TROUBLE BREWS AT STARBUCKS Jules Boletis Gera Lenssen Joost Verbakel Lotte Huisingh Ann-Kathrin Beiderwellen
Starbucks Time Line1971 1982 1987 19921971: Starbucks was founded in Seattle by Jerry Baldwin, GordenBowker and Sev Siegl. They mainly focused on the product attributes.1982: Howard Schultz joined Starbucks as the marketing director.1987: Howard Schultz took over 6 Starbucks stores and startedrecreating the Italian coffee bar culture. From this time on Schultz startedto focus more on the psychosocial aspects (brand personality).Next to that the growth strategy was diversification until 1992.1992: Starbucks went public and with a strong balance sheet anddouble digit growth the company became the darling of Wall Street. Alittle
Marketing strategy The level of association that Starbucks was going for until 1987 is product attributes. The vision was to educate consumers about fine coffees in the way a sommelier educates dinner quests about fine wines. After 1987 Starbucks decided to focus more on the psychosocial aspects (brand personality). Focus was not on product but on the consumer. Schultz wanted to create the “Third Place”, the place between home and work where people gather, relax and interact with one another.
Growth Strategy Ansoff Until 1992 the focus of Starbucks was on diversification. When opening Starbucks the United States was not used to a market that was not about commodity coffee. So a new market was entered with quality coffee. After 1992 the focus of Starbucks changed to market penetration. When going public and later on expending to other countries new markets were penetrated. Market/product Excisting New products products Excisting markets Market penetration Product development New market Market development Diversification
Means-end chain New OldEnd Value “Third Enjoymen Place” t Italian Social Convenienc coffee meeting e bar placeConsequenc Drive Homees through Affordabl High Relax Interact Fair trade e luxury price Food Store QualityAttributes design coffee
Means-end chain Old Starbucks started with quality coffee for at home at high costs. This was worth it and that is why it leads to enjoyment. New Once extending the product Starbucks introduced food and a change in store design. This led to convenience and a social meeting place. It now is an enjoying place, a “Third Home”. Effect on target group and positioning Focus is on a bigger group. Not just focusing on people that want quality coffee but also positioning the store as a place where people can relax and get connected to others.
Core brand values Customer experience “Third Place”, a place that feels like home and a convenient location. Discovering new things People get to know different kinds of coffee and a different way of enjoying this coffee and all other added values such as food, music etc. Quality Starbucks offers quality in every single product, it once started with quality coffee, the mother brand.
Brand extension strategy Extending the brand by not only selling coffee but also variations on coffee, different snacks and lunches, CDs, books, sponsoring movies etc. Especially the movie gave Starbucks the opportunity to broaden the use of its in-store Wi-Fi network by running trailers for this movie. Unfortunately the expected return on investments was not achieved. By doing this they attract more different types of customers and the extension products are more successful. The result of this is that the mother brand is disappearing to the background. This is not necessarily a bad thing because the all-round customer satisfaction is most important and the core brand Starbucks stays strong.
Discrepency between results Results of the next actions taken were as expected CDs/Music Food Books Results of the movies were not as expected Reason for this is that Starbucks used the product attribute strategy again while not paying attention to the consumers (brand personality). This is what they should have done to achieve the expected results.
Main marketing strategicissues More competition There were more competitors because of widening the product range. For example Mc‟Donalds. Economic climate has changed Customers are no longer willing to pay $3,- for a cup of Starbucks coffee. Espresso became “Main Stream” The demand for special kinds of coffees decreased because of the waiting time and too many flavours were available.
Marketing strategic options to solve theissues Starbucks tried to solve these issues by Buying faster and better machines Reducing the choice of flavours Reducing store comfort These options were not very efficient because competitors were still better and Starbucks is losing their offered customer experience. Other options to solve these issues New store evaluation Go back to product attribute, go back to the roots, downgrade the customer convenience Cost leadership Target segmentation Operations excellence
SWOT AnalysisStrengths Weaknesses Opportunities ThreatsBrand name Competition Target Competition segmentationLocation Product Operational Espresso main variation excellence streamPartners Price Product Economical specialization climateDistribution MarketingConcluding statementCurrent strengths are not sustainable anymore because of the threats.It is important to solve their weaknesses by focusing on theopportunities that lie ahead of them.
Solving marketing strategy Target segmentation and operational excellence Focus on certain customer groups, coffee as luxurious product. Reducing competition by for example cutting out the drive-through windows. Reducing the variation of flavours. Making the producing process more efficient, for example coffee in less than a minute (espresso is „„Main Stream“.