What do we Know about Starbucks

Introduction of Company

Starbucks, a merchandiser of retailer of specialty and designer packaged, and single-serve coffees, teas and bottled drinks opened in Seattle in 1971. Besides coffee, their menu also includes an array of healthy salads, sandwiches, wraps, sweet breads, muffin and parfaits. Their products can be purchased at their company establishments, specialty and grocery stores and foodservice distributors. Besides coffee, (MarketLine, 2018). In the United States in 2017, the company earned nearly 23 billion dollars. This represented a 5% jump in sales over 2016.

Results of a 2015 SWOT analysis revealed the company’s strengths, weaknesses opportunities and threats. Their strengths were listed as their value-added products and connection to technology which bolsters their distributing capabilities and their substantial economic position. Weaknesses were listed as products that needed to be returned or recalled. Starbucks listed opportunities as expansion in the Asia marketplace and continued growth and market share in the United States. Threats were listed as regulation costs, competition and price of raw materials (2018).

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Starbucks has a strong appeal to consumers because of its cult persona. It is seen as the it places to go for coffee. The dining rooms are equipped with plenty of wi-fi adapters, so it is a favored place for business meetings and students. It is not unusual for patrons to remain for hours long after their drinks and foodstuff have been consumed. Starbucks has a common presence within local, national and international communities with stand-alone facilities as well as in grocery and retail stores. Starbucks has built a strong customer loyalty; their brand is one of the most recognized world-wide. The foundational blueprint is built on delivering specialty coffees and bottled drinks to customers who may come in to make a purchase as well as those who come to spend the day. Starbucks uses reward and gift cards to as perks and bonuses for their frequent customers and for their customers to pass along as gifts to others.

Business Model

There is a major difference between Starbucks and other business collectives, some restaurants franchise out their establishments, the franchisers retain the name, but they are independently owned. This can often lead to uneven service and standards that are less than par of those of the company owned restaurants (Team, 2017).  According to an article in Forbes (2017) nearly half of Starbucks 26,000 restaurants are owned by Starbucks. While they continue to experience robust growth, their focus is to maintain the integrity of the brand by keeping their restaurants under the umbrella of the company and less on franchises. The company has projected a 5-year expansion with the majority ownership still on the side of the company.

Starbucks is very aware of the cultic culture that surrounds the brand, for this cause, they want to remain control of most of their properties to protect the name and atmosphere their customers have become accustomed to. Starbucks is aware that using the franchise business model would remove their daily operations. The franchises that are granted are to managers who agree with the Starbucks culture and projected mission. Company owned stores also guarantee the freshness and quality of its foodstuff menu. Starbucks understands the need to maintain the consistency and evenness of their brand is one of the reasons why they are doing so well economically and with the market share. The greatest amount of Starbucks franchises is located internationally. Starbucks does not depend on revenue from the fees and royalties garnered from franchises. Their philosophy is if their stores and majority company owned, they maintain the ability to monitor the costs of resources and cost of materials, coffee beans, containers, lunch and desert items which is reflective in the salaries they can pay their employees and management staff and costs of operations.

Market Segmentation

Starbucks Coffee uses the following types of positioning which is divided into three sections; adaptive, mono-segmentation and stand-by positioning. In the stand-by mode, they would not release certain products until there was a consumer desire for them. According to an article on Starbucks segmentation (Dudovskiy, 2017), one of the items on stand-by was the Frappuccino drink. The mono positioning targets customers who have no issue with higher priced Starbucks specialty items. The adaptive position targets customers who are health conscious and choose items with less sugar or more natural ingredients.

Geographics

Starbucks has chosen a wide geographical area across the globe, Asia, Africa, Canada, Central America, the European markets and China targeting urban consumers. Starbucks reaches out to men and women from 22 to 60 years old. They marketing outreach is targeted to their loyal customers who are social and connect with friends and business associates in Starbucks stores for meetings and socializing. Most loyal patrons are forward, successful, ambitious professional. The Psychographic segmentation definition is leadership and activism.

Promotional Strategies

Starbucks marketing strategy is quality even if it comes at a higher price. They have built a loyal customer following that is attracted to the brand and do not patronize the brand for the value. Their customers do no mind paying extra for premium coffees, designer coffees and the accompanying items on the menu. the number one coffee retail brand. The Asian market is the most recent demographic expansion for Starbucks. They are also very guarded about the reputation of their brand. Since their inception, the brand has worked to build an environment of quality and customer service.

Another promotional strategy of Starbucks is their ethics philosophy, built on the products they purchase and the accountability of the business they patronize. This creates a wall of transparency in which they sell quality goods and buy from sources who operate with good business practices (Pratap, 2017). The newest promotional strategy for Starbucks is making marketing and advertising an investment. Previously, Starbucks did not invest in advertising. They were successful at providing superb quality products and service. Since 2015, Starbucks has spent over 350 million dollars for marketing. Their television ads echo their brand philosophy of cozy, social, educated customers meeting and networking with their constituents meeting over coffee and select menu items in a warm decorated and friendly environment. However, Starbucks has chosen not to rely on advertising but instead depend on providing the highest quality drinks, lunch and desert items in a cozy atmosphere in an environment conducive to working alone on the computer, reading or meeting with a group (2017).

References

  1. Dudovskiy, J. (2017, April). Starbucks Segmentation, Targeting and Positioning – Targeting Premium Customers with Quality Products and Service. Retrieved November 2018, from https://research-methodology.net/starbucks-segmentation-targeting-and-positioning-targeting-premium-customers-with-quality-products-and-service/
  2. MarketLine, a Progressive Digital Media business. (2018). Starbucks Corporation. Starbucks Corporation MarketLine Company Profile (p. N.PAG). Retrieved from https://libraryresources.columbiasouthern.edu/login?url=http://search.ebscohost.com/login.aspx?direct=true&db=bsu&AN=132623346&site=ehost-live&scope=site
  3. Pratap, A. (2017, January). Marketing Strategy of Starbucks. Retrieved November 2018, from https://www.cheshnotes.com/2017/01/marketing-strategy-of-starbucks/
  4. Team, T. (2017, June). Why The ‘Company Owned’ Model Works for Starbucks. Retrieved from https://www.forbes.com/sites/greatspeculations/2017/06/01/why-the-company-owned-model-works-for-starbucks/#35e0b19e7deb
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