Case Study Starbucks

Introduction

Starbucks, a coffee brand which was launched by Jerry Baldin, Gordon Bowker and Zew Siegel in 1971 in Seattle in United States of America, emerged like a famous brand comparatively in short period of time, made a very incredible affluence from a simple idea of brewing coffee since its core process. In early stages of its opening, Starbucks product line was not so wide; it was relatively a coffee bean retailer and trade some other items like coffee jars and gadgets required to grind and make coffee at home. Gradually Starbucks included music, movies and books into its product line.

But Starbucks really penetrated in the market when Howard Schultz joined it. He introduced and implemented innovative and modern business ideas and marketing skills which result in extraordinary expansion of Starbucks that Starbucks was more or less in every corner in the United States of America in a very short span of time.

When the world economy was quite stable, Starbucks took enormous advantage of it by getting double digit growth in more or less each financial year. But in current period of recession which even caused the closure of lots of retail businesses affect the growth of Starbucks as well. In results company dismissed its CEO Jim Donald by the end of 2007 and called upon its visionary leader Howard Schultz to this position, looking forward that he is competent to take the company back to the top.

In this study report, we will discuss the key methods and elements of Starbucks operations like how it targeted the market, promoted it as a brand and related strategies about its product mix which guided to its positioning in the marketplace and facilitated Starbucks to grow from a small coffee retailer to a business leader.

Target marketing

A target market consists of group or groups of buyers who have similar needs or characteristics that the company decides to serve (Kotler and Armstrong 2004). Target marking is a procedure of selecting market segments and then produce a product or offer a service particularly designed for those segments. It is a relationship between segmentation and product positioning. Once companies select their market segment to launch their product the next stage come into place is target marketing.

 

When Starbucks commenced its business in Seattle, it was operated locally and had very limited product line. But Starbucks entered the market with unambiguous ideas and clear-cut objectives. The master plan was to build an Italian coffee bar culture, a café which feels like a third place in between house and work place to people. A place where people can sit in, relax and socialize. Although it was not an innovative idea which is brewing coffee and there were many competitors in the market as well. Starbucks made an effort to position itself as a luxury brand and gradually they were on the mark with their target market despite the fact that Coffee consumption in United States was drifting down since 1960’s( with reference to case study). The CEO of Starbucks took right decision at right time about introducing new ideas in the market. He took up the following market strategies to promote their business.

1. Well planned store arrangements which facilitate customers to relax and socialize.
2. Customers were allowed to listen the music they like.
3. High level of customer service, well trained staff which were given good training and other job benefits which kept them loyal and enthusiastic to their work.

 

Product positioning

Product positioning means to introduce a product in the market where it is competent to carry on and prevail over the competition in the market. However the perception of the consumer about the product is very significant and it must go with product attributes. The product positioning in the market determines its ability to survive and compete the market effectively.

Starbucks management had clear-cut strategies about their product positioning. “The overall strategy is to build Starbucks into a destination”. Kenneth Lombard, president Starbucks entertainment. “Starbucks isn’t an entertainment company. But we want to have an entertainment strategy that supports the foundation of the coffee experience that our customers have come to expect and enjoy”. Howard Schultz, CEO Starbucks.

Howard Schultz, CEO Starbucks took revolutionary steps for product positioning and the market response was amazing that share price raised from $17 to $21 which made possible for the company to implement its expansion policies. The following considerations were taken by Starbucks while initiating its business in new region.

1. Presume the local demographic profile which will help out to elevate operational leverage.
2. A ‘Hub‘ setup in main areas of the city, where qualified and trained people will be hired to assist and support new stores.
3. In every region, Starbucks will plan at least one big social event to rejoice its arrival.
4. Local representatives will be enlisted from customers and new business partners whose names are part of Starbucks database of customer’s catalogue.

All these were the major moves by the Starbucks in expanding process which in result awarded excellent response to company and access to inaccessible places like airports. Starbucks followed Licensing and Partnership strategies to expand their business in different regions of the world but it was very vigilant in sustaining its goodwill and brand image at the same time. In addition Starbucks opened the stores across the street and some stores as clusters which increased better results in busy mornings and gave rise to sales volume.

Another important feature of Starbucks success was the appropriate importance given to customer’s feedback as it was very important for the company because they had introduced many innovative things in the market that actually took hold of the market. At first Starbucks product line was very limited but by the passage of time and by realizing the demand, Starbucks going ahead with expanding their product line. Orin smith, member of senior management team said”it is not going to be a lot of one thing. It will be food that makes sense and complements the customers and their choice of beverages”.

Starbucks initially a local coffee retailer, even started product developing with more advanced and established companies which facilitated Starbucks to make the most of their wide distribution networks and way in to new superstores, shopping malls and restaurants.

 

Marketing Mix

Marketing mix is a set of controllable, tactical marketing tools that the firm blends to produce the response it wants in the target market. The marketing mix consists of everything the firm can do to influence the demand for its products, (Kotler and Armstrong, 2001). Product, price, place, promotion, physical evidence, process and people are the comprehensive marketing means that a company utilizes to achieve its goals. All of these marketing mix components play a vital role in the success of every business. A variety of roles participated by these factors in Starbucks case are discussed below.

 

Product

Starbucks started business with traditional coffee brewing techniques and some other products like coffee jars and gadgets required to grind and make coffee at home. Apparently they expanded their product line and majority of these products captured the market. Like Starbucks introduced non-fat milk, it increased the demand and produced improve results. Other things in Starbucks product line were movies, music and reader’s corner. Starbucks also experienced Frapuccino, which made admirable results as well.

 

Service

Customer care is a key quality control technique for a service marketer. (Lancaster 2001). Good service quality was another foremost landmark of Starbucks. All the staff was well trained and Starbucks gave them good training and other job settlements which kept them loyal and enthusiastic to their work. In words of Howard Schultz, “Treat people like family and they will be loyal and give their all.” The entire inside procedures were well defined and correspondent which also improved customer satisfaction.

 

Promotion

Starbucks experienced short of funds for its promotional activities while entering a new market. Instead of running a popular promotion in a very noticeable location, Starbucks intended to celebrate at least one big social or community event on its arrival in every region and it also recruited local representatives as part of promotional activities, which made wide publicity and goodwill for Starbucks and also improved sales turn over.

 

Location

Location or place is an important tool in the marketing mix. Starbucks carried out a number of sophisticated researches to sort out the complexes that may occur as a part of its physical existence as the location of a business plays a key role in its success. They used to study the demographic profiles to create an operational structure with high leverage. They also introduced stores with drive through service, which also became a landmark. Starbucks also tried store clusters and opening stores across the street. All these decisions produced fair results than expected.