Advertising Strategies of Tim Hortons and Starbucks - Essay Example

Essay: Promotional and Advertising Strategies The café and coffee industry started to boom in the past couple of years. Coffee addicts have been growing and thus more and more joints have been opened up so as to cater and accommodate these needs. There are specifically two companies that are in constant competition: Tim Hortons and Starbucks. These two companies have got their own loyal clientele and even though they essentially sell the same product, they also greatly vary in some other aspects. Thus in this particular essay, two different modes of promotional activities will be examined, compared and contrasted. Starbucks is among the most admired and successful companies globally today. It has over the years grown from being a single coffeehouse in Seattle more than 3 decades ago to a multi-billion dollar international company Studying Starbuck’s marketing strategy; one is able to apply the success principles that have helped Starbuck in a great way. On the other hand, Tim Horton’s is one of the favourite coffee and doughnut restaurants, in addition to being Canada’s biggest fast food service. Their slogan is “Always fresh, always Tim Horton’s.” Starbucks’ promotional strategy is not mostly seen in several companies nowadays. It’s quite rare to find a Starbucks ad space in newspapers, billboards or other places where you expect to find adverts for other similar establishments. Starbucks uses unconventional promotional services. The promotional team saw that Starbucks is most likely to benefit if she used unconventional strategies that are unique and seldom-tried, however most absolutely matches the notion that the company wants to depict. Starbucks has always been insisting on the perfect coffee cup, and has shown that their main emphasis is mostly on product quality. Even though their coffee is slightly priced higher than expectation of most people, it usually satisfies most of their customers with their delicious rich aroma and taste. On the other hand, Tim Hortons has also been customer centered and has offered her customers large cup sizes. Thus consumer research and focus groups discovered that Tim Horton’s customers felt that the old coffee cup wasn’t big enough. This changing of the cup size is aimed at exploiting the customer’s psychology behind sizing to influence the behaviour of consumers. This means that from a pure profitability view point this is a rather smart promotional strategy. The other promotional strategy used by Starbucks is brand marketing. Thus the promotional strategy employed by Starbucks has constantly focused on “word of mouth” method of marketing and letting their high quality of their services and products talk for themselves. For several years this has been exceptionally Starbucks’ method of doing business and has contributed in a big way in making Starbucks a success story. On the other hand Tim Horton is constantly growing and trying innovative things. They are always having new promotions that give innovative menu item for a particular period of time. If the product sells well, Tim Horton’s adopts it permanently on their menu. This type of promotion is known as a Push promotion strategy. This type of promotion is employed by marketing managers who when s/he wants to push the company’s sales and an increased purchases and also increases the consumption by their consumers (Charles, 2012). Starbucks for instance should use marketing information to come up with a forum whereby members of the public and other stakeholders can get involved. This will create a community around their brand. Thus they can come up with a website whereby customers and other individuals are encouraged to air and express their ideas and experiences with the history of Starbucks .Thus the company can personally strive to join in these discussions. And through such, it can get a lot of useful feedback which can assist it in improving their products and service delivery. The second recommendation would be to engage in product development and market research. This is a very useful tool since it will support the company to think up innovative and creative ideas to add to their services and products .This will help them come up with various flavours to their coffee, increase the amount of food on their menu and could even become one of the biggest breakthroughs of offering internet capabilities in their numerous coffeehouses spread out throughout the world (Charles, 2012). Sales promotion can be referred to as any variety of techniques planned to offer purchasers an additional enticement to purchase in the form of benefits or value beyond those given by the product being bought. Some of the consumer-oriented promotions that could assist Starbucks in both the short and long term for their products include; retail promotions-thus Starbucks can offer inducements to their consumers such as price discounts, double coupons, special displays and retail coupons. The other consumer-oriented promotion strategy that can be applied by Starbuck include consumer promotions which are enticements given to consumers include premiums, rebates, samples and bonus packs (Ken, 2013). These kind of consumer-oriented promotions could assist Starbuck to create; value addition-this means that promotions that are value-added, for instance, free instructional course with each purchase, training that is complementary, bonus points in regard to future purchases and free trials help in building retention of customers since customers will naturally appreciate the effort that is put by the company to get them buying. Unlike discounts and coupons that are usually short term, a company can build strong relationships with their customers that have got long-term outcomes with promotions that are adding value and significant to the purchase made by the customer. This when combined with loyalty discounts can assist in developing long-term strategies that create strong customer confidence, boosts identity of the brand and increases referral rate. The other long-term effect is the fact that regular and constant sales and marketing promotions will have an effect on the bottom line in the long-run. Holding regular discounts will usually make the company expect increased sales during such periods. Thus the total profit resulting from these sales leads to an increase in the company’s yearly profits and may cover up for periods when sales are low. Thus when the company is planning its annual budget, it can take into consideration any planned promotions which they know will bring in extra sales. This therefore means that as part of long-term budgeting plans, promotions that are customer oriented can play such a significant role especially in boosting the company’s profits (Ken, 2013). Starbucks is a market leader as far as the coffee market is concerned. As an entity company, it is in control of many times more market share more than any of its closest rivals. Thus Starbucks offers a mixture of relative, authority and quality value over and above its high-priced coffee shop. Starbucks employs a pricing objective that is value-based so as to maximise her profits. Starbucks does this on the basis of customer analysis and research so as to formulate targeted price hikes that capture the largest number of customers who are willing to pay without actually chasing them away. Thus profit maximasation is a procedure through which a company establishes the product and price output level that assists in the generation of most profit. Even though this may seem obvious to anybody involved in running an enterprise, it’s quite rare to witness companies utilising value based pricing strategy to effectively reveal the maximum amount a consumer base is enthusiastic to spend on their products. Starbucks therefore uses the following approaches to generate big profits; Starbucks usually focuses on the Right Customers and the Right Market. Whereas cutting prices is broadly accepted as the easiest and best method of keeping customers when times are tough, this practice is seldom based on an in-depth analysis or rather testing of the actual consumer base. However this is different for Starbucks, in which increases in price throughout the history of the company have already prevented the most price sensitive consumers ,leaving behind a loyal, big-income customer base that has a perception that the coffee beverages are a luxury that they can afford. Thus for Starbucks to compensate for the loss of customers to cheaper alternatives such as Dunkin Donuts, they usually raise prices so as to maximize profits their price insensitive consumers, depending on their strong epicurean coffee. Instead of trying to enter into competition with chains that are cheap such as Dunkin, Starbucks utilises price hikes so as to separate itself from the rest of the pack and assist in reinforcement of their premium image of their brand and unique products (Kurtz, Boone, 2010). Starbucks also engages in product Versioning and Price Communication.Starbucks thus applies price hikes to particular drinks and sizes instead of the entire lot. By hiking the price of the large range brewed coffee solely, Starbucks is capable of capturing customer surplus from the consumers who get more value in upgrading to grander drinks, following their witnessing the price of a little drip with tax climb over the 2 dollar mark. Thus versioning their product this way, Starbucks is able to enjoy a somewhat higher margin from these consumers who were convinced by the increase in price to buy bigger sizes. Starbucks also skillfully communicates their price hikes so as to manipulate customer perception. The price increase may be on the basis of the consumer’s readiness to pay, but they however relate the hike with what seems to be a just reason. The following are actions that other companies within the same product group may take so as to differentiate themselves and gain competitive advantage; foremost these companies should take their time and study their consumer’s personas. This is because they should understand what majority of their consumer base is price sensitive and utilises small price hikes that daily consumers hardly notice so as to boost margins. This therefore means that quantification of their buyer’s personas and the demand for the company’s service or product will assist the company in choosing a price that is able to capture the maximum amount the company’s consumers are ready to pay for. Secondly, Starbucks’ competitors should employ product differentiation so as to put their company in the lead. A company can justify maximising their profits by use of the fairest of grounds, but if the consumers do not rate the company’s service the way they rate a delicious cup of coffee, then it will mean a definite decrease in demand. A company should therefore create a service or rather product that customers cannot live without and this will enable it to employ price increases without necessarily turning off their consumers (Marie, 2009). The most effective medium of marketing for Starbucks is social media. This is because of the following two key reasons; foremost, social media will enable Starbucks to create customer relationships and instead of entirely relying on efforts of accumulating new customers, it will simply cultivate its present relationship. This will obviously ensure more followers and fans in the long run in addition to the continued existence of brand ambassadors and advocates. This stays true across the board; meaning that in-store experiences are extremely valued, alongside other online engagements, stressing on the significance of customer service (Kaye, Medoff, 2011). Secondly social network advertising will enable Starbucks to go to its customers. The moment Starbucks captures a photo, it will immediately share it on Instagram, tweet it on Twitter, maybe post on Facebook most probably have it pinned on Pinterest. This will definitely go out to where Starbucks’ customers love to hang out. This type of cross-promotion is highly valuable especially in this world that has become highly digitalised (Don, 2010) References Charles, L. W. (2012). Marketing. New York: Nelson. Don, D. (2010). Streetwise Marketing Plan:Winning Strategies for Every Small Business. New York: Adams Media. Kaye B, Medoff. N. (2011). Electronic Media:Then,Now, and Later. New York: Focal Press. Ken, K. (2013). Advertising and Uses of Sales Promotion. New York: South-Western Cengage Learning. Kurtz D, Boone. L. (2009). Contemporary Business 2010 Update. New York: John Wiley & Sons,Inc. Marie, B. (2009). Starbucks. New York: Greenwood Publishing Group. Read More