“Every day, we go to work hoping to do two things: share great coffee with our friends and help make the world a little better. It was true when the first Starbucks opened in 1971, and it is just as true today” (Starbucks, n.d.). Starbucks first opened a single store in Seattle’s historic Pike Place in 1971, by Jerry Baldwin, Zev Siegel, and Gordon Bowker (Coffee.org, n.d.). Starbucks offered some of the world’s finest fresh-roasted whole bean coffees. The name, inspired by Moby Dick, evoked the romance of the high seas and the seafaring tradition of the early coffee traders (Starbucks, n.d.). Since then the company connects with millions of its customers with unique coffee products from over 70 countries. The company has more than 277,000 employees (Forbes, 2018). Starbucks mission statement is to inspire and nurture the human spirit – one person, one cup, and one neighborhood at a time (Starbucks, n.d.).
Starbucks is working in the retail coffee industry. They offer a wide range of differentiated products that the customer enjoys in the coffee shops, at home, and on the run (Starbucks, n.d.). The coffee company serves more than 30 blends and single-origin premium coffees (Starbucks, n.d.). Additionally, they serve a set of handcrafted beverages, which includes fresh-brewed coffee, hot and iced espresso drinks, non-coffee products like smoothies and teas. It is also possible to purchase coffee and tea brewing equipment, mugs, and accessories, packaged goods, books and gifts from this store. A wide variety of baked pastries, sandwiches, salads, oatmeal, yogurt variations, and fruit cups are available as well (Starbucks, n.d.). The corporation sells whole bean and ground coffee, various tea filter bags and latte concentrates. One can also buy bottled and chilled coffee drinks as ready to drink product, which also includes iced coffee, double shot espresso drinks, fresh bottled juices, iced, and juiced tea. They also sell products through licensed stores and groceries. Starbucks also markets its product mix with other brands such as Teavana, Tazo, Evolution Fresh, La Boulange, Ethos Water, and Torrefazione Italia Coffee (Starbucks, n.d.).
Starbucks dominates a highly competitive and fragmented retail coffee industry with the presence of several small and large (Technavio, n.d.). The company revenue reached nearly $22.39 billion in 2017 (Starbucks, n.d.). For the Direct Competitors, Dunkin’s Donuts and McDonald’s are the main competitors for Starbucks. Dunkin’ Donuts began putting more emphasis on coffee business in the late 1990s. They represented themselves as a brand for all-American customers by using traditional advertisements. They managed to earn a revenue of $828.9 million in 2017, which falls behind Starbucks (Hawley, 2018). On the other hand, McDonald’s has traditionally been a fast food restaurant. However, they introduced flavored and iced coffees in the mid of the 2000s (Hawley, 2018). At $22.82 billion, McDonald’s revenue for 2017 was higher than Starbucks’ and significantly higher than Dunkin’ Donuts (Hawley, 2018). Nevertheless, this is because McDonald’s has a much broader menu. Starbucks has the upper hand over the two companies as the corporation offers physical stores that serve the customers with additional unique products.
Now Costa Coffee is the second largest coffeehouse in the world after Starbucks and the largest in the UK. Founded in 1971 in the UK, Costa coffee has expanded to over 3000 stores in over 30 countries. Costa Coffee is also probably the only Starbucks Competitors on this list, which exclusively deals and promotes its coffee. All other brands have a combination of different products to offer (Bhasin, 2018).
• Describe the product’s current marketing strategy (objectives, target segment(s), value proposition) and implementation (marketing mix).
Starbucks successful marketing strategy is behind their huge achievement. The core marketing strategy involves the STP model, which consists of segmentation, targeting, and positioning. The STP model is used to create marketing communication plan to help marketers identifying a group of people from the public as customers, then deliver personalized messages to engage with the target audience (Hanlon, 2018). At Starbucks, the demographic segmentation’s primary group is between 22 and 60 years of age who are students, employees or professionals (Dudovskiy, 2017). They are geographically targeting urban areas of the United States, Canada, Latin America, Europe, Middle East, Africa, China, and the Asia Pacific region. Psychographic segmentation shows that customers belong to the upper-middle class (Dudovskiy, 2017). The company targets individuals who are enjoying coffee in a relaxing atmosphere with friends and relatives or at work (Dudovskiy, 2017).
The company initiated to develop a strong relationship with its customers. Firstly, they targeted the segment of the parents with young children. Once proven successful, added more segments including teenagers and to promote their product range (Linda, n.d.). Starbucks positioning strategy is customer oriented. Starbucks boasts a personalized and differentiated customer experience, which is seen in their stores’ layout, furniture, and the music. The product’s design and quality also differentiated from their competitors. Starbucks starts with the internal marketing. By achieving the employees’ satisfaction, they attain their customer-oriented approach. The employees are partners. They have the freedom to take part in every decision to make the business a successful one (Linda, n.d.).
• Evaluate the product’s current marketing strategy and implementation.
The marketing mix by the four P’s (product, price, Place, and promotion) helps us understand the company’s activity to satisfy the target customers. The company produces the highest quality coffee products at a premium price. It is justified due to high tech technology and the developed luxurious image with the store’s facilities (Linda, n.d.). Starbucks has become one of the most respected and admired companies in the world, an enduring global merchant that today delivers the Starbucks Experience more than 85 million times per week at more than 28,000 stores in 76 countries (Starbucks, n.d.). The sites are chosen professionally to easily reach the target customers. They use the ATL ; BTL media to promote their brand. Through the social responsibility programs, the company supports farmers, coffee, tea, and cocoa sourcing areas. They also help the environment by developing recyclable cups and designing green buildings (Zigu, n.d.).
The company has built its marketing strategy based on customer service and ethical behavior (Haskova, “Starbucks Marketing Analysis”). They are selling an experience, not a commodity (Sommer, 2017). The unique customer-based proposition makes the company unique and enhances the customer loyalty. Starbucks strives to maintain their high-quality coffee products to meet the high demand for their coffee loving customers. The store seems like a socializing place. Starbucks Company always tries to develop a wide range of products to satisfy all customer’s needs. They support eco-friendly stores, reduced water consumption and serving coffee in recyclable cups (Haskova, “Starbucks Marketing Analysis”).
• Make recommendations for “fixing” the problems you found.
Pricing decision is a crucial factor in the success of the products. Product Expensiveness is one of the main issues at Starbucks (White, 2016). A Café latte range from $2.95 to $4.15 based on the size, while Lunch and snacks range from $1.95 to $6.45 (Realmenuprices, 2018). The company claims that the products are of the highest quality and the premium Starbucks experience that given to the customers requires much spending on developing their services, stores quality, and the staff quality. There is an emerging market in developing countries with potential segments offer a great opportunity for further expansion. The pricing strategy prevents the company to expand to developing countries (White, 2016).
Starbucks Company should adjust the price to compete in such developing countries. Coffee beans are the main ingredient in their business. The market prices for coffee beans have some fluctuations. Pre-planning and securing their contracts to buy and store it with big quantities will help them to manage the cost issues (Sommer, 2017).