Dir. of Retail
Schultz founded II
brewed coffee &
w/ Starbucks coffee
w/ Magic Johnson
Jim Donald hold
President and Chief
Executive Officer .
The operating profit of the
company during fiscal 2004
was $610 million, an increase
of 43.7% over fiscal 2003.
Schultz resumed his
roles as President
and Chief Executive
2004 2006 2008
Rival Diedrich Coffee
announced that it would sell
most of its company-owned
retail stores to Starbucks
Launches Starbucks® Bottled
Frappuccino® Coffee Drinks in
China through International
Coffee Partnership with PepsiCo
Where does the problem lie?
1. Lacked a Strategic Marketing Group
2. Changing Perception
3. Unsatisfied Customers
4. Increasing Competition
1. Lacked a Strategic Marketing Group
• No Chief Marketing Officer
• Marketing Department functioned as
three different groups :
Market Research Group
• Starbucks was not meeting expectations in
terms of Customer Satisfaction and there was
a direct link between Satisfaction and
4.Increasing Competition (1)
• Though Starbucks is still a dominating
chain but its hold on coffee has
• Facing Competition not from
newcomers but from older coffee chains
that have increasing customer loyalty.
• Another threat are the established
food chains that have altered their focus
to incorporate the rising trend of coffee.
Increasing Competition (2)
1. Dunkin Donuts: Complementary
pairing of Coffee & Donuts.
2. Peet’s Coffee & Tea: Focus on Quality
Coffee & Strategic Positioning of Stores
nearby to Starbucks locations.
3. Caribou Coffee: Differentiate themselves
on the basis of Store Environment.
Strategies for Managing
• Pricing- Starbucks has been able to accomplish with its
pricing strategy : “ focus on profit, not on sale” and “low
pricing would erode the perception of quality”
• Reservation - Starbucks launched Starbucks Express,
customers can pre-order and prepay for beverages and
pastries by phone or website. “Just call or click”
• Service – Starbucks hear music, Starbuck’s card, wireless
o “Live coffees” mantra - to keeping the national coffee culture alive.
o Creating an “experience” around the consumption of coffee
Three components to this experiencing branding strategy:
First, coffee itself – offering the highest-quality coffee in the world, coffee
standards by controlling the supply chain as possible and the distribution to retail
Second, service – customer intimacy
Third, atmosphere. To make customers want to stay. Based on human spirit, a
sense of community, the need for people to come together.
Channels - Broad distribution strategy
Want to reach customers where they work, travel, shop, and dine
Good Location: Company-operated stores located in high-traffic, high-visibility settings
Product mixed tended to vary depending on a store’s size and location
non-company-operated retail channels, food-service accounts, domestic retail store
Strategies for Managing
• Part time employees- Starbucks had
lowest employee income rate of any
restaurant or fast-food company but
Starbucks offering health insurance and
modest stock options to part-timers.
• Increased consumer participation-
Starbucks does a nice job of encouraging
this through its integrated marketing
– has questionnaires in its stores urging
customers to send in feedback about their
• The company's efforts to greatly increase its
sphere of strategic interest by its joint ventures
with Pepsi and Dreyer's, its move to sell coffee in
supermarkets, and the possibility of marketing
fruit-juice drinks and candy under the Starbucks
In order to sustain the company's growth and
make Starbucks a strong global brand, that the
company had to challenge the status quo, be
innovative, take risks, and alter its vision of who
it was, what it did, and where it was headed.
• Facilities for future expansion
INNOVATIVE FEATURE :
• STARBUCKS EXPRESS
Customer can pre-ordder and prepay for
beverages and pastries via phone or on website.
• STARBUCKS CARD
Prepaid card, priced from $5 to $500, that
offered to cuts transaction times.
• HIGH SPEED WIRELESS INTERNET SERVICE
How to maintain growth and keep growing
– Cannibalizations: one challenge lies on its own
dominance – with Starbucks in every corner of a
street there is likelihood of cannibalization of sales
from existing locations. Starbucks closed 600
underperforming locations in 2008. This seems to
be an admission that cannibalization seems to be a
– Quality :premium coffee quality with local taste,
there’s some specific coffee drinking market that
Starbucks still left open.
• Prices: as a high-end coffee, Starbuck has a substantial price
premium, should have a more reasonable price strategy to face
with harsh competition of others like Mc coffee.
• Economic situation: The company relies on consumer discretionary
spending to drive sales. Consequently, a major economic change
can have a large impact on revenues. Eg: With the global economic
recession of 2008-2009, potential customers have less money and
are more likely to forgo a $4 specialty coffee in favor of a cheaper
• Target demographics-yuppie, teens: Starbucks targets a higher-
income crowd of the young and college-educated, a group that
tends toward higher luxury-consumption levels. Although this focus
allows the company to maintain high profit margins, it also puts
Starbucks at greater risk from a shift in consumer spending habit.
• Being a Global responsibility corporation:
– Environment: In October 2008, Starbucks
was report wasting 23.4 million litres of
water a day by leaving a tap constantly
running for rinsing utensils, 10% used cup in
the US is not recycle, what about hundred
million cups served over the world?
– Health Concerns: Consumers’ awareness of
their health rise the concern of obesity with
dairy, sugar and caffeine product, may
caused some “would-be” Starbucks
customers to turn to their health options.
– Labor relation: should improve working
conditions and others benefits for employee
Who are they?
What are their current needs?
Personal needs and usage occasions
Why Buy (Brand)? (Essence of the brand)
Product line 1
Product line 2…
How do we communicate the “why”?
For the brand?
By product line?
Aligning the Marketing Value Chain
1. Implement Employee Branding:
– Employees are motivated with more incentive to perform
– Lower employee turnover rates
– Positive reinforcement which leads to higher feelings of
– Let them feel they are not just employees but rather as
2. Prevent Self-Cannibalism:
– Stores must be strategically located
3. Improve Corporate Social Responsibility
– Help farmers have a sustainable livelihood
– Improve the life and living conditions of the farmers
who plants cocoa by help building rural
infrastructures such as schools, irrigation systems,
roads and houses for the farmers.
3. Pricing Strategy
– Starbucks should consider the general demand and
work a price reduction strategy into the Company's
overall pricing strategies.
– Price reduction strategies may include a rebate or
coupon promotion program as the increase in sales
will offset the costs of these price reduction
5. Neglected Customers
– Starbucks should also consider researching into
the tea specialty drinks market. Tea drinks will
increase popularity because their perceived value
of healthy benefits.
– Starbucks may need to review its company
policies to see if updates are needed to address
different consumer relation situations.
• FACTORS CAN LEAD TO SUCCESS OF STRABUCKS
IN THE FUTURE
• BUY, SELL AND USE ENVIRONMENTALLY FRIENDLY PRODUCTS
• MEET SATISFY OF CUSTOMER WITH FASTER AND
• IMPROVE FACILITIES OF STALL