****Chapter 3:Marketing statergies****
:Products of company
Starbucks is primarily known for selling coffee, but also sells other hot and cold
beverages, pastries, sandwiches and other snacks.
A "Skinny" line of drinks rolled out in 2008, offering lower-calorie and sugar-free
versions of the company's offered drinks which use skim milk and are sweetened by a
choice of artificial sweetener (such as Sweet'N Low, Splenda, Equal, or one of the
company's sugar-free syrup flavors. Starbucks stopped using milk originating from
rBGH-treated cows in 2007.[
In June 2009, the company announced that it would be overhauling its menu and selling
salads and baked goods without high-fructose corn syrup or artificial ingredients. This
move was expected to attract health- and cost-conscious consumers and will not affect
Starbucks introduced a new line of instant coffee packets, called VIA "Ready Brew", in
March 2009. It was first unveiled in New York City with subsequent testing of the
product also in Seattle, Chicago and London. The first two VIA flavors include Italian
Roast and Colombia, which were then rolled out in October 2009, across the U.S. and
Canada with Starbucks stores promoting the product with a blind "taste challenge" of
the instant versus fresh roast. Many people could not tell the difference between the
instant and fresh brewed coffee. Some analysts theorized that by introducing instant
coffee, Starbucks would devalue its own brand.
Starbucks began selling beer and wine at at some US stores in 2010. As of April 2012,
it is available at seven locations and others have applied for licenses.
In 2011, Starbucks introduced its largest cup size, the Trenta, which can hold 31
ounces. In September 2012, Starbucks announced the Verismo, a consumer-grade
single-serve coffee machine that uses sealed plastic cups of coffee grounds, and a "milk
pod" for lattes.
On November 10, 2011, Starbucks Corporation announced that it had bought juice
company Evolution Fresh for $30 million in cash and plans to start a chain of juice bars
starting in around middle of 2012, venturing into territory staked out by Jamba Inc. Its
first store released in San Bernardino, California and plans for a store in San Francisco
will be launched in early 2013.
In 2012, Starbucks began selling a line of iced refresher beverages in its stores which
contain an extract from green arabica coffee beans. The beverages are fruit flavored
and contain caffeine but, according to the company, "with none of the coffee flavor".
Starbucks' green coffee extraction process involves soaking the beans in water.
Starbucks entered the tea business in 1999 when it acquired the Tazo brand for US$8.1
In late 2012, Starbucks paid US$620 million to buy Teavana.
November 2012, there is no intention of marketing Starbucks' products in Teavana
stores, though the acquisition will allow the expansion of Teavana beyond its current
main footprint in shopping malls.
Kevin Knox, who was in charge of coffee quality at Starbucks from 1987 to 1993,
recalled on his blog in 2010 how George Howell, coffee veteran and founder of the Cup
of Excellence, had been appalled at the dark roasted beans that Starbucks was selling
Talking to the New York Times in 2008, Howell stated his opinion that the
dark roast used by Starbucks does not deepen the flavor of coffee, but instead can
destroy purported nuances of flavor.
The March 2007 issue of Consumer Reports
compared American fast-food chain coffees and ranked Starbucks behind McDonalds's
Premium Roast. The magazine called Starbucks coffee "strong, but burnt and bitter
enough to make your eyes water instead of open"
4Ps Business & Marketing, in a strategic alliance
with the new york times service, presents a
column by howard Schultz, Chairman, President
and CEO of Starbucks corporation
Great global brands do not succeed across cultures
because they are cool or trendy. They succeed
because they remain relevant to people inside as well
as outside the company – regardless of where they
were founded or where in the world they operate.
That‟s why, as an organisation grows beyond its home
borders, its leaders must be sure to export the
company‟s culture as well as its products.
This has been Starbucks‟ strength as well as our greatest challenge since we first
decided to open a store outside North America in 1996. Back then, none of our
senior leaders had any international experience. In fact, we hired a consultant who
came in and essentially told us that our plan to expand into Japan wasn‟t going to
work. Our no-smoking policy for our stores would be a disaster. Japanese
customers wouldn‟t walk around the streets with coffee in a paper cup. But our
conviction that we had something universal to offer customers in addition to our
coffee – a place to personally connect with others – pushed us forward, and we
opened our first store in Tokyo.
Fifty-four countries later, our conviction has not wavered, yet more than at any
other time in our history, we are asking ourselves how to remain relevant as times
For our coffee and our food, we have learned that each should reflect regional
tastes and traditions but not deviate too far from our core. A vanilla latte in Zurich
should taste the same as one in Chicago. In China, Starbucks stores would
probably not sell noodles for breakfast; but we would – and do – include popular
Chinese flavours such as sesame and green tea in our Frappuccinos. People don‟t
want from us what they can get down the block, but they appreciate our efforts to
put a local twist on a muffin.
Even more important than our products, however, are the company‟s guiding
principles of respect and dignity, which fuel the personal connections we try to
make with customers.
Instilling such internal values beyond a company‟s home country is crucial, but it
does not come with a handbook of instructions. It‟s a subtle task, and there are
concrete steps we‟ve learned along the way that hold true to any company. These
include dedicating enough resources from the outset to put the right culture in
place, and launching a new market under the guidance of long-term employees to
ensure that like-minded talent is hired. Local leaders can then model the behaviour
they want their people to emulate, celebrate behaviours they want to perpetuate
and listen to what is important to the people they hire.
At Starbucks, spreading our values is critical because
it allows our partners (our terms for employees) to
deliver our competitive advantage in every market in
which we operate.
Let me be more specific. Starbucks‟ value to its
customers has never been just about great coffee but
instead, it has been about delivering a great
experience AROUND our coffee. In our stores this comes across in many ways;
mainly the familiar relationship that develops when a barista gets to know her
customers by name and remembers their favourite drinks, where they work or their
But a barista won‟t even try to connect with customers unless she first feels
positively connected to the organisation. The kind of employee connection I‟m
referring to does not come about merely by providing competitive pay and benefits.
This engagement results from having leaders at every level whose actions reflect
our principles in the daily decisions they make, how they interact with one another
and in the unique experiences they create.
Leadership that fosters authentic connections takes other forms as well. Managers
can get to know their employees‟ career goals and mentor them. They can involve
people in decision-making, give them the permission and resources to make their
own decisions and always communicate with transparency. Showing sincere
appreciation, even a „thank you‟, is also tremendously important.
Recently, I attended an event in Shanghai, China, where I witnessed a seemingly
small gesture that helps to illustrate my larger point.
During a dinner for about 700 Starbucks baristas, store managers and executives,
a partner, Marco, was named Manager of the Year. Marco had come from a rural
village and, as he stood on stage in front of his peers, someone asked what he
would say to his parents back home about receiving the award. As he spoke, he
was asked to close his eyes.
Then a door opened and a man and a woman walked in, toward the stage. Our
team in China had flown Marco‟s parents (who had never been on a plane before)
to the meeting to surprise their son. Emotion rippled through the room, and it was
an incredibly touching moment.
For me, this family reunion was significant not just because of what it meant to
Marco. Imagine the domino effect of emotional capital that will build as the
meeting‟s attendees go back to work and share the story with their co-workers,
customers and friends throughout the region, or even the world. The emotional
power of Marco‟s reunion with his parents is universally relevant.
I truly believe that any company that effectively fosters a culture where a sense of
connection exists INSIDE the company also has the potential to bolster its
competitive advantage with customers on any continent. The fact that Marco‟s
reunion took place half a world away from our home office in Seattle gives me
confidence that we are effectively exporting our culture, as well as our coffee.
No company can succeed without differentiated, relevant products and services.
But I have long believed that a company cannot exceed the expectations of its
customers without first exceeding the expectations of its own people – in any
country. Organisations that translate universally relevant values inside and outside
the company – to employees as well as customers – are the ones that have what it
takes to endure.
:STP (Segmentation, Targeting and Positioning)
Marketing segmentation helps marketers to group their customers and identify the
specific needs for each group more precisely. After doing this, resources can be
allocated accurately and the marketing mix can be adjusted perfectly.
Starbucks uses a combined strategy to
break down their own market from others in order to sell their products more effectively.
The coffee company mainly uses demographic - and psycho-graphic
segmentation. Starbucks focuses mainly on married,well educated men and women
with children in the age of 40. Therefore, the coffee house created a mature and high
prestige image and also provides beverages and food that appeal to children in order to
appeal to their ideal segment. The actual segment turned out to be younger and less
educated than expected.The main segment represents women in the age of 18 - 43,
42% of them have children, 33% of them are college graduates and 54 % of them are
married. However, Starbucks target market also have common psycho-
graphical characteristic. Main Starbucks consumer are college graduates with high
income who like to socialize and share a neighbor hood. The coffee house locates its
retail stores in central spots of a neighbor hood such as train stations because these
spots are easy to reach for everybody in a community.
Also, Starbucks practices a concentrated targeting strategy by focusing only one
segment which is the gourmet coffee drinker. This is how Starbucks defines its niche
and label themselves as a high quality product. After establishing their niche, Starbucks
continually expanses its product line to keep its only segment excited.
Who Is Starbucks' Target Audience?
by Renee O'Farrell, Demand Media
Starbucks owes its success to a well-defined target audience.
Starbucks holds around 33 percent of the market share for coffee in the U.S. It sells
almost as much coffee as do fast food and convenience stores combined, even though
it the bulk of its consumers are in cities or upscale suburban areas. Starbucks has been
able to gain such a large share of the market by catering specifically to a well-defined
Starbucks‟ primary target market is men and women aged 25 to 40. They account for
almost half (49 percent) of its total business. Starbucks‟ appeal to this consumer age
group through hip, contemporary design that is consistent in its advertising and decor,
and working to keep its products current as status symbols. Customers tend to be
urbanites with relatively high income, professional careers and a focus on social
welfare. This target audience grows at a rate of 3 percent annually.
Young adults, aged 18 to 24, total 40 percent of Starbucks‟ sales. Starbucks positions
itself as a place college students can hang out, study, write term papers and meet
people. Starbucks appeals to this consumer directly through introducing technology as
soon as it comes available, focusing on social networking and actively cultivating a
“cool” image. The young adult audience grows 4.6 percent each year.
Kids and Teens
Kids and teens are also a large part of Starbucks‟ target audience. Together, customers
age 13 to 17 account for just 2 percent of Starbucks‟ sales, but most items for kids are
purchased by the parents. Whether the focus is on the steamed milk that Starbucks‟
baristas refer to as “babyccinos” or the sugary, caffeinated, whipped cream topped
coffee drinks that are so popular with teenagers, kids and teens form a large part of
Starbucks business. Kids go there with their parents; both mother and child leave with
cup in hand. Teens meanwhile use Starbucks as a place to hang out with friends or
study. Starbucks may not cater directly to kids (and risk criticism about the high calorie
and caffeine content of some of its drinks) but it does make its products kid-friendly,
offering special child sizes for instance.
Mercer (1996) defines segmentation as a process used by companies to target a
specific group of customers with different needs, wants and characteristics. For a
segment to be viable, it must meet several requirements such as size, identity,
relevance and accessibility. In order to have an effective market segment, companies
must have a target market, tailored marketing mix and differential marketing strategies.
Starbucks' marketing strategy involved positioning its Starbucks outlets as a place
where consumers can spend time other than their home or work. This was done by
making each of its stores as comfortable and relaxing as possible by using comfortable
furniture and relaxing music in their stores. (John, 2008) Starbucks chose to focus on
the geographic, demographics and psychographics of their customers. It is with the
information gathered regarding these segments that Starbucks can better serve its
Demographics are concerned with the structure of the population in terms of ages,
lifestyles and economic factors (Blythe, 2008). Starbucks targets connoisseurs, highly
educated relatively affluent, well travelled and technologically savvy with an interest in
arts and other cultural events. In addition, by introducing other non-coffee products, they
aimed to have wider target market i.e. non-coffee drinkers.
Psychographic segmentation involves dividing a market into different groups based on
social class, lifestyle or personality characteristics. (Blythe, 2008) Starbucks focuses
heavily on charity and the arts, and is making significant efforts to be a socially and
environmentally responsible company. To help ensure sustainability and future supply
of high-quality green coffees in Central America and to reinforce the Company's
leadership role in the coffee industry, Starbucks operates the Starbucks Coffee
Agronomy Company, S.R.L, a wholly owned subsidiary located in Costa Rica. Staffed
with agronomists and sustainability experts, this first-of-its-kind Farmer Support Centre
is designed to proactively respond to changes in coffee producing countries that impact
farmers and the supply of green coffee. During fiscal 2008, the Company expanded this
sustainability program to Africa by establishing a Farmer Support Centre in Rwanda
(Starbucks annual report, 2008). Starbucks also actively participates in AIDS benefits,
and for every city that has a store, Starbucks sets up at least one shelter for the
underprivileged children and donates money as well (Starbucks.com). By participating
in various different positive causes and events, Starbucks gains a lot of favourable
exposure and publicity for its brand.
Geographically, Starbucks targets areas located in high-traffic, high-visibility locations,
to serve as a' hub' for the area. It then opens many other outlets stores in the same
area. While the Company selectively locates stores in shopping malls, it focuses on
locations that provide convenient access for both pedestrians and drivers.
According to Blythe (2005), branding is defined as a process of adding value to the
product by use of its packaging, brand name, promotion and position in the minds of
consumers. The Starbucks brand has been positioned as upscale and good quality and
promoted as such to its consumers. To compete successfully in a target market involves
providing the customer with a differential advantage. This involves giving customers
something better than competitors (Jobber, 2001). The Company's goal is to become
the leading retailer and brand of coffee in each of its target markets by selling the finest
quality coffee and related products and by providing each customer a unique Starbucks
Experience. (Annual Report, 2008)
By positioning itself as a specialty premium coffee retailer which sells a wide variety of
coffees and other beverages, both hot and cold, together with snacks and sandwiches
and a network of over 17,000 stores in 49 countries, gives the company a strong and
well known brand image and differential advantage over its competitors. This scale and
strong brand give Starbucks a high degree of bargaining power with suppliers and also
differentiates its offerings.
Starbucks implemented a well integrated market mix to maximize their brand awareness
and establish themselves as the best coffee brand to the world and target markets. The
7 elements of the marketing mix implemented by Starbucks can be found in table 3.1 in
Starbucks were able to achieve market dominance by positioning its price, products,
place, promotion, process, people and physical environment in a way which
differentiated them from competitors. Starbucks has managed to convince its customers
its products are associated with quality, and as a result, the company has been able to
differentiate itself from competitors with this perception whilst also charging a premium
price for its product.
although coffee is one of the highest in volume of global trading, the coffee market is
very fragmented. This has led to a consolidation process where coffee is handed off
from farmer to collector, collector to miller, miller to exporter or broker, and finally to
importer. The importer or broker then sells the coffee to large mass-market coffee
roasters and producers.
Starbucks however, wishes to maintain the quality of its coffee by working back up the
supply chain to the actual growers. In doing so the company works on attaining
expertise and good relationships with the coffee growers themselves. As mentioned
earlier this has resulted in the company attaining its supplies from the actual coffee
growers, and thus, effectively bypassing much of the middle market and saving a
sufficient amount of funds.
Starbucks uses multiple channels (hybrid) of distribution for its products. This means the
company utilizes more than one distribution design. Firstly Starbucks sells its products
through a direct retail system in company-owned stores. They import and process
coffee and then sell it under their own brand name in their own stores. However,
Starbucks also sells its products in supermarkets and shopping centers. Additionally
Starbucks has distribution agreements with office coffee suppliers, hotels, and airlines.
Using multiple distribution channels allows the company to reach a wider market,
however, while doing so Starbucks needs to careful with this approach due to the
potential for channel conflict.
In order to properly evaluate the possibility of bringing Starbucks to Finland, I‟ve made
the assumption that Starbucks would be expanding simultaneously to all of the Nordic
countries. I had to make this assumption in order to be able to logically and thoroughly
consider transportation and supply costs. Since Finland is located on the outskirts of
Europe, Starbucks would most likely never consider entering the Finnish market alone.
It would be much more logical for Starbucks to enter all of the Nordic countries at the
same time as a joint collaboration. This is however very unlikely taking into
consideration that Starbucks has so far only entered new markets one country at a time.
The reason why I feel that simultaneously entering Scandinavia would be a smart idea
is because it would then be possible to situate a warehouse and the top headquarters in
one of the Nordic countries, therefore reducing costs considerably.
Just a quick thought on the practicalities of bringing my favorite coffee brand to Finland
Every business can learn from another, especially if a particular business is one that
has displayed tremendous success over the years. The Starbucks Corporation and its
successful marketing strategies are definitely something that anyone interested in
business can learn about. What sort of techniques did the company use, and how were
these able to reach out and attract millions of people worldwide? Some of their best
strategies are outlined below.
“Perfect Cup of Coffee” – Starbucks history has shown that they place a huge
emphasis on product quality. Their coffee, even if priced slightly more expensive
than expected, is notorious for satisfying customers with its rich, delicious taste
“Third Place” – From the very beginning, the Starbucks marketing strategy has
focused on creating the “third place” for everyone to go to between home and
work. Creating this unique and relaxing “experience” and “atmosphere” for
people has been very important for the company as they have realized that this is
one of the strongest concepts attached to the company, to which customers have
been strongly attracted.
“Customer Satisfaction” – Customer satisfaction is a very important issue with
Starbucks. From entrance to the store to the very last drop of their coffees, it is a
must that customers feel the uniqueness of enjoying their Starbucks coffee
experience. Without a doubt, Starbucks Coffee Company knows the answer to
the question, "Why is customer service important."
“Creating a Starbucks Community” – The Starbucks marketing strategy has
even expanded to create a community around their brand. On their website,
individuals are encouraged to express their experiences with Starbucks history,
and the company strives to “personally” join in the discussions. This technique
was cleverly pointed out by Webolutions: The Strategic Marketing Agency in their
“Starbucks Marketing Observations” article.
“Smart Partnerships” – Starbucks Coffee Company has been known to create
strategic partnerships that demonstrate the fact that another way to grow your
business is to partner smart. Over the years, the Starbucks Corporation has
greatly increased sales just by using this strategy.
“Innovation” – Through the years, the Starbucks Coffee Company has been
known to think up creative and innovative ideas to add to their products or
services. They‟ve added different flavors to their coffee, more food on their menu,
and even became one of the firsts to offer internet capability in their stores.
“Brand Marketing” – The Starbucks marketing strategy has always focused on
“word-of-mouth” advertising and letting the high quality of their products and
services speak for themselves. For years, this has been uniquely Starbucks, and
it has played a huge part in making Starbucks Coffee Company a success. The
definition of viral marketing speaks to this new word of mouth that Starbucks has
run with, and made their own.
Starbucks Coffee Company and Marketing
It is clear that the company has created greatly individualized marketing techniques to fit
the promotion of the Starbucks brand as it applies to the unique concept it was built on.
But Adelino de Almeida wrote a blog article named, “Starbucks’ New Marketing
Strategy: Advertising Like Everyone Else”, where he discusses how the Starbucks
marketing strategy may try to finally follow everyone else‟s marketing. Read his article
and the discussion it has created to find out what this might mean for the company.
Nevertheless, the Starbucks‟ marketing strategy has led the company to its current
success. This fact is enough to realize that there can be much to learn from what this
company has achieved to the benefit of many small businesses. Isabel Isidro, managing
editor of PowerHomeBiz.com, has written an excellent article that outlines what small
businesses can learn from Starbucks. The article is entitled, “Learning from Starbucks:
10 Lessons for Small Businesses”.
For more comprehensive and detailed information on this topic, read about the paper
entitled, “Catching the Starbucks Fever” (2002) written by Brent Kembell and