Marketing Strategies of Starbucks
Starbucks applies various marketing strategies, encapsulated under each of the four marketing mix variables, namely product, promotion, pricing, and place. The company employs these strategies to design and avail valuable products and services to its targeted consumers. It also applies these strategies to position itself appropriately, distinguish its products from its competitors’ offerings and to appeal to consumers across diverse stages of the decision-making process.
The product construct entails intangible and tangible elements of the company’s physical products and services (Finch, 2012). The company applies various strategies under the product variable. Firstly, it uses a related diversification strategy. Starbucks deals in a wide portfolio of products and services. Its product mix services and physical products. Secondly, it employs a product development strategy. This entails continually improving its existing products and developing new ones. For example, the company introduced Frappuccino beverages in 1995. It also introduced sugar-free beverages and low calorific value sweeteners such as honey, agave syrup, and raw sugar in 2008 (Starbucks, 2017). Further, Starbucks has developed more than 30 unique blends of coffee such as Caramel Macchiato, Espresso Con Panna, Caffé Misto, Cinnamon Dolce Latte, and Mint Mocha Chip Frappuccino among others. Thirdly, Starbucks employs a product diversification strategy. For example, it introduced baked goods such as flatbread pizza and sandwiches, desserts vegetables, and plates of cheese. It also began selling alcoholic beverages such as beer and wine in its restaurants.
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Starbucks also uses product packaging as a product strategy. The company adopted a new sustainable packaging design to increase brand visibility, reflect its sustainability outlook, and support sales of its new instant “Ready Brew” coffee packets. The design of Starbucks’ packaging led to a rise in global sales by 15% (Starbucks, 2017). At the same time, the company has positioned itself along its customer-centeredness stance. It also has a recognizable siren logo, which enhances its brand identity. Moreover, Starbucks uses mental stimulus processing as a service strategy to symbolize the exclusiveness of its services. It has designed its outlets uniquely to personify its desired personality, image, and positioning (Kotler & Armstrong, 2012). For example, it has comfortable sofas and chairs, plays cool background music to entertain customers, and provides free wireless internet services in its premises. These accentuate its positioning as the “third home” after the home and the office.
The organization employs service customization as a product strategy. It encourages baristas to grind coffee beans frequently and to make only two drinks at a time to preserve freshness and uphold the quality of the coffee made. It also trains its waiting staff and empowers them to go out of their way to attend to customers’ unique needs and to provide them auxiliary services upon request. Lastly, Starbucks inaugurated the Starbucks app that allows customers to order and pay for food and drinks remotely, reducing waiting time for services (Starbucks, 2017).
Place refers to the distribution of products and services to increase customer’s convenience. Starbucks uses various place strategies. For example, it uses market development to introduce its products and services to new geographical areas (Finch, 2012). After penetrating and saturating the U.S. market with more than 12000 chains, the restaurant entered overseas markets in diverse continents such as Asia, Australia, and South America. For instance, it plans to open more than 3000 restaurant chains in China by the last quarter of 2019. It also has nearly 500 chains in Mexico, and intends to increase the number to 850 before the end of 2018.
Starbucks also makes strategic location selection decisions when deciding where to open new stores. For example, it scrutinizes pedestrian traffic, aggregate demand, and the availability of parking space before opening an outlet. Further, the company makes strategic supply chain decisions. It uses backward and forward integration strategies to gain control over its upstream and downstream supply chain activities. For example, it controls six farmer support centers to preserve the delivery of high-quality green coffee (Lamb, Hair, & McDaniel, 2011). It has also established diverse farmer support centers and employed sustainability experts and agronomists who assist the coffee producers in growing high quality coffee beans. In addition, Starbucks also maintains good channel relationships with suppliers of dairy products, cutlery, and other plastic products to minimize the risk of supply chain disruptions and to preclude delayed deliveries. Lastly, it operates private warehouses, where it stores coffee beans from Asia, Africa, and Latin America. This lowers its logistics and transportation overheads.
Promotion encompasses diverse communications methods through which organizations communicate with customers. These are advertising, direct sales promotions, public relations, and personal selling. In the past, Starbucks relied solely on its brand image and positive word of mouth to market itself. However, it changed this approach and currently invests hundreds of millions of dollars annually in advertisements on diverse media such as television commercials, digital channels, and prints. Starbucks uses diverse promotions methods to create emotional, humorous, and rational appeals to develop resonance with its targeted consumers. It integrates traditional and modern promotions methods. For example, it uses social networking through its Twitter and Facebook channels to reach, communicate, and bond with its clients. In addition, it uses its customized mobile app along with its corporate website to advertise its products, reach wider coverage, and to develop personal bonds and relationships with customers. Further, Starbucks uses stealth marketing by harnessing its in-store digital network along with its mobile app. For instance, it used this approach to announce the debut of content series known as “Upstanders” in 2016. This series sought to inspire people with stories about citizenship, civility, and compassion (Lamb, Hair, & McDaniel, 2011).
Starbucks also uses direct sales promotions. For example, it has a robust loyalty program. It introduced its loyalty program in 2008, where it offered loyal patrons who registered into the program diverse perquisites such as free WI-FI, flavored syrups, soymilk, and refills on iced coffee, tea, and brewed drip coffee (Kotler & Armstrong, 2012). Another direct sales promotion strategy that company employs is the point-of-purchase promotion, through which it gives customers in-store sale offers, gifts, and online sales promotion.
Further, Starbucks uses public relations as a promotion strategy. It uses this approach to instill positive customer attitudes towards its diverse outlets through community relations, consumer education, and diverse sponsorships. For instance, the company participated in the 2010 River Project to transform Hailey Ditch into a natural stream (Lamb, Hair, & McDaniel, 2011). Lastly, Starbucks employs personal selling as a promotional strategy. Through this approach, it offers detailed descriptions and conducts demonstrations on product usage. The company also employs friendly and helpful sales personnel who interact amiably with consumers and deliver professional services.
Starbucks integrates various pricing strategies to sustain its standing as an upscale coffee outlet and to cement its competitiveness. It primarily uses premium-pricing strategy to target affluent consumers who value superior quality and are willing to pay higher prices. It also employs discounted pricing such as cash discounts, seasonal discounts, and promotional allowances to stimulate consumption. For instance, the company ran a promotion in which it sold coffee at $2 in the afternoon for customers who produced the morning receipt (Starbucks, 2017).
- Finch, J. (2012). Managerial marketing. San Diego, CA: Bridgepoint Education, Inc.
- Kotler, P. & Armstrong, G. (2012). Principles of marketing. (14th ed.). Upper Saddle River, NJ: Prentice Hall.
- Lamb, C. W., Hair., J. F., & McDaniel, C. (2011). Marketing. (11th ed.). Boston, MA: Cengage
- (2017). 2016 Annual report. Retrieved from https://investor.starbucks.com/financial- data/annual/reports/