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Developing Marketing Strategy For Starbucks

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Question:

Discuss about the Developing Marketing Strategy for Starbucks.
 
 

Answer:

Introduction

The report would discuss the marketing strategy of Starbucks through the analysis of 5Cs of the company. The 5Cs would comprise of Company, Customer, Competitor, Collaborator and Customer Requirements. The report would further discuss how Starbucks has maintained its brand image in the changing business environment through its adaptability and innovation. The report would develop a marketing strategy to enter a new potential market with its new product, value proposition and a brand positioning statement. Finally, the report would develop marketing tactics for Starbucks through 7Ps of marketing mix.

Starbucks’ Company Profile

Starbucks is a premier coffee company with its coffeehouse chain all over the world. It is a US based company with its operating stores located in US, China, Canada, Japan, South Korea, UK, Australia, India etc. Starbucks has been able attract its customers through its premium quality coffee, affordable and luxurious infrastructure, customer engagement and innovation and adaptability (Starbucks, 2016).

Starbucks mission is “to inspire and nurture the human spirit – one person, one cup and one neighborhood at a time.” (Starbucks, 2016). With its every cup of coffee, it thrives to bring an exceptional experience to life (Starbucks Australia, 2016). The company assures that it delivers the best quality of coffee by maintaining the sourcing of coffee beans. The mission clearly signifies that the company believes in creating a great experience through its premium quality services and luxurious ambience (Reinhard, 2016). Starbucks effectively uses relationship marketing through social media and Starbucks idea website. It employs 5R marketing strategy approach through social media marketing for continuous customer engagement. Recognize, Relevant Offer, Reveal, Redeem and Reward is the 5R strategy approach which helps in attracting its customer through exciting and amazing offers (Simon, 2009).

Starbucks provides a unique Starbucks Customer Experience through its great execution of services and luxurious infrastructure (Starbucks, 2016). Since its inception, it has been evolving its marketing strategies to develop a personal relationship with its customers through its rich café experience (Yeshin, 2012).

Initially, Starbucks started its business operations through selling coffee beans and equipments which was evolved with the idea to sell coffee and espresso drinks. The products of Starbucks include different flavors of coffee and tea such as brewed coffee, caffe latte, cappuccino, caffe misto, chai tea, tea latte, English breakfast tea etc. Its iced beverages menu includes iced Americano, iced caffé mocha etc. Apart from beverages it also serves fresh food such as cakes and pastries, sandwiches etc (Schultz, 2011).

 


Coffee industry is one of the growing industries in Australia and has grown over the past five years. There are many players in the industry such as Dunkin Donuts, Seattle’s Best, Folgers etc. Starbucks has shown its authority over the other players through its premium pricing policy (Schultz, 2012).

Analysis of 5Cs of Starbucks

Strength of Starbucks

The strength of Starbucks is that it has built its strong brand name over the years and has been able to maintain its loyal customers through that. The company has created its extensive global supply chain all over the world though it’s increasing loyal customers. In spite of company’s increasing prices, it has been able to attract customers from all over the world. Apart from that it is also able to maintain its business through diversification and acquiring subsidiaries. Its innovative and adaptive marketing strategy allows it to engage its customers (Yeshin, 2012).

The key resources of Starbucks are manpower and retail store.

Manpower: Starbucks has very well employed its manpower by accumulating well trained employees in the company. Every single employee from the level of front staff service to the manager level staff is trained (Schultz, 2012). 

Retail Store: Starbucks has its retail stores operating all over the world. The strategic location for a retail store is an asset for the company which has allowed to company to dominate over the coffee industry (Percy, 2008).

Apart from the above resources, company’s brand name adds to its value in the market and has allowed building a sustainable business model. Its unique Starbucks experience concept combined with its innovative marketing strategies such as Starbucks idea has maintained its brand equity through continuous customer engagement (Percy, 2008).

Weakness

Starbucks employs premium pricing policy which only attracts high class consumers and the remaining low class consumers which comprises of a large population is left out. The products of Starbucks are generalized which does not allow market penetration. It does not use the concept of the country or the city to attract the customer rather employs a generalized corporate concept which can be easily copied by other organizations (Simon, 2009).

Opportunities

Starbucks has its coffee chain across the globe but still it has scope for further expansion in Asia, Africa and the Middle East. Through product diversification and adapting the cultural values of the respective region, it can expand itself in the location of Asia which has great future prospect in terms of company’s growth. This would give company a competitive edge over its competitors. Further, it has scope for partnering with other firms or making joint alliances is also a considerable option (Simon, 2009).

Threats

Starbucks’ premium policy allow to serve only high class consumers, the remaining low class are served by its competitors such as Dunkin’ Donuts, McDonald etc. Starbucks faces tough competition from its competitors and finds it extremely challenging to attract low class consumers (Simon, 2009).

 

Customer Analysis

Starbucks key customers are high class consumers who are not price sensitive and are not affected by the price hikes of the Starbucks. During a recession or severe crises, they do not bother to pay high price for a coffee. They rather find it very affordable due to its luxurious environment and infrastructure (Conlon, 2015).
Though, Starbucks has also started serving low class consumers through its low priced products.

Collaborators

Starbucks sources its raw material from suppliers and farmers who grow and produce these products. This is the best method of sourcing because it maintains the quality of the product and maintain long term sustainability of the premium products that Starbucks offers. The Arabica coffee, cocoa, tea or other manufactured goods are all sourced from these suppliers (Starbucks Australia, 2016).

Starbucks has designed its multiple distribution networks very strategically in order to reach a wider market. Starbucks has its own retail stores all across the globe through which the company imports and processes coffee and sells it under its own brand name. Starbucks also supplies its product to supermarket and groceries. Apart from that its products are supplied to hotels, airlines and coffee suppliers (Conlon, 2015).

Competitors

Its competitors are Dunkin’ Donuts, McDonalds, Costa Express. Starbucks faces tough competition from them because of their low prices. They are able to attract low class consumer which comprises of a large population.

The coffee industry has low market entry barriers and thus, there is always a threat of new entrants to the industry. Though the probability of new entrants is high, Starbucks would not be affected by them because of its strong brand name in the coffee industry (Groth & Lubin, 2011).

PEST Analysis

Political Factors

The political factors include adhering to the laws and regulations of the country in terms of sourcing raw materials so as to not violate any social or environmental norm. The other political factors can involve tax policy and employment laws of the country (Schultz, 2012).

Economical Factors

The great recession is the key economic factor and has declined the sales of Starbucks because of the customer’s switching to other less expensive options. Apart from that the labor and operational costs are also rising continuously. Other economic factors could be taxation, exchange rates of local currency and the environment of the country (Groth & Lubin, 2011).

Socio-Cultural Factors

The socio-cultural factors refer to the changing lifestyles of the people and their changing buying behavior. Starbucks would have to degrade its quality in order offer less expensive products to the customers. Then there are green and ethical chic customers and Starbucks would have to make sure that its products align with the customer requirement (Sokolowski, 2013).

 


Technological Factors

Starbucks’ adaptability approach has allowed it to enjoy the benefits of emerging technologies such as social media, smart phones, iphones etc. It internet facilities in the retail stores gives it an edge over the competitors. The other technological factors are emerging innovative technology, agricultural development and developments in the biotechnological fields (Schultz, 2012).

Legal Factors

The legal factors could regulations for product safety and employment regulations. Product safety regulations by the government are beneficial for Starbucks as it would help it to maintain its product quality. On the other hand employment regulations could pose some restrictions on Starbucks’ access to labor market.

Environmental Factors

Environmental factors are maintaining a sustainable framework, taking responsibility for sourcing of the material and promoting products which are eco friendly. All of them are beneficial for Starbucks and would help to achieve its goals and objectives

Customer’s Requirement Analysis

Starbucks collects the information regarding the customer requirement from various sources and Starbucks idea is one such source. Starbucks idea is a website which allows to chat the customer with company employees. It is an open platform where a customer can share what changes or improvement could be carried out in the company to ensure customer delight (Sokolowski, 2013).

Apart from this, it also actively uses social media network to stay connected to its customer through facebook, google plus, twitter etc. Apart from that a customer can also leave a note in the retail store of Starbucks to share his personal experience with the Starbucks. This way Starbucks extensively uses market research to ensure that customer requirement are fulfilled (Sokolowski, 2013).

Competitors Analysis

The key competitors of Starbucks are Dunkin Donuts and McDonalds who are posing threat to the company. The company has a specific department for gathering the market data of its competitors. The company collects data through its customers and distributors who gives an idea about the performance of other players in the industry, published annual reports, industry reports etc (Groth & Lubin, 2011).

Analyzing the Changing Business Context

Starbucks has been very responsive to the changing business environment through its adaptability and innovative approach. The company makes extensive use of social media network, dedicated website and customer feedback to stay updated with the current business trends and requirements of the customers. Its presence on Facebook, Twitter and other social media network has allowed interaction with the customers and receive a feedback directly from the customer. Its dedicated Starbucks idea website ensures that it meets the needs and requirement of the customer through feedback and suggestions from their end (Reid & Plank, 2004).

Since its inception it has evolved with its innovative marketing strategies such as the concept of 5Rs which excites customer through attractive offers by directly reaching their email boxes (Reid & Plank, 2004).

Collaborator’s Role

Starbucks uses ethical sourcing to obtain its raw materials such as tea, coffee and employs responsible farmer purchasing practices. This allows it to maintain its premium quality of its products and build a long term supply of the premium products. The company critically evaluates the quality of the material through its third party verification organizations. The company continuously engages with its stakeholders, suppliers and farmers to maintain the premium quality of the product and improve its practices. The company continuously seeks feedback and responses from its suppliers and distributors for the market research (Floor, 2006).

The retail stores of Starbucks are one of the key sources of distribution and take feedback from the customers regarding their experience with the Starbucks. The company also gathers information regarding the same from the hotels and airlines where it supplies it products.

Developing Marketing Strategy

Starbucks has its operational stores across the globe but still has a scope for expansion in the Asian market. The Asian market has a growing economy which would help the company to maximize its profits. India is the potential market in Asia with its huge population size and great demand for the product. Though there are few retail stores in India as well but they all are franchise stores. India’s socio cultural factors would greatly support for a complete set up of the company. Low labor cost and availability of resources are the great benefits of the market.  

Starbucks can target the higher middle class segment which comprises of the major population in India. Starbucks would have to launch a new product with low price in order to compete with other brands such as Dunkin Donuts, CCD, Costa, Barista etc. The target market would comprise of working class corporate who are looking for a great coffee along with luxurious and affordable infrastructure. The corporate professionals staying away from their families look for a place to hang out with their friends and colleagues and even families sometimes (McDonald, 2007).

This new product would be especially designed to meet the requirements of the customers. Low prices would act as a value proposition for the customers because they would get a unique Starbucks experience for affordable prices.

Target Market: Corporate executives who work in multinational companies and are currently the customers of Dunkin Donuts and Costa and Barista. They look for affordable and well maintained cafes and restaurants to have a quality time with their friends and colleagues. This way they can have their business meetings at Starbucks at very affordable prices (McDonald, 2007).

 


Value Proposition: Offering Starbucks premium quality at affordable prices.  

Positioning Statement: ‘Corporate executives can now enjoy a cup of Starbucks coffee everyday with their friends and colleagues at affordable prices. Come at Starbucks to spend a valuable time with your friends and colleagues (Floor, 2006).

Developing Marketing Tactics through Marketing Mix

Product: An affordable Starbucks coffee would attract huge number of customer executives. They would prefer Starbucks for business meetings above any other brand because of its strong brand name and affordable prices would be a value proposition for them.

Place: Starbucks can open its stores near the offices of multinational companies where the corporate executives find it easy to reach (Kubicki, 2015).

Price: The prices of Starbucks would be brought down so as to compete with its competitors and provide an affordable coffee to its target market of corporate executives.  

Promotion: Starbucks can promote through Social Media and Email Marketing which are strong tools of marketing. It can send an email to all the executives to give them great deals and offers for their business meetings at Starbucks. Using 5Rs strategy, it can promote its product through email marketing (Blakeman, 2014).

People: Starbucks can easily hire front office staff and employees but would have to maintain its brand image through the right people because the front office staff would be responsible for carrying out great services. The staff should be well mannered and trained so as to attend the customers tactfully (Ang, 2014).

Processes: Starbucks would have to ensure its great service execution that it has been maintaining over a period of time. It would have to deliver great services so as to maintain its unique Starbucks experience (Kubicki, 2015).

Physical Evidence: Starbucks would have to ensure its great infrastructure so as to cater the corporate executives. Well maintained infrastructure would attract the executives for their business meetings and quality time with friends (Blakeman, 2014).

Conclusion

The report has thus, discussed and analyzed the marketing strategy of Starbucks and how it has positioned itself over the years. The report has thoroughly discussed and analyzed the 5Cs of the company and identified the strengths, weaknesses, threats and opportunities of the company. PEST analysis helps to evaluate the external factors impacting the company. The report then develops a marketing strategy for Starbucks through analyzing India as its potential target market because of its huge population and growing economy. The discussion further extends to value proposition of an affordable priced product of the Starbucks with corporate executives as it target. It further discusses the 7Ps of marketing mix to develop marketing tactics for the proposed target market. Starbucks can attract its target audience by opening its stores nearby the corporate offices so as to attract the target audience for business meetings and quality time with friends.

 

References

Ang, L. (2014). Integrated Marketing Communications: A focus on new technologies and advanced theories. Melbourne: Cambridge University Press.

Blakeman, R. (2014). Integrated Marketing Communication: Creative Strategy from Idea to Implementation. US: Rowman & Littlefield.

Clifton, R. (2009). Brands and Branding. UK: Profile Books Ltd.

Conlon, J. (2015). 5 Things I Learned Building The Starbucks Brand. Branding Strategy Insider. Available at: https://www.brandingstrategyinsider.com/2015/10/5-things-i-learned-building-the-starbucks-brand.html#.WFikwVV97IU [Accessed 19 December 2016]

East, R., Singh, J., Wright, M., & Vanhuele, M. (2016). Consumer Behaviour: Applications in Marketing. California: SAGE.

Floor, K. (2006). Branding a Store: How to Build Successful Retail Brands in a Changing Marketplace. London: Kogan Page Publishers.

Groth, A & Lubin, G. (2011). 11 Things Starbucks Does Better Than Almost Any Competitor. Business Insider. Available at: https://www.businessinsider.com/starbucks-does-better-2011-7?IR=T [Accessed 19 December 2016]

Kubicki, M. (2015). The Marketing Mix: Master the 4 Ps of marketing. US: 50 Minutes.

Luther, W.M. (2011). The Marketing Plan: How to Prepare and Implement it. New York: AMACOM Div American Mgmt Assn.

McDonald, M. (2007). Marketing Plans: How to Prepare Them, how to Use Them. US: Butterworth-Heinemann.

Percy, L. (2008). Strategic Integrated Marketing Communication: Theory and Practice. US: Routledge.

Reid, D.A., & Plank, R.E. (2004). Fundamentals of Business Marketing Research. New York: Psychology Press.

Reinhard, K. (2016). Differentiation as the key to success. A marketing plan for Starbucks. Munich: GRIN Verlag.

Schindler, R.M., & Schindler, R. (2011). Pricing Strategies: A Marketing Approach. California: SAGE.

Schultz, H. (2011). Onward: How Starbucks Fought For Its Life without Losing Its Soul. UK: John Wiley and Sons Ltd Publication.

Schultz, H. (2012). Pour Your Heart Into It: How Starbucks Built a Company One Cup at a Time. New York: Hachette Books.

Shimp, T.A. (2008). Advertising Promotion and Other Aspects of Integrated Marketing Communications. US: Cengage Learning.

Simon, B. (2009). Everything but the Coffee: Learning about America from Starbucks. London: University of California Press Ltd.

Sokolowski, O. (2013). Influences and Attitudes Within Consumer Behaviour Process. Germany: GRIN Verlag.

Wilson, J.S., & Blumenthal, I. (2008). Managing Brand You: 7 Steps to Creating Your Most Successful Self. US: AMACOM Div American Mgmt Assn.

Yeshin, T. (2012). Integrated Marketing Communications. US: Routledge.

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