not directly involved in the marketing mix, but somehow they affect the marketing process. For example, the employees of Star Bucks represent the brand of the company and wherever they go they leave a trail of the brand. How these employees behave and how the other people, i.e. the customers are affected by their attitude helps the company in marketing.
Process: The process of marketing mix is very critical and it also includes different sub processes. How a strategy of marketing is planned and implemented through a smooth process defines the brand. Not only the process of marketing but also the process of product development, its delivery to the customer also affects Starbuck marketing campaign. As Starbuck cafe is known for its quality of the coffee and the services offered by the staffs. So, Starbuck cafe regular checks the process of how the employees are offering the services.
Physical environment: The physical environment is mainly related to the environment of Starbuck’s stores and outlets. The ambience in which people sit and enjoy the coffee is very important. If a person is able to relax while sipping the coffee, it’s definitely a positive point for the marketing process.
4.1 Plan marketing mixes for two different segments in consumer markets
To introduce a new product into the market is very important to evaluate 7 P’s of marketing. The marketing mix of any product explains the type of product and in which market it should be introduce. Here we will elaborate the marketing mix of two segments (Demographical and geographical segment):
Marketing mix for Demographical segment: main targeted customers for this segment are students, professionals, and planning to target old people too and marketing mix is as follows:
- Product: Starbucks must offer the coffee with low sugar and low calorie for the old people.
- Place: Starbuck need to open stores near collage libraries and church (Graham, 2008).
- Pricing: Pricing for the coffee for young people and old should be low as they have small money to spend.
- Promotions: The promotions of the coffee should be done in the way that it does not impact a wrong impression on the youngster or the older one.
Marketing mix for Geographical segment: in geographical segment, the Starbucks divide the market according to the location, region especially into the countries etc. The marketing mix for this segment is mentioned below:
- Product: the local taste of the location and the region should be preferred by Starbuck as it would be an added advantage for Starbuck as it offers the different flavour in coffee by keeping the same local taste.
- Place: airport and shopping mall and posh area of cities are the best place to market the coffee.
- Pricing: the pricing for this segment could be high as it uses for other countries and regions.
- Promotions: the promotion strategy for the Starbucks might be same as it uses for the other places that is mouth to mouth publicity.
4.2 Illustrate differences in marketing products and services to businesses rather than consumers
For Starbuck, Marketing products to business (B2B) rather than consumers (B2C) is entirely a new thing and most of the process could be differentiated from B2C marketing as per the points given below:
- Business to business marketing needs Starbuck to focus on the pros and cons of the doing business with another company, while in Starbuck to consumer marketing does not have any cons and company gets only benefitted from this type of marketing.
- In Business to business marketing, Starbuck wants to build a long term relationship and an agreement of partnership or franchise is signed by both parties in which the terms and conditions are mentioned which were used in the marketing of the product while in business with consumer for Starbuck, there is no such agreement required.
- When Starbuck goes for business to business marketing, they have to take extra caution while choosing the target business. The marketing people of Starbuck have to make sure that the target company would be able to get profit to the company by further business to consumer marketing.
4.3 Show how and why international marketing differs from domestic marketing
International marketing and domestic marketing have their own different strategies for Starbuck and these strategies could not be used in exchange. The difference between domestic and international marketing is as follows:
- The first and most important factor that Starbuck has to consider of international marketing is the cultural difference among the local people and foreign people. On the basis of the cultural differences both strategies are prepared.
- Domestic marketing is easier than international marketing as Starbuck had to spend lots of money on research of where to open new store in Japan and the local taste of population of Japan.
- For international marketing Starbuck has to hire lots of multi lingual and multi-national employee team who can translate the idea into action on other country and will be aware of rules and ritual of country as in domestic marketing company already aware of the rules, rituals and regulation of country.
- Another difference between the domestic marketing and international marketing is adopting the foreign environment and study the target market (Kotler, 2012). Segmentation of the market is also different in both cases.
- For Starbuck, the level of competition also differs in international marketing and domestic marketing. In the domestic country, the marketing team of Starbuck knows their competitors and always has the advantage of the brand value, but when they go for international marketing; their brand value might not be same as it is in the domestic market. There are always local companies who hold the market and in international market, company has to fetch these customers which are really difficult task. They have to gain the trust of the local people by many ways.
To anticipate the need of the customer the marketer conducts the various types of researches and market analyses and the promotional activity to persuade the clients to buy it. The process of marketing also include the different technique to communicate the product or services to the customer of the targeted market at the best possible price these technique are market analysis, segmentation, consumer behaviour, pricing, promotion, publicity. The main motive behind this entire concept is to satisfy the need and wants of the customer and consumer at the profitable price. To run a business in the new market at different place the organisation examines some factors related to politics, economic, legal, and culture of the new area and make their marketing decision accordingly. Starbuck also go through this environment scanning and take decision to raise the graph of growth chart.
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