The marketing strategies of McDonalds and Starbucks andthe comparison of their current marketing plans - Essay Example

? XXXXX No. XXXXX BUSINESS McDONALDS AND STARBUCKS XYZ 16 December, McDonalds and Starbucks Formulation of strategic objectives and marketing plan is the base of success for any organization while appropriate implementation and finishing of these aspects is the key to achieve the short and long term objectives. It is quite possible that a company may fail even having an ideal product because of lag in its marketing strategies like improper distribution, wrongly identification of target markets, insufficient promotional strategy, and limitations of marketing plan. McDonalds and Starbucks gained a leading edge in fast food and drinks industry through successfully execution of their marketing plans. The organizations successfully converted their consumer experiences into exceedingly cost-effective business. This paper deals the marketing strategies of McDonalds and Starbucks and analyzes the comparison of the current marketing plans of two industries which include production strategies, positioning strategies, pricing strategies, competitive environment, and several other factors which have substantial effects on the marketing strategy. The paper also provides recommendations to both the companies to improve their existing marketing strategies by more appropriate steps. Literature Review Food industry can be considered as a concurrent or triple point in terms of history, innovative ideas, and taste. This industry is dependent on number of factors like government regulations regarding hygiene standards and suitability, new innovative brands and trends in the market, consumer behavior, and cultural and religious beliefs. Despite of all such factors, the industry is one of the largest industries in the world as it had sale revenue of about $3.2 trillion in 2004 (US Food Industry Overview, 2007). In USA almost 16.5 million people are professionally associated with food industry and Americans spend about $1 trillion annually which is about 10% of Gross Domestic Product (GDP). UK fast food is the largest fast food market in Europe which is double and triple in size than Germany and French markets respectively. The food industry (including fast food) had an estimated gross value added of ?73.4 billions in 2007 (http://www.whatmattersweblog.com). It had a contribution of 18.8% of national part-time employment and 8.7% of national full time employment. Coffee has established a strong standing in hospitality industry in last 10 years. In many countries espresso, cappuccino, and caffe latte has replaced the brewed filter coffee and therefore set a cafe style coffee. Because of having a major contribution (almost 61%) with respect to both the revenue and volume in market, the carbonated beverages are the mainstay of the industry. Australian citizens prefer milk-based coffee as about 90% of coffee cups sold in 2005 contained milk in it. In recent years, cappuccino has come out as the most favorite brand of coffee for Australian people however, people having strong financial assets particularly young ladies have more inclination towards the caffes lattes. Espresso and the flat white are generally more demanded by young males and senior citizens respectively. Another significant trend in coffee industry is the cafe preference of customers with respect to either fair trading or sustainable source. A rising trend has been observed by the farmers that they intended to approach the fair trading cafes instead of low pricing cafes (Bacon, 2005). McDonalds are the two leading companies in the industry of fast food and soft drinks respectively. McDonalds is the world’s largest fast food providing organization, presently operating at more than 33,000 locations across the world and serving more than 64 million people around 119 countries on daily basis (http://www.mcdonalds.ca/). Although the company has more than half century experience even then it works through dynamic marketing strategies. McDonalds offers innovative ideas in their operations to keep itself at No.1 position in the fast food industry. Primarily the marketing strategies of McDonalds focus on the provision of excellent services and high quality food at a reasonable cost. McDonalds initiated its existing marketing strategy in 2008 which was named as ‘Plan to Win’ (McDonald's Marketing Strategy, 2008). The main theme of this strategy is not to be the largest fast food chain; rather the aim is to be the fast food chain second to none. As far as Starbucks is concerned, its huge network of coffee stores is the major component of its marketing strategy as it is running its business in more than 55 countries at more than 17,000 locations in the world. The hallmark of Starbucks marketing strategy is the successful implementation of its stores as sites for social gatherings. The main point of Starbucks strategy is to gain the leading edge in soft drinks industry by offering high quality brands and provides innovative and distinguished coffee products, not just for a matter of sale but to realize its customers a rich experience. Marketing Strategies In terms of maximizing the awareness of their brands and keep themselves as the leading companies in fast food and soft drinks industries, both McDonalds and Starbucks persistently implement their well-integrated marketing strategies. Since a well-integrated marketing program would use a marketing mix to meet and satisfy the standards of its target markets, therefore, the marketing strategies of both these organizations will be discussed in the perspective of these elements of marketing mix i.e. product, place, price, and promotion. Price Pricing is one of the key elements of marketing strategy for any organization and McDonalds has devised this strategy with the aim to facilitate each family with affordable rates to go outside the home and enjoy their breakfast, lunch or dinner in the well facilitated environment. McDonalds implemented the pricing strategy by offering special offers to children like happy meals for kids and children. These meals are offered at suitable rates with sufficient quantity. McDonalds also offers dollar menu items and value meals. Almost more than 10 items are available having cost of less than a dollar which provides an easy access for any customer to visit any of the outlet of McDonalds with great confidence. Another innovative offer of the company is with respect to breakfast i.e. they provide special breakfast menu for 2 heads just for $3 i.e. the fast food chain facilitates the parents to arrange the food for two children against the charges of one head. Besides parents and families, it also assists hungry customers to get more food just for a price of single person. Starbucks has successfully projected a fame of its upscale image of its products and brands; therefore, this successfully executed strategy enables it to set higher prices. In recent times, Starbucks offered a trend setting service i.e. $1 bottomless 8 oz. cup of coffee along with unrestricted refills. In order to provide inexpensive coffee brands to all customers, Starbucks has implemented ‘value strategies’ which will further focus on price-skittish consumers For example, the company is providing a ‘breakfast pairings’ just for $3.95 per head. Instead of offering expensive drinks, the breakfast includes other popular items as well like coffee or brewed coffee just for $2 (Jennings, 2009). Additionally since the products are generally consisting of distinctive dimensions, the price strategies are based on the quantity (Pride & Ferrell, 2008). Promotion Promotion is another essential part of marketing strategy. Over the years, McDonalds used number of ways to make the people more aware about its brands and products. Basically McDonalds used Hierarchy-of-Effect Model for its continuous advertising campaign. The Hierarchy-of-Effect Model is considered as the predominant model of advertising because it elaborates the goals of advertising without any ambiguity. This model presents six steps which marketers do to facilitate the consumers for the purchase of a product or service. These steps include awareness, knowledge, liking, preference, conviction, and purchase (Clow & Baack, 2007). In order to execute the Hierarchy-of-Effect Model, McDonalds used the media including television, radio, billboards, and internet. It is quite possible that consumers might have good awareness of the product, but have no good idea about the brand. Therefore, McDonalds used numbers of slogans to put and leave a durable impression on people’s mind and make them to move and visit their nearby locations of McDonalds. Some of the famous slogans are listed below. It’s a good time for the Great Taste of McDonald’s Food, Folks, and Fun We love to see you smile I’m Lovin’ it McDonalds also offer separate links to its consumers to get awareness about the taste, sweeteners, and hydration. Additionally McDonalds applies other techniques to promote its products like painted buildings, billboards, songs, and seminars as well. Of course these advertising and promotional models change the purchasing trends and consumer behavior of target markets. In order to enhance the consumer knowledge, awareness and conviction, McDonalds offers online feedback programs. McDonalds advertises the brands with specific information of the product like its benefits to health, its competitive edge over its rivalries, and information about the appearance of the product. McDonalds also uses sportsmen, athletes, and celebrities to promote its products and its services over the entire globe. In terms of its cups and packages, McDonalds contracted nine athletes during Beijing Olympics 2008. Starbucks has also taken numbers of steps to convey its messages to the consumer markets. Some of the most significant steps are discussed here. Offices have been provided with numerous brands of coffees and no specified restrictions on coffee size for offices. Approach of philanthropy has been used for promotions of coffees and other products. Starbucks does good amount of charity with non-profit organizations and NGOs to enhance the awareness level of customers along with projection of a good brand image. Advertising of the company through referral system is an innovative marketing strategy of Starbucks. The company uses Starbucks Card system for this strategy. The card possesses advertising messages about brand image and loyalty and acts as a free promotional mean for the company. Another card is offered for business sales. This card is used for real business deal, employees’ performance appraisal, and a gift to some customers. Starbucks arranges seminars and social gatherings which appeal diversified customers for local and international coffees, teas, and other soft drinks. Placing Placing is the third component of McDonalds’ marketing mix strategy. In modern business world among all ‘Ps’, this placing aspect has become more significant. Since McDonalds is dealing with more than 64 million people around the globe on daily basis, it is only possible due to the placing of its outlets at more than 33,000 locations of the world. This vast network of placing has enabled the company to become the leading and largest fast food chain in the world. In a survey, it was observed that about 50% of population of United States of America was located at a distance of just 3 minutes away from their closest outlet of McDonalds. It is the most obvious evidence that how McDonalds is the leader in terms of customer satisfaction. At several locations, McDonalds also provides entertainment for children in the form of play areas. In fact McDonalds promotes the habits of sports, exercises, and healthy activities among children by providing the playing attractions like slides, swings, and ball-pits. Starbucks is available at every such place where there is a good expected amount of human traffic for its stores. The company has also established its branches within the chains of large soft drinks companies e.g. Barnes & Noble and Target. The stores of Starbucks are very much encouraging for those people who are fond of music and reading as well. The company has recently launched a marketing strategy named ‘stealth outlets’. In the context of this strategy the store is named after the name of street where it is situated. These stores do not use logo of Starbucks for their products; in turn they use the address of the street as the brand name. Product McDonalds offers a huge variety of innovative products and services which in turn satisfy all the people of any locations. The menu consists of burgers, pizza, chicken sandwiches, French fries, chips, chicken nuggets, apple pies, soft drinks, tea, coffee, and ice cream etc. the menu varies from place to place and thus this huge variety of food has made it difficult for the people to make a decision either to go out or dine in at a single particular place. In recent times, McDonalds introduced Vegan and vegetarian menu as well in many parts of the world. This offer has increased the area of its target market. Further McDonalds has started the service of offering beer along with the food. Although this service is yet to be implemented in United States, however it is predicted that it will be in action in near future. Customer satisfaction is the foremost objective of McDonalds; therefore besides variety of high quality food, it facilitates the customers with instant and smart services. Saving the precious time of the customers is one of the main objectives of the McDonalds services. Starbucks offered a variety of 30 different and innovative coffee brands. They include of whole bean coffees, cappuccino, espresso, ness cafe, and some other Starbucks paraphernalia. These coffees are manufactured in numerous styles to enable the customers to end up being paid by every individual irrespective of whether affluent or poor (Paley, 2006). Since its origination, Starbucks has tried to introduce new brands and tastes regularly. Some of its new products are listed below. Instant via Ready. An instant coffee impossible to differentiate from regular brewed coffee (Jargon, 2009). Full Leaf Tazo Tea Lattes. Main feature is to attract the tea drinker Tazo Tea Infusions. Main feature is to attract the tea drinker (Edwards, 2008) People: The Target Market People or in other words the target market is the 5th aspect of McDonalds marketing strategy. For McDonalds, people don’t mean only the customers but it also includes the employees of the organization as well because in case the employees are displeasure due some justified reason, they in turn will misbehave to the customers. Eventually it will create a bad impression on the reputation of McDonalds. This is why McDonalds has taken important steps to cater the internal and external factors of marketing strategies. Management authorities of McDonalds have formulated a clear cut policy with respect to employee dealings. Proper respect of employees, courteously, welfare, and proper training are the aspects which have kept the company’s employees motivated. Hertzberg’s two factor theory has been applied to resolve the hygiene and motivational factors (Herzberg, 1959). The target market of McDonalds is quite vast ranging from children to parents, males and females. In respect of parents, the visit of McDonald’s outlets is easy and affordable to arrange for the whole family while for children it is not less than an entertainment and treat because besides the food of their demand, they are also served with playgrounds and toys. McDonalds frequently conducts public surveys to know the trends employees’ behavior and change in consumer behavior. The results of these surveys enable the company to initiate the steps to make customers and employees equally satisfied. McDonalds deals with a huge part of its target market by supplying its products to homes. Further there are people who want quick meal within no time. McDonalds has arranged a special counter for such customers to provide them with food of their orders. Starbucks has strong strategic assets in USA as it holds about 33% of the market share for coffee business. The sale of Starbucks coffee is almost equal to the combined sale of coffee at convenience stores and fast food outlets. The primary target market of Starbucks is the population group of age between 25 to 40 years which is about 49% of its total target market. The strength of this group is increasing at a rate of 03% per annum. This group consists of professional males and females having more social interactions with others and has relatively better financial status in society. Youth aged 18 to 24 years is the 2nd target market of Starbucks, consisting of 40% of the company’s total target market. This market increases at the rate of 4.6% annually. Starbucks has started to emphasize this group as well through social networking sites, promotional campaigns, and by offering special packages to students and young adults. The age group between 13 to 17 years yields just 02% revenue to Starbucks. Findings and Recommendations Both McDonalds and Starbucks keep world wide strong strategic assets and supply chain networks Offering of innovative products and brands is the key of success of both companies Customer conviction is the highest achievement of McDonalds while Starbucks has also gain a lot of conviction from its target markets in USA In modern scenario, since fast food and soft drinks industries are facing lot of government regulation for environmental protection, therefore, they need to focus on their sustainability management McDonalds’ food chains are present in more than 200 countries while Starbucks is functioning in 119 countries. Therefore in order to minimize the business risk, Starbucks must focus on expansion strategy. In terms of variety of products, McDonalds have an edge over Starbucks. Besides coffee and soft drinks, McDonalds also offers a huge variety of fast food items. With the passage of time, it seems that Starbucks will become more vulnerable to the probability that its products will fade off and eventually halt the growth of company. As Starbucks has limited network of operations, therefore it has more opportunities to grow its business in new target markets. McDonalds needs to maintain the standards of its value, norms, and innovative brands. Along with its card system, Starbucks can also start points rewarding system with free cup of coffee or tea for the utilization of specific minimum points. The strategy of acquisition can assist the companies particularly the Starbucks to procure other competitors of their respective industries. The acquisition will facilitate the companies to earn more income and hold on the market share (Mullins, 2009). Conclusion McDonalds is expanding its network across the borders through effective and dynamic marketing strategies. Dynamicity in marketing is the hallmark of McDonalds. It mainly emphasizes on its advertising campaign to stay ahead of its competitors. Presently it is not facing any significant rivalry from some fast food chain except the Burger King. Starbucks is facing challenges from several competitors in soft drinks industry which include Dunkin Donuts, Caribou Coffee, 7-Eleven, BIGGBY Coffee, McDonald’s, Einstein Bagels, and Panera Bread. In order to maintain its standing in the industry and to have conviction from target markets, Starbucks has to focus a lot on its marketing strategy and advertising messages. References Allison, M. (2009). Starbucks tests new names for stores." 16 July, 2009. The Seattle Times, Retrieved on November 3, 2009: http://seattletimes.nwsource.com/html/localnews/2009479123_starbucks16.html Bacon, C. (2005). Confronting the Coffee Crisis, Nicaraguan smallholders use of cooperative, Environmental Studies, p.350, Santa Cruz, University of California, Santa Cruz Clow, K. E. and Baack, D. (2007). Integrated Advertising, Promotion, and Marketing Communications 3rd Edition, Pearson Education. pp. 165-171 Edwards, M (2008). New Tea Drinks Coming to a Starbucks near You. 30 December, 2008. The News Tribune. Retrieved on November 3, 2009: http://blogs.thenewstribune.com/business/2008/12/30/new_tea_drinks_coming_to_a_starbucks_nea Herzberg, F., Mausner, B. & Snyderman, B.B. (1959). The Motivation to Work. John Wiley, New York. Jargon, J (2009). Starbucks Takes New Road With Instant Coffee --- Company Launches Marketing Campaign and Taste Challenge to Tout Its Portable, Less Expensive Product Via. 29th September, 2009, pg. B.8. Wall Street Journal. Retrieved on November 3, 2009: http://proxy.lib.wayne.edu/login?url=http://proquest.umi.com.proxy.lib.wayne.edu/pqdweb?did=1867970661&sid=1&Fmt=3&clientId=14288&RQT=309&VName=PQD Jennings, L. Upscale Brands Positioned as Less Luxury, More Valuable. 8 March, 2009, v43-10 p1(2). Nation's Restaurant News. Retrieved on November 3, 2009: http://galenet.galegroup.com.proxy.lib.wayne.edu/servlet/BCRC?vrsn=unknown&locID=lom_waynesu&srchtp=glbc&cc=1&c=52&mode=c&ste=72&tpc=Products+%26amp;+Services&tbst=tsCM&tab=2&ccmp=Starbucks+Corp.&mst=starbucks&n=25&docNum=A196051969&bConts=13247&finalAuth=true McDonald's Marketing Strategy, (15 Oct, 2008). Web, 30 Nov. 2009. http://www.macdonaldconsultingservices.com/post/2008/10/McDonalds-Marketing Strategy.aspx McDonald’s Worldwide, < http://www.mcdonalds.ca/ca/en/our_story> Mullins, J.W., Harper, B.A., and Walker, C.O (2006). Marketing Management: A Strategic Decision-Making Approach. Sixth Edition. New York, NY: The McGraw-Hill Companies Inc. Paley, N. (2006). The Manager’s Guide to Competitive Marketing Strategies, Thorogood: London Pride, M.W. and Ferrel, C.O., (2008). Marketing, 15th Edition, Cengage Learning US Food Industry Overview (2007). Plunkett Research Limited, Available at [Retrieved 17 Feb, 2006] Read More