The Case of Starbucks - Essay Example

? Starbucks is an upscale, recognized coffee brand enjoying competitive advantage. However, with competition being intense, Starbucks needs to understand the motivation and benefits that consumers seek. The Theory of Planned Behavior (TPB) suggests that behavioral decisions are not spontaneous and depends on values, attitudes and norms. To enhance their self-esteem and self-identity consumers desire to feel distinguished and consumer unique and scarce products. Such consumers are not price conscious. However, at different stages in the family life cycle decision making is done by different members. While the youth and children are the primary decision makers on certain categories of products, among the adults the decision rests with the one who contributes the maximum towards household expenses. Based on these factors Starbucks is advised to cater to the discerning consumers products and service that would make them feel distinguished. Table of Contents 1. Introduction 1 2. Motivation & Benefit 2.1 Theory of Planned Behavior 1 2.2 Self-identity 1 2.3 Uniqueness Theory 2 2.4 Scarcity and attractiveness 3 2.5 Organic coffee and its impact 3 2.5 Customer preferences 4 2.6 Physical environment 4 2.7 Recommendations for Starbucks 5 3. Family Life Cycle and Family Decision-Making 5 3.1 Family Life Cycle 5 3.2 Stages in FLC and choices 7 3.3 Family decision-making 8 References 10 1. Introduction Starbucks is an upscale, recognized coffee brand enjoying competitive advantage. They have 17,000 stores in 49 countries and their greatest strength is their strong brand image and a considerable market share. The UK coffee market, according to a study by Mintel in 2010, is expected to grow and is forecast to be worth GBP976 Million by 2015 (PR Newswire, 2010). On an average adults consume about two cups of coffee per day and Starbucks has less than 1% of the global market share (Kotha & Glassman 2003). Competition being intense, Starbucks needs to understand the motivation and benefits that consumers seek. 2. Motivation & Benefit 2.1 Theory of Planned Behavior Consumer behavior is associated with idealized people and communicates information about consumers (Smith, Terry, Manstead, Louis, Kotterman & Wolfs, 2008). It communicates their personal values and their self-identity. The Theory of Planned Behavior (TPB) suggests that behavioral decisions are not spontaneous but the result of a reasoned process in which behavior is influenced, even if indirectly, by attitudes, norms and perceptions of control over the behavior (Smith et al. 2008). The attitudes, norms and the perception of control over behavior influence behavior through their impact on behavioral intention. Food choices including the intention of consuming environmentally friendly products are all influenced by the TPB. 2.2 Self-identity People buy a product for the value they can deliver. The purpose, the product and the person interact to shape consumer behavior and any changes on any of these could impact consumer behavior (Ratneshwar, Shocker, Cotte and Srivastava (1999). How the product or service contributes to their self-identity and well being influences consumer behavior. The teenagers, for instance, like to be seen at trendy places. To them the social experience and the perceived brand value hold importance (Lockyer 2009). Self-identity is the extent to which the individual sees him- or herself as a typical consumer of a product, and may play a role in the context of the consumer (Smith et al. 2008). Self-identity, an important determinant of behavior, reflects the label people use to describe themselves. To boost their self identity consumers can consume food and also consume food at places that would help distinguish them. Self-identity predicts intentions to consume fair trade products and unique products. 2.3 Uniqueness Theory Food can either be consumed publicly or privately. Consumers like to experience goods and services that will distinguish them from others. Hence advertising should be unique in its appeal to the coffee consumers. Marketers recognize the need of consumers to be unique and they hence use such advertising messages that make each individual feel unique. Uniqueness theory deals with people’s emotional and behavioral reactions to information about their similarity to others (Lynn & Harris, 1997). However, people do not like to feel distinctively similar or distinctively dissimilar. They just want to be moderately distinct from others. People tend to avoid unpleasant effects in being too similar or too dissimilar. Hence people want to feel unique but this need for uniqueness is constrained by social affiliations and social approval. Thus they would not like to engage in something that leads to social isolation or disapproval. 2.4 Scarcity and attractiveness Scarcity enhances attractiveness even in case of cookies, soft drinks and food items. Consumers would like to differentiate themselves and engage in consumption of food that is unique. Scarcity also enhances desirability (Lynn & Harris, 1997). Consumers may desire scarce products or services as a means to differentiate themselves from others. Adopting new products before others is also another way of being unique. This group of people then influences the adopters. Thus consumer innovativeness may be motivated by the desire to be unique. Consumers’ motivation where to shop is also influenced by the need to be unique. Consumers with a strong desire to be unique may prefer to shop at small outlets with unique merchandise than at outlets that are large and carry standard merchandise. 2.5 Organic coffee and its impact UK consumers prefer mild and mellow coffee. They now prefer premium brands over cheaper jars of instant coffee (PR Newswire, 2010). Tastes are changing and British consumers prefer more of Cafe Latte than Cappuccino (Boughton, 2005). They also prefer fairly traded coffee. The consumers have become conscious of the social and environmental impacts of the coffee they purchase and hence the trend towards ethical coffee has increased (PR Newswire, 2010). Consuming food produced ethically enhances their self-esteem as they believe they contribute towards a healthier society. However, consumer behavior has been found to be inconsistent with their reported attitudes or concerns. While many express concerns about safety and prefer organic and healthy foods, only a quarter of such people actually buy healthy or organic foods (Rimal, Fletcher, McWatters, Misra, & Deodhar, 2001). They are not willing to pay the premium price for it. The gap is wider among people with lower levels of education. Educating consumers about food safety threats could reduce the concerns and changes in food consumption habits. Government publications and food labels would be effective education methods that can be used by the organizations. 2.5 Customer preferences A well-made coffee can fetch more profit than any other beverage. The price of coffee does not affect the number of times they buy it. In fact too low a price may adversely impact the reputation of the marketers. Moreover, many consumers associate the price with the product. The amount of time that consumers spend at a good coffee outlet has increased, on an average consumers now stay for more than half an hour (Boughton, 2005). This enhances the importance of the physical environment. 2.6 Physical environment The physical environment determines consumer perception and behavior. The physical environment should attract attention. The place where a product or service is bought or consumed is important contends Kotler (Hightower, Brady and Baker, 2002). The physical environment should be able to create and deliver a message. The physical ambience of the Starbucks stores can influence the consumer behavior and the purchase intentions. In fact the store interiors can have more influence than the product purchased. The store environment can stir feelings that have a signaling effect on the purchase. The emotional state of the consumer helps the service provider design a suitable service environment (Clarke & Schmidt, 1995). 2.7 Recommendations for Starbucks Since consumer behavior is a reasoned action and a planned behavior Starbucks should ensure that each customer feels distinguished. Even though findings suggest that very few consumers actually would consume fairly traded coffee, Starbucks should offer organic coffee. The need for self-identity and the motivation to enhance their self esteem consumers would feel distinguished if they consume organic coffee. Price is not a constraint for the discerning consumers and hence Starbucks should position itself as an upscale brand. People also have a desire to feel unique and this desire can be satisfied when they consume coffee in a distinguished environment with unique products. 3. Family Life Cycle and Family Decision-Making Coffee is one of the most popular beverages in the world and a healthy alternative to alcoholic beverages in social gatherings (Hsu & Hung, 2005). Coffee has been stereotyped as an adult beverage. However, based on the family life cycle and family decision-making Starbucks can alter their marketing strategy. 3.1 Family Life Cycle The family life cycle (FLC) is used by marketers for segmenting the markets based on consumer behavior. This sociodemographic variable is used for explaining and understanding consumer behavior and market segments (Redondo-Bellon, Royo-Vela & AldaAs-Manzano, 2001). It helps in understanding the consumption of food and beverages as well. The FLC is based on the fact that family changes impact the family income and expenditure. The FLC explains that an individual passes successively through several stages in the family life cycle. Each phase of the FLC has its own characteristics in terms of interests and needs that affect specific patterns of consumption behavior. In the area of food purchasing decisions, the FLC influences the diet-related attitudes and behavior (Riefer, 2009). However, presence of children and the employment status also influence the food consumption patterns. In addition, the number and age of children represent important attributes. Consumer behavior needs deeper understanding of the psychological variables such as attitudes, values and norms. While there are differences and divergences concerning the stages that define the family life cycle, six stages are generally accepted (Fernandez, Oliveira & Hochheim, 2001): Couples/singles without children Couples/singles with children Couples/Singles with children and adolescents Couples with young adults Couples with adolescents and young adults Couples/widows/widowers whose children have left home. While much has been talked about organic food and coffee consumption, the FLC also influences such decisions. For instance, the transition of children into adolescence results in reduction of organic food consumption while consumption of traditional food increases (Riefer, 2009). In fact children do not prefer organic products in food categories such as snacks, breakfast cereals, dairy products, or fizzy drinks. Even for convenience food items such as pizza they prefer conventional products. Children and the youth reject organic food because of the taste, the intensity and dimension. They find the organic food bland and look for flavor enhancers. Children consuming organic food and drinks would not conform to the image of the youth and perhaps this is the reason that the youth and children reject organic food. 3.2 Stages in FLC and choices The young and single have become independent in their decisions. The spending power of the youth has increased and their disposable income is much higher than other groups (Lee & Collins, 2000). The youth indulges in 16-ounce Frappucinos that contains a high dose of caffeine (Linn 2007). Offering coffee with high dose of caffeine might ultimately impact Starbucks’ reputation. The youth primarily look for a place to hang out and caffeine or coffee is not the primary motive. Hence, even if the product attribute for the youth is altered, they would still visit Starbucks because they seek excitement and pleasure. They look for social experience and perceived brand value. Starbucks is the most preferred destination among teens. The engaged couples buy a product to begin life together. They would lay emphasis on where they are seen together and hence self-identity plays an important role. There are families with single or double income but no kids. The empty nester’s or those whose children have grown up and move out of the house, seek comfort and contact with the outside world. They tend to be lonely. For this category of consumers Starbucks can be a place where they spend their time in relaxing or when they seek some contact with the outside world. Very often they would also like to consume food that would suffice as a meal. Single parents often visit Starbucks with their child or children as they need some time off from the daily chores. Grandparents too raise their children and may like to visit coffee shops where the children could be taken care of the grandparents could sip their coffee. Thus, Starbucks also needs to cater to the children. 3.3 Family decision-making For consumer marketers and researchers age is a vital demographic that plays an integral role in determining consumer behavior (Roberts & Manolis, 2000). The environment in which a generation is raised provides important clues towards explanation of some consumer-related behavior. Changes in the socio-cultural environment impacts the consumer behavior, as also the generation’s attitude toward marketing, advertising and shopping. In the baby buster generation breakdown of the tradition family structure, the ever-changing marketing messages, and the environment where shopping is a form of worship, are accepted norms. Young adults make their purchase decision under the influence of their family (Bravo, Fraj & Martinez, 2006). However, the trend has changed and there is a difference in how the elders and the youth perceive the product or service. The elders look for tangible and intangible values and consequently their decisions are based on the deeply held core values (Cheng, 2006). Luxury goods and services fulfill an emotional need and the youth particularly look for excitement and pleasure. Therefore the marketer would need to understand the type of family, the type of the product and the characteristic of the influence. They should also understand the perception of the parents’ degree of expertise on the product. On holidays people attach greater importance to food consumed by themselves and their families. Even on festivities and celebrations they experience food in a different way than on normal days (Zarantonello & Luomala, 2011). People tend to be more careful about its purchase, preparation and consumption. Teens go out with parents on festival and holidays but they also seek privacy on other days. Family conflicts in family decision making can arise due to the existence of cognitive structures as the purchase motives and the perception of alternatives could differ. Family decision making also depends upon the family structure. Changes in the role of women in the society, changes in education level, growing double income family structures and greater incidences of career-oriented women, influence the purchase decisions in the family (Lee & Beatty, 2002). Since women contribute to the resources of the family, it has brought about changes in consumption expenditures. Thus if the husband fulfills his duty to provide for the family, the woman will allow the husband to define the norms of decision making. Whoever contributes more towards the household expenses would influence the family decisions. The cultural values of a family also influence the decision regarding food consumption. The influence of children varies with the type of product and the decision stage. Children and adolescents have the highest influence in family decision making when they are the primary consumers. This pertains to decisions regarding vacations, movies, entertainment, eating out, or even clothing. References Boughton, I 2005, 'CHANGING TASTES IN COFFEE CONSUMPTION', Caterer & Hotelkeeper; Jul 14-Jul 20, 2005; 194, 4383; ABI/INFORM Trade & Industry pg. 58 Bravo, R Fraj, E & Martinez, E 2006, 'Modelling the Process of Family Influence on the Young Adult Consumer Behaviour', Journal of International Consumer Marketing, vol. 19, no. 1 Cheng, C. (2006). The Impact of Brand Image on Consumer Behaviour of Luxury Goods of Fashion Industry in China. Retrieved online 9th May 2010, from http://edissertations.nottingham.ac.uk/1585/1/07MSclixss24.pdf Clarke, I & Schmidt, RA 1995, ‘Beyond the Servicescape, The Experience of Place’, Journal of Retailing and Consumer Service, vol. 2, no. 3, pp. 149-162. 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