Starbucks Marketing Strategy

Executive summary

Starbucks success has been driven by its effective marketing strategy which has enabled the development of a unique business model in the domestic and international market. Presently, the firm continues to improve its product portfolio with an aim of satisfying customer needs and improving a premium brand image. The marketing strategy employed involve differentiated product mix, premium pricing of coffee and other products and promotion strategies that involve digital marketing such as use of social media in marketing. A shortcoming of the marketing strategy has been the failure of premium pricing and product mix to address the entire market.                                                                            

Company profile and product description

Starbuck Corporation is an American firm that is headquartered in Seattle, Washington and operates in the food and beverage industry in both local and global markets. Its major operation includes purchasing and roasting bean coffee of high quality which it then sells along with other food products. The firm has coffeehouses in both domestic and international markets and these outlets have been a beacon for coffee customers in all places. The company provides an array of exceptional food products to its customers in various stores and in residential areas. The products includes; coffee, where over 30 blends and single-origin premium of this coffee is provided; handcrafted Beverages that consists of coffee that is freshly brewed , iced and hot espresso beverages , other blended beverages not related to coffee , teas and smoothies; merchandise comprising of tea and coffee –brewing equipment , packaged goods, mugs and its accessories and Verismo-System ; fresh foods including sandwiches, baked pastries , grain bowls and salad, yogurt parfaits , oatmeal and even fruit cups (Starbucks Corporation, 2016).

 The company sells products such as tea and coffee through its licensed trademark through other different channels like licensed stores, through equity investees and licensees. The company has at least 3 reportable segments that are in operation including the United States, International and Global Consumer Products Group. The company is present in over 50 countries and also works in conjunction with its store partners who have a wide knowledge on coffee, customer service and expertise in the products offered in the market (Starbucks Corporation, 2016). Since coffee is the major selling brand, coffee buyers are committed to high quality product and follow the product line from the farm to the production process.

Strategic Focus and Plan

The core values of Starbuck are embedded in the company’s mission and vision statement. Mission and Vision statement of any given brand are majorly an indication of organization’s business and even its future and mission is the reason why a firm exists while vision statement represents a future plan. The mission of Starbucks involves inspiring and nurturing the human spirit with the statement being “one person, one cup and one neighborhood at a time” (Starbucks, 2017).  This implies zeal to be a premier provider of the finest coffee product in the global market while at the same time not comprising the social principles as the firm is growing. The mission of the company is also touches in the environment where it is committed to environmental leadership in all aspects of its business. As such the firm ensures that products provided are packaged in an environmentally friendly way and prepared in favorable environment.

The values of the firm are embraced throughout its business operations with the partners, products and customers at the core and these ensure the firm lives by the established values. These values comprises of creation of a culture of belonging and warmth that welcomes everybody; being courageous in action to challenge the status quo and establishing new ways in which the growth of the company will be formed; presence and connection with transparency, respect and dignity; delivering the best in any activity being carried out and being accountable for any results of the company’s operations (Starbucks, 2017).  These values are entrenched in the culture of the firm so that its performance is driven through humanity lens.  On the basis of these values, the coffee houses of the company have become centers where customers come to meet up, chat and even work. Hence, they act as neighbourhood places for gathering, a daily routine in many locations. The values are enhanced by the efforts to ensure that all is done through the humanity lens starting from the firm’s commitment to highest possible product quality to the manner in which customers and communities are engaged for responsible business operations (Starbucks, 2017).

Situation Analysis

The marketing strategy of Starbucks can be understood from the marketing mix which involves a set of tactical and controllable tools that can be blended by the firm for the purpose of producing the response need in the market.  It consists of all the actions taken by a company with an aim of influencing its product’s demand using product, price, place and promotion as the main variables.

Products

 This means the combination of goods and services offered by a firm to its target market. Product-mix is a major factor that led to Starbuck gain a competitive edge over its major competitors like hot chocolate, teas and brewed coffee. The firm has been providing blended beverages so as to target people who are non-coffee drinkers, and serves oatmeal, pastries, juice, sandwiches and salads to cover more grounds on customer needs (Starbucks Corporation, 2016). The firm continues with an innovation of product mix so as to capture a broader market base and this marketing mix involves what is offered to customers by the business. This product mix has resulted from many years of innovation in its operations especially an on-going innovation process of the product whose aim is to provide products that attract and retain a larger pool of customers. Product-mix has been very essential to the oversee target customers where the products have been implemented with a certain standardization, even through in some oversee markets; the standardization has not been in place due to various factors (Geereddy, 2013). For example, in India, customers prefer cream in the coffee than skim milk since dieting has not gained popularity in this society.  So as to satisfy the needs and requirements of different customers, the company has produced special products that have different taste and taste for the purpose of diversity in the market. This ensures that the product offered fits the needs of different kind of customers.

In China, where tea is highly favored to coffee, Starbucks uses a differentiated strategy in creation of Chinese Tea flavor to match the customers in this market. In Japan, the firm has focused on new recipes that match the Japanese taste such as seasonal offerings of Sakura Steamer which comprises of streamed milk that invokes cherry blossoms when in season. In Muslim Countries such as Malaysia, Starbucks obtains authorized Halal, so as to reach out to more Muslim markets. As such, all the products – food and beverages – offered by the company in Malaysia are considered safe to be consumed by all Muslims (Haskova, 2015). Through this product-mix, the firm is able to provide products that do not go against the market’s aversion to pork. In this case, religion is a major factor that informs the product developed to target the markets where the Muslims are majority. This also involves the labeling of the products, so that logos of the firm used in packaging do not make this market to resent products provided by the firm. As such the labeling of Starbucks’ products uses different logos for the markets such as Saudi Arabia s compared to those in other world markets. The product –mix ensures that the targeted customers of the company to not resist consumption of these products due to issues that could be avoided (Haskova, 2015). This has enabled the firm to expand to markets with different cultures both domestic and global markets.

 Place

Starbucks products are mostly distributed and sold through Starbucks store and cafes’. The venues at which products are provided and accessed by the customer are determined by the marketing mix. In this case, the main places where the products can be accessed includes Cafes, retailers, Online Store and Starbucks App. The stores of the firm may be found in any visible and high traffic locations like downtown, retail centers, office building and airport terminals. These places provide favorable environments where customers may enjoy their stay and can read, meet and in some instance access WIFI connection. In addition, customer experience is enhanced by highly qualified baristas, who are trained to for the same purpose(Haskova, 2015). As demand is growing, Starbucks is able to maintain its competitive position by a strategy that involves managing the crowd, traffic and then providing the best services in its stores.  In the expansion strategies, the entry mode has been to select business leaders in the local markets to become their partners. This strategy has been employed by the firm in the larger global market as part of expansion strategies.

The three entry strategies implemented by the company include joint ventures, licensing and even wholly-owned subsidiaries. For instance, the company used a wholly-owned subsidiary to enter into the UK market, and this was informed by the requirement for management efficiency and risk management. In case of New Zealand, the firm is using licensing as the major mode of entry since it lacked the knowledge of this market and the various barriers presented by cultural differences. In case of Spain, the firm used joint venture as an entry strategy since this market presented great potential and a need for high level of control rather than using minimal control as a strategy (Starbucks Corporation, 2016). The strategies have been aimed at obtaining the highest possible expansion to the global market and hence, achieve the overall goal of being the best provider of coffee and other related food and beverages in the global market. The approach for efficient distribution has been to focus on international expansion by first partnering and then country second and hence, the choice of a local partner in this line of business is very important. The choice of different modes of entry in the expansion strategy has played out well for success of the company in reaching out to various markets in both the domestic and international markets (Lingley, 2009). It has enhanced the distribution process of the company and ensured that products are provided in various markets in the global market.

Price

Starbucks prices are set on the basis of premium strategy of pricing. The strategy involves exploiting the behavioral tendency of customers to buy products that are more expensive since they relate high prices to high quality and hence value. Hence, customers are willing to offer higher prices for products of high quality, provided at comfortable environment, having unique tastes and the alignment of places to customers’ convenience where they are able to break away from their busy schedules. As such, the firm is able to provide its coffee products at higher prices that other competing products like Premium Roast offered by McDonalds (Haskova, 2015). This marketing mix is in line with the generic strategy adopted by the firm and which helps in maintaining the brand image at premium value.

 However, in some oversee markets such as Japan, the firm offers products at lower prices but with reduced product size. This is because the coffee industry in this market experiences deflation prices and competition is very stiff. In such a market, it is also quite difficult for the firm to maintain customer loyalty and hence reducing prices attracts more customers. In some places like India, the firm embarks on sourcing raw materials from local farmers as a strategy of saving on production cost while maintaining product quality. The firm also results in offering products at different prices for times different times of the day in certain days (Starbucks Corporation, 2016). This has been used as strategic penetration prices in markets such as Malaysia with an order to capture a larger market share. New products are also offered at lower prices during special times.

Promotion

Product promotion involves various activities whose aim is to communicate a product’s merit and persuade customers in the targeted market to purchase it. The promotion of Starbucks products is mainly done through advertising where communication strategies are employed in dissemination of information regarding the products of the firm. The promotion-mix comprises of public relations, advertising and sales promotion.  The advertisement is done through print media, internet and television, while public relations are frequently been used. Sales promotion involves using items such as Starbucks Card through customers can get freebies. This aspect of marketing mix is an indication of the core importance of advertising, the sustaining roles of sales promotions and public relations in this firm. The firm has also understood the relationship between a product, consumers and digital technology especially social media (Haskova, 2015). There have been efforts by the form to successfully use the three aspects to improve the profile of their brand and even generate higher revenues.

The power embedded in social media makes it possible for firms to develop additional revenue streams through an observation of the interaction between customers and the products, getting their feedback. The communication avenue created allows Starbuck to addresses the needs of the customers and then repositions the brand as the market environment is changing. The firm has been able to maintain competitive advantage by integrating digital marketing through social media into various operations (Trefis, 2016).

Interpretation of the marketing strategy and situation

The marketing strategy adopted by the Starbucks has largely been useful to its expansion and growth strategy. The placing and pricing strategy has ensured the positioning of the brand as high quality in the market and ensured high customer experiences. The product-mix employed by the firm has also ensured that it gains a higher market share in the domestic and global market driven by the expansion strategies. The product differentiation has been the major mark of the improved brand in the market and this has set it aside from other brands of coffee provided by competitors. The focus on customer relationship and integration of communication with customers has enabled the firm to obtain feedback on customers’ needs and ensure that product mix focuses on how to satisfy the needs. The expansion plan has also ensured that the firm can provide customized products targeting the premium customers including the coffee connoisseurs and uber-rich (Trefis, 2016). This has seen the firm gain a higher market share and increases its revenues both in the domestic and global market.  

The distribution strategies adopted by the firm, that has involved opening more stores even in oversee markets has seen the growth of the form grow in terms of market share. The stores enhance the reach of the company and ensure that its penetration into the new markets is possible and especially driven by the partnership, joint ventures and even whole-ownership. The changes on the store mix in both the suburban and urban areas ensure the firm can provide its products to a large market and hence increasing its sales revenue. In addition, with the expectation that coffee market will continue with its constant growth over the coming years, the marketing strategy of Starbucks enabled it to pull all stops and position is brand in way that it will be perceived to best coffee shop in any market.

 In these markets, the firm is able to offer coffee product mix that will keep the brand a high notch in the market. Even where the company has faced challenges in the market due to fluctuations in costs of raw materials and increased competition, a well established premium brand has ensured that the form remains afloat and competitively beats its competitors. Through the product and store portfolio, the firm is able to address various ubiquity and competition challenges through offering different varieties and high quality products to its customers (Trefis, 2016). An important aspect in the growth is the promotion efforts using the digital marketing and more so, the use of social media. It has enabled the firm to build customer relations and hence brand recognition in the market and thereby gaining a competitive advantage over rivals. A major drawback of the strategy especially in pricing is that the firm has not been able to reach out to all the potential customers. This is true for the high prices of coffee that have sometimes been quite high for some especially when costs are increasing. High prices may only attract high end consumers and leaving out the rest. To correct this, the product mix and pricing should also target the lower class consumers and this will make it possible to introduce a new product.

References

Starbucks ,(2017).OUR MISSION. Retrieved from:https://www.starbucks.com/about-us/company-information/mission-statement

Haskova, K. (2015). Starbucks Marketing Analysis. CRIS-Bulletin of the Centre for Research and Interdisciplinary Study, 2015(1), 11-29.

 

Geereddy, N. (2013). Strategic analysis of Starbucks corporation. Harward [Електронний ресурс].–Режим доступу: http://scholar. harvard. edu/files/nithingeereddy/files/starbucks_ case_analysis. pdf.

 

Lingley, R. (2009). Marketing strategy and alliances analysis of Starbucks corporation.

 

Starbucks Corporation, (2016). Form 10-K. retrieved from: https://www.sec.gov/Archives/edgar/data/829224/000082922416000083/sbux-1022016x10xk.htm

Trefis ,Team,(2016).Let's Look At Starbucks' Growth Strategy. Retrieved from: https://www.forbes.com/sites/greatspeculations/2016/09/19/lets-look-at-starbucks-growth-strategy/#3bd077b03d71