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Diploma in Business(Marketing)
Unit Number and Title
Unit 4 Marketing Principles
Most of the companies these days a separate marketing team which looks after all the major marketing activities if the organization. There are a lot of marketing principles which are being taken into consideration before performing any marketing activity by the organizations. The marketing is basically done by the marketing department which mainly coordinates with the sales people of the organization. In the case of Starbucks also the marketing principles are considered effectively and according the company decides its strategies. We will be discussing this in detail in this paper. Along with these we will also be discussing about some of the marketing principles and marketing theories which are being applied on Starbucks and how the company make use of them. Here we will be discussing about the concept and process of marketing. How the marketing concepts are being used by Starbucks. There are various elements of the marketing process.
There are various elements of marketing process of Starbucks. We can go through few of them to understand them in detail. The marketing mix basically includes the four things: 4 Ps i.e. Product, Price, Promotion and Place.
Product: The product of Starbucks includes coffee and the beverages related to coffee and some fast food. Starbucks also have some tea products. Starbucks have also included some of the accessories related to coffee. One of the most famous products of Starbucks is Italian-style espresso beverages.
Price: Starbucks has targeted the customers who are looking for quality products.
Place: Starbucks has a lot of coffee shops around the globe. Some of the places where the company has steeped are Argentina, Singapore, Japan, Australia, Chile, Toronto, Ontario and UK.
Promotion: They use a number of promotional activities to promote their brand which will be discussed later.
There are other marketing principles also which can be used for Starbucks. Next could be the Porters 5 Force model which can be discussed and which will help to understand the strategies of the company for their competitors and threats from other players in the market. The five forces which are there in this model are basically the bargaining power of the suppliers, the bargaining power of the customers, new entrants, substitutes, competitors in the market (Neal, 1999). We can discuss each of them separately. For the threat of new entrants, Starbucks know that the entry to the premium coffee retail sector in not that easy and it requires a lot of resources in terms of money and people. It will be very difficult for any new entrant to survive in a well-established coffee market which is dominated by Starbucks. People who are already very happy with the products of Starbucks from so long would never want to switch to other brands due to lack of trust on new brands as they are spending a good amount of money. So, Starbucks do not have to worry about this marketing force. Another force would be the bargaining power of the buyer. Starbucks have developed a loyal base of customers over the time that are ready to pay premium price for better quality product and services and they do won’t come back to Starbucks to lower down the prices as the product is better than others. Also, those customers do not have other option in the market for such quality product and hence Starbucks do not have toworry about this also. Next we have the bargaining power of the suppliers. Suppliers have strong bargaining power as the entire business depends upon the quality of beans provided by the farmers (Porter, 2008). This is one thing which is has to be taken care by the organization as the suppliers can anytime move to other organizations and they can anytime bargain about the deal between them. Next we have the threat from the substitute products. There are many other brands which supply coffee and there are many other restaurants which are providing similar products. Starbucks have a different customer base altogether who like to spend at Starbucks for the quality of product which is supplied to the customers. Starbucks also have to think about the threat of already established rivals. There are many brands which are picking up very quickly like the McDonald’s Mccafe, Dunkin Donuts and Café Coffee Day. These are the major players which are giving touch competition to Starbucks. Starbucks provide better quality and ambience to the customers as compared to these brands and also Starbucks has its set of loyal customers.
Organisations do research to identify the need and want of customers and produce accordingly known as market orientation. They put their emphasis on fulfilling the need and wants of customer and produce goods accordingly so that customers get satisfied. The main motive of these organisations is to make customer satisfy, earning profit is their second motive. With the market orientation approach business get positive impact on their overall business. With the help of the market orientation strategy Starbucks indentifies the local taste and constantly add bit of their unique flavour to the final product.
There are a lot of benefits and costs of a marketing orientation for Starbucks. The marketing orientation is described as different departments of an organization indulging in the activities which will help to understand the customers in a better way. By understanding the customer, it mean like to know the current and future needs of the customers and what are the factors which affect them. After they understand this, the next step would be to share this knowledge across the organization especially those sections of the organization who are working closely to meet the needs of the customers (Barney, 1991). It is sometimes debatable that the social and economic justification of what the customer desire and at the same time meeting the goals of the organization is difficult and does not depend on aggressive selling by the sales people but it all in all depends on the decision of the customer to buy a product.
There are many benefits of a marketing orientation for Starbucks. Some of the benefits are with the help of the marketing orientation; they are able to build a strong brand name as well as a strong customer base that are loyal to the company. Through marketing Starbucks have managed build a brand which is known for its quality products and services all over the world. They have been able to portray the image of providing a nice experience to the customer along with the beverages by maintaining a good atmosphere in the store with good ambience.
Costs:Doing market research results in huge expenditure. It requires lots of time as well as money and other resources. Other than market research there are few more activities which required investment such as: training and development programs for their employees, modifying taste, comfortable ambience, etc. Starbucks stop selling their low demanded products to minimize their cost. For example: At the time of Christmas Starbucks provide coffees and teas in red cups based on Christmas theme. It attracts the customers. This little innovation costs huge amount for Starbucks
There are certain objectives of Starbucks that they have listed down for their organization. Few of them are like the brand should be known all over the world and it should have presence in all over the world. It will cost the company to set up in many countries where it is not present yet. The political system of some of the countries is very rigid and can be a difficulty for the brand. Another objective of the brand is to maintain its quality and give superior products to its customers. This will cost the company the skilled labourers and standards to be followed everywhere. This requires that the company hire high skilled resources and the training of the employees should be done in regular intervals.
There are several micro and macro environmental factors which influence the marketing decisions for Starbucks. Now there are many environmental factors which will influence this.
Political: Political activities of different countries highly influenced the Starbucks business. For Starbucks country having stable politics is best suitable for business to operate their day to day activities because company doesn’t review and follow the policies which can be changed in case of political instability. For example: if the tax policies of government have changed of such places form where Starbucks gets their coffee beans, it would directly affect the Starbucks business. They have to pay more to their suppliers for coffee beans due to increase in tax rates.
Economic: To start and run the business in an effective manner Starbucks search such countries having developing and stable economy. To attract the customers Starbucks provide variety of products. Starbucks products having high prices so that growing or develop economy play an important role in their success. If a country having poor economy and their peoples are not able to fulfil their basic needs then in this situation how they can purchase the coffee over their basic needs.
Social: Starbucks has to analyze the external environment on various factors like: type of population, level of education, family size, work environment, etc. before starting the business. The most suitable area for Starbucks to start their business is young, educated and friendly population.
Technological: Technological factor is dynamic in nature and affects the every business. It keeps on changing in every few months. Starbucks has to update their technology so that they can provide better services and products to their customers. With the help of technology Starbucks can prepare their products fast and easy due to this customers get their product on time.
Environmental: For Starbucks it is necessary to follow the environmental laws and follow their activities according to the set policies. Activities like disposing the wastes they have to follow the disposal methods set by the government. Natural calamities are the part of environmental factors. Due to any natural calamity like heavy rain, flood, etc. which can influence the decision making of Starbucks. These activities directly hit the supplies of Starbucks and without availability of raw material (Coffee beans). Without raw material Starbucks is not able to serve even a single product.
Legal: Starbucks has to follow the laws, rules and regulations of the countries where they run their business which is set by their government. Different countries having different laws, rules and regulations. Starbucks have to follow them to avoid any consequences.
There are various stakeholders which can influence the marketing decision of Starbuck such as:
Suppliers: Suppliers are those parties who can supply the coffee beans to the Starbucks. If they charge high rates for coffee beans then it is very difficult for Starbucks to maintain reasonable costs for their products. Suppliers influence the marketing decisions of the Starbucks.
Competitors: There are many competitors arises in the today’s market like Cafe Coffee Day, Costa Coffee, etc. These can also provide variety of products to attract the customer. Due to these factors they can influence Starbucks marketing decisions.
Customers: Customers influence the marketing decisions of Starbucks in various ways like they demand for new product with unique taste at reasonable price, healthy products, etc.
Employees: Employees are the one who can interact with customers on daily basis, so it is very necessary for Starbucks to make them trained, so that they can easily and effectively interact with customers. With the help of rewards and recognition Starbucks can motivate their employee, so that they can perform their activities effectively.
Segmentation is one of the most important marketing concepts which are being used by almost all business in the market. Segmentation is basically the task of dividing the entire market into different segments according to some similar characteristics of the customers. There is similarity in the customers of a particular segment. There can be different basis which can be used to divide the market into segments. One of the segmentation criteria can be the age group, other segmentation criteria could be the location of the customers, etc. These ways there can be other segmentation criteria also like sex, lifestyle, behaviour, occupation, attitude, customer preferences, etc. Depending on these bases there are several segmentations which are possible. Some of them are Geographic segmentation i.e. where segments are created based ion the location of the customers. With the help of the Geographic segmentation Starbucks has to analyze the suitable location and then segment the market into countries, cities, type of population, etc. of the target market. Starbucks start their business in such location which has populated with educated peoples having age between 15 to 45 years. For each segment they have variety of healthy products, so that they can attract the peoples (Clarke, 2005).
We have Demographic where segmentation is done based on age group of customers. Starbucks segment their target on the basis of age. As per this segmentation area having population between 15 to 45 years is best suitable place for their business. Then we have Behavioural segmentation where segmentation is done on the basis of lifestyle of people. Lifestyle of people impacts a lot to the business of Starbucks because if the lifestyle of peoples is not so good then Starbucks can’t attract the population towards their product. Next we have Psychographic segmentation where segmentation is done based on the attitude of the potential customers. For Starbucks also this segmentation can be used to divide the market in different segments. Starbucks can use geographic segmentation for the major cities in which they are operating. They can also use the demographic segmentation for their different products. If we take particular examples then the sugar free products are preferred by people who are sugar patients or who are health conscious and basically they are in the age group of 30-45. There are many products which are chocolate enriched and sugar enriched and these are preferred by the young generation in the age group 15-25. This way demographic segmentation can be used here.
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Segmentation helps in dividing the target market in various groups so that they can easily prepare marketing strategy. With the help of market segmentation they target the large group and provide them that product. For example: In the target market Starbucks identifies that there is majority of such peoples having age of 35 to 45 years then Starbucks has to provide them healthy products like coffee with no-fat milk. Market segmentation helps in making effective marketing strategies as per the type of population, choices, etc.
Targeting is yet another one of the most important marketing concept and this comes after the segmentation has been done. So as discussed after the segmentation is done the market is divided into different segments after by targeting we mean to target the desires segments out of the different segments which we get after segmentation. So this process is in in succession to the segmentation process. For Starbucks also this is very helpful as after the segmentation is done by the company they can focus to target that segment, which are potentially their future and the present customers. After selecting the segments we need to have separate target strategies for each segment. We need to find out the preferences of customers within a segment and on the basis of that distribution and promotional strategies are developed. The next step which is in succession to position in the marketing concepts is positioning their product to the target market. As per the market segmentation analysis Starbucks get to know that their product is highly preferred by the age group of 15-45 years. With the motive of providing healthy products Starbucks can provide healthy and sugar free drinks for their customers. These types of products make them healthier and satisfied with this it will attract new customers. Due to high level of satisfaction customers become loyal towards company and unknowingly they do mouth publicity for Starbucks. In today’s competitive market mouth publicity is the best and effective publicity method.
The buyer behaviour affects the marketing activities majorly in different buying situations. This is because the marketing activity has to be decided depending on the buying situations and the behaviour of the customers. The marketing activities are planned in such a way that it incorporate the behaviour of the customers and if proved to be effective to attract the customers. Buyer behaviour in marketing research defined as the way the customer makes the decision to buy any product or service. This study of the customer buying behaviour will be very helpful to manage the marketing activities in such a way that it will help them to make the buying decision. The customer buying behaviour help to understand how the customer make the decision to buy anything and there are many steps which are included in this decision making process. This starts with identifying the problem for which the product or service would be needed. Then customer search to find the solution of that problem. Then the customer lists a set of solution to solve the problem and then evaluate the alternatives in different parameters. Lastly they make the purchase decision by selecting the best alternative. These can be studied closely to make the marketing activities effective and help the customers to identify their problems and then convince that the product or service which is offered is the best solution of their problem. If we consider the case of the Starbucks, then there are many customers who prefer to have quality products, the marketing activity for those customers would be to convince them that Starbucks provide the best quality coffee (Donaldson, 1995). Then there are economic customers that would like to buy something if there are some offers, for them the marketing activity would be to provide discounts and loyalty coupons, etc. Similarly there can be many other buying situations and buying behaviour of the customers and the marketing activity has to be designed accordingly. For example: Starbucks provide variety of healthy products like coffee using low fat milk for elder’s etc. their prices are high so that it is depend on customers to make purchases or not.
To attract the people Starbucks provide attractive ambience having facility of Wi-Fi, they also provide fast delivery of orders so that customers don’t wait for long.
Positioning: It is a market strategy through which a Organisation can aim to make their brand capable to get an distinct position in the market as compare to their competitors.
Positioning is basically defined as the way how the product is being placed in front of the customer. This is how the value of the product is being portrayed in front of the customers. Starbucks need to position its products in such a way that customer should be able to connect itself with the product and customer should find it worthy to buy the product at the given price. Suppose there a new beverage in the coffee segment which would be the Strawberry Frappuccino. The positioning strategy should for this product should be in such a way that customers like the product and they should feel the need of the product. For example: local celebrity can be used to promote the product in the market which can create the need and demand in the target market. They should identify themselves with the product. They can put forward the taste of the product as the selling point of the product as well as the choice of the youngsters. Style should also be linked with this product and maybe a celebrity can endorse this drink to make it more popular and to add a style quotient.
There are also a lot of benefits and advantages of the marketing at Starbucks. There are marketing concepts like STP i.e. Segmentation, Targeting and Positioning which can be used on Starbucks to understand the strategies of the organization in a better way. Also there are a lot of micro and macro environmental factors which influence marketing which will be discussed in this paper. In this paper we will be discussing about the SWOT analysis on Starbucks as well as the PESTEL analysis. These are the most common marketing theories which are used on the organization to understand the organizations in a better way. Marketing principles can include a lot of things like buyer behaviour segmentation, promotion, targeting, positioning, advertising, promotion, international marketing, etc. All these should be used in the best possible manner so that it proves to be beneficial for the organisation.
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