Target Market of Starbucks - Essay Example

?Running Head: Starbucks Starbucks [Institute’s Starbucks Executive Summary This business report is an attempt to present a critical analysis on the service experience of the Starbucks store at 201 Elizabeth Street, Sydney, New South Wales. Operating as the largest coffeehouse on this planet, Starbucks was founded by Jerry Baldwin, Zev Siegl, and Gordon Bowker in 1971. Responses from four respondents, which are a part of the Starbuck’s target market, have helped to formulate the analysis and discussions. The analysis revealed that there are some problems with customer service, product fit, promotional efforts, parking, employee involvement, and parking of Starbucks. Surprisingly, the packaging is the only aspect where there are no objections at all. The recommendations proposed in this report include first, offering discounts, coupons, free benefits, rebates, premiums, lotteries. Second, increase the volume of promotional activities. Third, train and manage employees in such a way that they could associate themselves with the company. Fourth, at off peak one employee must greet the customers at the door and the other must help customers with their parking problems. Table of Contents Introduction 4 Discussion 5 Target Market of Starbucks 5 Pricing 6 Promotion 7 People 8 Product 9 Process 10 Physical Evidence and Place 11 Recommendations 12 Conclusion 12 References 14 Appendices 15 Appendix # 1 – Questionnaire 15 Appendix # 2 – Respondent # 1 18 Appendix # 3 – Respondent # 2 19 Appendix # 4 – Respondent # 3 20 Appendix # 5 – Respondent # 4 21 Introduction It was in March 1971 in Seattle, when three people Jerry Baldwin, Zev Siegl, and Gordon Bowker decided to open their coffee shop with the name of Starbucks (Bussing-Burks, pp. 26-34, 2009). The name came from their favorite novel Moby-dick but at that time they did not realized that this name would remain restricted to Seattle, but it is going to rule the hearts and minds of millions of people all around the world (Pride & Ferrell, pp. 36-38, 2007). With 2010 revenue of more than 10.71 billion US dollars, Starbucks is the biggest coffee house on the planet earth. With its 16,858 stores in more than 50 countries, Starbucks is one the corporations that have been able to survive when its fellow brands were failing due to revelations of corporate scandals, manipulations, socially irresponsible behaviour but despite going through all this, it was able to make it through to what it is today (Armstrong et al., pp. 312-317, 2009). Currently, Starbucks is operating almost 23 stores in various parts of Australia. This report is an attempt to explore, investigate, and critically examine the service experience of the Starbucks shop at 201 Elizabeth St, Sydney, New South Wales. The report would first start by drawing lines to highlight the target market of Starbucks in Australia. The report has collected its data from four different people that fit in the picture of Starbucks’s target market and have who have recently been to Starbucks. The data collection method was primarily through an interview questionnaire, which is a part of this report under the heading of Appendix # 1. Furthermore, the responses of these people, in form of the brief bullet points and notes are also there in the appendix section. This report would be profound importance of to the Starbucks executives of Australia. For the past few years, Starbucks has been struggling in Australia to produce the same results that it has been showing in rest of the world. It was in the year 2000, when Starbucks entered the Australian market with hopes that it would capture the market and become the market leader as it is in the US and many other parts of the world. Important here to note is that this was the time when Starbucks was touching its peak. “Open a store a day and beat the competitors away” was the policy of the company (Michelli, pp. 255-256, 2007). However, Starbucks soon realized that this model is not producing the intended results and in mid 2008, finally, Starbucks announced that it would close 61 out of 84 stores that it operates in Australia (Lamb & McDaniel, pp. 166-168, 2008). Therefore, the Starbucks stores, which have been able to make it through, must make sure that they live up to the expectations of their head offices. Quite understandably, the same is not possible without exceptional levels of service experience and this reports intends to provide the Starbucks’s management of Elizabeth Street Store that how can they improve their service levels. Discussion Target Market of Starbucks Before discussing the findings, it is important to shed some light on the target market of Starbucks in Australia. Without any doubts, defining the target market and segmentation of the same is one of the trickiest jobs for any marketer but also the most important one as well. In brief, the target market of Starbucks is not confined to any particular age group, ethnic segment, geographical market, psychographic tenders, or others (Simon, pp. 277-280, 2009). The target market of Starbucks is all those people, which are ready to pay a premium for a good environment, Starbucks’s brand name, and a great cup of coffee. However, the recent marketing campaigns of Starbucks appear to be more inclined towards a more youthful segment. This would mean that Starbucks is not focusing more people within the ages of 15-35, both males and females, belonging from at least middle class family and are coffee lovers. Again, these people must be able to or must be willing to pay a premium for higher perceived benefits and services (Lussier, pp. 269-274, 2008). Despite the fact that there are many coffee lovers in the old aged segment as well but the reason why Starbucks is so interested in having the Generation Y as their customers is because these people do not mind paying a little extra for anything that they even “perceive” is any better than the other products. Furthermore, if Starbucks remains too focused on a generation, which will be replaced by a newer generation within ten to twenty years, which would not be the smartest of the decisions. Secondly, by engaging with a target market with of newer generation the one that is able to live for at least the next 40 to 50 years the company is looking at a long-term goal (Lamb & McDaniel, pp. 166-168, 2008). In terms of psychographic segmentation, one can say that the focus of Starbucks in the Australian market is on people, which fall into the categories of “Achievers” and “Experiencers. (Pahl, pp. 133-134, 2009)” Achievers are the people who have a high sense of achievement and these people remain focused on their goals. These goal oriented people try their level best to achieve as much success as they can and they make that they are using products which are a symbol of symbol, power and achievement to them and their peers. Experiencers are the people who are young, spontaneous, and impulsive and want their lives to be rollercoaster ride. They want excitement and they are ready to pay for the products that excite them, such as clothing, fashion, cars, personal care, and others (Read, pp. 456-458, 2007). Pricing The study revealed that people are not ready to pay high prices for the Starbucks coffee. For example, Joseph said sarcastically “I paid Six A $ for sitting there at Starbucks’s shop for around 90 minutes. I ordered a coffee, sat down at the table, read newspaper. It took me around 15 minutes to finish the first one. So, I felt embarrassed and guilt and after a little while I ordered another coffee and after 90 minutes I realized that they made 6 dollars out of me.” Quite clearly, people do not appear to be satisfied with the pricing plan of Starbucks. The company has been operating worldwide on the same pricing approach of charging a premium for their services. More importantly, this has worked in various countries and the reason being because Starbucks had the somewhat the first mover advantage in those countries. Even if there were coffee shops before Starbucks, they were not developed (Gilbert, pp. 78-79, 2008). This allowed the “Starbucks’s experience” to be something new, creative and innovative and thus people were ready to pay a premium for it. However, it is not the case with Australia (Lamb & McDaniel, pp. 166-168, 2008). When Starbucks entered the Australian market n 2000, the Australian consumers were already tired of too many coffee shops and cafes in their neighborhood. As a result, it just does not make any sense to pay a premium for something, which is excessively common. This explains why respondents expressed their extreme dissatisfaction if Starbucks intended to increase the prices even by 20 percent (Lussier, pp. 269-274, 2008). Promotion Another important insight gained by this little study relates to the promotion efforts of Starbucks’s store at Elizabeth Street. It appears that not only this has been the problem with this particular Starbucks store in Australia but also this is the issue with the entire Starbucks chain of Australia. Starbucks’s management strongly feels that its international performance, standings, reputation, and brand name would be enough to woo the customers to make a visit to Starbucks. However, Starbucks’s management has a strong reason behind the same (Simon, pp. 277-280, 2009). Most of the internal expansions that the company went through in the near past were into countries where the coffee industry or the coffee market was still developing and it had no direct, stiff competition (Pham-Gia, pp. 99-103, 2009). However, the Australian market is the different case. Australian people have had cafes, coffeehouses, and snack bars since long. Not only the market is mature but also there are many of them in each neighborhood thus increasing the competition to some ruthless levels (Pham-Gia, pp. 99-103, 2009). Furthermore, with no information about the offering and the company, people see no incentive or motivation in leaving their traditional coffeehouses and bars and spend time at Starbucks (Lamb & McDaniel, pp. 166-168, 2008). As evident by the responses of the customer, not many promotional efforts are taking place from the side of Starbucks’s management in Australia and this particular store. The respondents indicated that they do not find them exposed to any of the promotional activities of Starbucks. This explains why people in the near neighborhood do not even know about the presence of a Starbucks cafe in the area (Pham-Gia, pp. 99-103, 2009). Communication or Promotion is an equally important aspect or marketing as the other aspects. If the customers do not know about you, your presence and your offerings, there is no point of running a business (Simon, pp. 277-280, 2009). People Furthermore, another concern for this store of Starbucks is regarding the customer service levels prevalent at the store, specifically, the dealing of employees with the customers. Despite the fact that the overall ratings regarding the same are satisfactory, in fact, above average, yet the bar has to be very high for Starbucks (Pahl, pp. 133-134, 2009). When a coffeehouse is charging a premium for almost the same coffee, which is available two shops away at another store, then it has to justify its premium prices through the overall experience it is providing (Behar & Goldstein, pp. 55-58, 2008). All around the globe, Starbucks is known for its excellent customer service levels. Several researches have revealed that employees at Starbucks are well trained and well equipped. However, the study has shown some complaints regarding the same. The management of this store must recall and try to stand true to what Howard Schultz, Starbucks Chairman, and Chief Global Strategist said in 2005 “We aren’t in the coffee business, serving people. We are in the people business, serving coffee. (Gilbert, pp. 78-79, 2008)” The dealing of the employees with the customers needs improvement. There may be just a few instances when employees would have been a little surly to the customers but those few instances are enough to cause a huge dent on the company’s operations and revenue. This is because whenever a customer feels that he is being mistreated by any of the employees of the company, he does not associate that mistreatment to the employee but to the company. As in the example of Alex Martin, for him the female employee is not the culprit but the whole Starbucks chain, wherever it is operating in the world is bad and unresponsive to the needs of the employees (Fellner, pp. 9-15, 2008). More importantly, employees are the ambassadors of the company, especially in the case of companies where customer service is involved. Therefore, it is important that the store sits down with employees and reinforces the values of mutuality and togetherness amongst them (Pride & Ferrell, pp. 36-38, 2007). The employees need to be told that they are not employees of the company but a part of the company as well. Quite understandably, even if they are having the worst possible day but they would never be surly and unfriendly with their guests. The reason being that the own their house and the people. The sense of ownership has to be taught, practiced, and reinforced by the managers so that these events could be avoided in the future (Read, pp. 456-458, 2007). Product Another P out of the 7ps of marketing mix relates to the “product” itself. There is very little debate about the quality of the coffee that Starbucks provides since it is one of its kind. In fact, Starbucks can sell itself for its product quality at almost any part of the world. However, the point here is that it is not about the superior quality but the match between the need and the product (Lamb & McDaniel, pp. 166-168, 2008). Despite the fact that Starbucks has brought with itself, the great taste, smell, and quality of its coffee, yet this is not exactly what the Australian coffee drinkers need. Quite understandably, for ages Australia has under the European influence. European settlers controlled Australia for long and even today, there are many glimpses of European taste in the Australian culture, cuisine, lifestyle, preferences, and others (Fellner, pp. 9-15, 2008). The same is the case in coffee as well. One of the most crucial reasons why Starbucks had to pull it self out of the European market was because of the fact that it its American taste and style did not quite appeal to the Australian customers as such. Even a glance at the usual coffee houses of Australia would reveal that most of them try to fit themselves into the European style of coffee, not only their taste but also their menu reflects the European style. Starbucks’s store should try to alter their product offering a little bit, so that it can appeal to the customers more (Armstrong, Harker, Kotler & Brennan, pp. 312-317, 2009). Process The study has also revealed that customers are complaining about the long waiting times and over crowdedness of the store at peak times. Quite understandably, whenever a customer sees a full store with long lines and no empty seats, it forces him to think that whether or not he should go to somewhere else and if the customer does the same, there is a high probability that he would not return in ages (Pahl, pp. 133-134, 2009). Therefore, making sure that the store appeals to all at all times is vital to revenue growth. Now, there can be two possible solutions for this problem. First, would be to expand the store so that its capacity increases (Behar & Goldstein, pp. 55-58, 2008). However, the second solution, which is comprehensive one, is deeply rooted in ensuring friendly work environment for employees. If employees think that the have stake in the store and they own it, then obviously, during peak times, they would try their best to work faster themselves and serve as many customers as possible. There are many great examples of companies like Continental Airlines, Southwest Airlines, Lincoln Electric, AT&T, Google, Toyota, Honda and many others, where companies have tried to built partnerships with their employees and the same has resulted in decreased time in manufacturing the product or serving the customers (Lussier, pp. 269-274, 2008). This explains still many American companies take more than 24 months to manufacture a car, however, many Japanese companies, with strong corporate cultures and employee friendly practices are able to do the same in about 12-18 months (Armstrong, Harker, Kotler & Brennan, pp. 312-317, 2009). Starbucks of Elizabeth Street can really learn from these examples and allow its people to give their suggestions, empower them to solve the problems and tell them that the management has all the faith and confidence in them (Pahl, pp. 133-134, 2009). Physical Evidence and Place The responses have also revealed that despite the fact that the internal environment of Starbucks is great as compared to other coffee houses but the external location problems needs to be addressed as soon as possible. Customers are having problems in finding parking spaces near the store. Quite understandably, the store management has two options here. First, find an alternative parking space for its customers near the store (Pahl, pp. 133-134, 2009). Second, shift the store to some other location in the neighborhood where the intensity of this problem is not extreme. The reason why the store management shall pay urgent attention to this issue is that if the problem persists, customers would not even attempt to visit the store. Despite the fact, the problem is virtually not in the hands of the management yet this is a part of the overall experience that the customers are getting (Read, pp. 456-458, 2007). Recommendations The shop must try various discount offers, coupons, free benefits, rebates, premiums, lotteries, and other pricing methods, which can attract the customers (Behar & Goldstein, pp. 55-58, 2008). More efforts shall take place to promote the store in the neighborhoods through, advertising, billboards, street activities, posters, catalogues, company reports, display signs, brochures and booklets, donations and others. The idea here is to keep in touch with the customers and another possible way of the same could be by emails and text messages to the recurring and loyal customers telling them that they company appreciates their loyalty and keep them informed about all the happenings so that they can associate themselves with the store (Fellner, pp. 9-15, 2008). New employee training programs should be brought in and efforts should be made to make sure that employees think that they have a stake in the store as well. Friendly relations with the manager, profit sharing plans, authority, and sense of achievement are some possible options to create and reinforce these feelings (Behar & Goldstein, pp. 55-58, 2008). At least, at off peak times, an employee must be given the task to greet customers as they come to the store and the idea of “customer is always right” shall be made the order of the day. Another employee should take the job of helping customers, which are in search of a parking space. Conclusion Towards the end, it is understandable to conclude that the Starbuck shop at the Elizabeth Street has to make some serious efforts in improving the overall marketing and service experience as soon as possible. However, it is also important to note that the store has all the potential to do the same. It is one of the surviving stores in the 2008 massive shutdown of Starbucks and always appears to be busy. If the store management is ready to consider the above-mentioned recommendations and prepared to implement some, if not all of them then it certainly make improvements and attract new customers. References Armstrong, Gary, Harker, Michael, Kotler, Philip, & Brennan, Ross. 2009. Marketing: An Introduction. Financial Times Prentice Hall. Behar, Howard, & Goldstein, Janet. 2008. It's not about the coffee: leadership principles from a life at Starbucks. Portfolio. Bussing-Burks, Marie. 2009. Starbucks. ABC-CLIO. Fellner, Kim. 2008. Wrestling with Starbucks: conscience, capital, cappuccino. Rutgers University Press. Gilbert, Sara. 2008. The Story of Starbucks. The Creative Company. Lamb, Charles W., & McDaniel, Carl. 2008. Essentials of Marketing. Cengage Learning. Lussier, Robert N. 2008. Management Fundamentals: Concepts, Applications, Skill Development. Cengage Learning. Michelli, Joseph A. 2006. Starbucks Experience. Tata McGraw-Hill. (Michelli, pp. 46-48, 79-82, 2006) Michelli, Joseph A. 2007. The Starbucks experience: Five principles for turning ordinary into extraordinary. McGraw-Hill Professional. Pahl, Nadine. 2009. The Idea Behind the Starbucks Experience: The Main Elements of Starbucks' Strategic Diamond. GRIN Verlag. Pham-Gia, Khanh. 2009. Marketing Strategy of 'Starbucks Coffee'. GRIN Verlag. Pride, William M., & Ferrell, O. C. 2007. Foundations of Marketing. Cengage Learning. Read, Opie Percival. 2007. The Starbucks. BiblioBazaar. Simon, Bryant. 2009. Everything but the coffee: learning about America from Starbucks. University of California Press. Appendices Appendix # 1 – Questionnaire Name of the respondent: - _______________________ Date: - _____________________ Gender: - M / F Age: - Q. 1 Have you ever been to the Starbucks at 201 Elizabeth St, Sydney NSW? A) Yes B) No Q. 2 How often do you visit that place? A) Everyday B) Thrice a week C) Twice a week D) Once a Week E) Once a month Q.3 What do you think is the value proposition of Starbucks A) More for less B) More for more C) More for much more D)Less for much less Q.4 How do the rate the overall packaging of Starbucks? A) Exceptional B) Good C) Satisfactory D) Poor E) Pathetic Q.5 Would you still prefer to go to Starbucks if they rose their prices by 20 percent? A) Yes definitely B) Yes C) Maybe D) Not really E) Not At All Q.6 Would you still prefer to go to Starbucks if they rose their prices by 50 percent? A) Yes definitely B) Yes C) Maybe D) Not really E) Not At All Q.7 Do you think Starbucks is much more than just coffee. A) Yes definitely B) Yes C) Maybe D) Not really E) Not At All Q.8 To what an extent the outer look of Starbucks attracts you to look inside. A) Very much B) To some extent C) Don’t Know D) Not at all Q.9 When was the last time that you saw an advertisement, billboard, promotional sign, or activity of Starbucks. What was it? __________________________________________________________________________________________________________________________________________________ Q. 10 How do you the rate the service and dealing of Starbucks’s employees with you? A) Exceptional B) Good C) Satisfactory D) Poor E) Pathetic Q. 11 Have you ever felt that Starbucks employees of the store under discussion are any better, well trained, well mannered, and well equipped to provide a superior service experience to you. A) Yes definitely B) Yes C) Maybe D) Not really E) Not At All Q.12 Can you share with any bad or unpleasant experiences that you had with Starbucks’s shop at 201 Elizabeth St, Sydney NSW? ____________________________________________________________________________________________________________________________________________________________ Q.13 Would you like to provide any suggestions, which can help Starbucks to improve their customer service and provide a better experience to their customers? ___________________________________________________________________________________________________________________________________________________________ Q. 14 Do you think that the location of this Starbucks store is convenient and reachable? A) Yes definitely B) Yes C) Maybe D) Not really E) Not At All Q.15 How do you rate the overall internal store environment? A) Exceptional B) Good C) Satisfactory D) Poor E) Pathetic Appendix # 2 – Respondent # 1 Alex Martin, Male, 25 years 1. A 2. C 3. C 4. B 5. D 6. E 7. C 8. B 9. A couple of weeks back. A poster 10. B 11. B 12. Three to four months back when I was at the store and asked an employee for something that I needed, she responded as if I have offended her. I tried to complain to the manager about the same but he did not seem to be interested. Other than this, I always had a pleasant experience with the employees at the shop but this one was not at all good and I still remember that. 13. Decrease the prices by a little. The overall experience and offering is good, in fact, better but there is no sense in asking for such high price for being just a fraction better than others 14. C 15. A Appendix # 3 – Respondent # 2 Joseph Zack, Male, 30 years 1. A 2. D 3. B 4. B 5. B 6. C 7. A 8. A 9. A Billboard, earlier this week 10. B 11. A 12. None 13. I am a regular customer of Starbucks but I always face problems with the finding the parking space. In fact, I received a ticket earlier this month for parking at the wrong place. Decrease the prices by a little. The overall experience and offering is good, in fact, better but there is no sense in asking for such high price for being just a fraction better than others 14. D 15. A Appendix # 4 – Respondent # 3 Tanya Aryan, Female, 23 years 1. A 2. D 3. B 4. B 5. B 6. C 7. A 8. A 9. I cant remember any. 10. B 11. A 12. The music is not supposed to be that loud, for a coffee house, light and sweet music, and in fact instrumental tunes are the best suited for coffee houses. 13. Why are the coffees in the American Style and why not of the European taste 14. D 15. A Appendix # 5 – Respondent # 4 Joseph Howard, Male, 32 years 1. A 2. A 3. B 4. A 5. B 6. C 7. A 8. A 9. I cant remember any. 10. B 11. A 12. Every now and then, there is a problem of overcrowding at the store. Furthermore, very often I have to wait in lines for more than 5 minutes to wait for my turn 13. They should not allow all customers to sit there for infinite period. 14. C 15. B Read More