Barriers to Marketing Planning for Starbucks - Essay Example

? Marketing planning Table of contents Contents Introduction 3 Marketing audits 3 Environmental analysis 5 Organizational analysis 7 Barriers to marketing planning for Starbucks 10 The marketing plan 13 Ethical issues 16 Conclusion 18 Introduction The Starbucks Coffee Company has come a long way from its first store opened in Seattle in the year 1976 to its present position with over 6000 stores across 30 countries (Starbucks website, 2011). The success of the company is largely accountable to its well planned marketing strategy and consumer satisfaction that has helped in promoting brand loyalty. The consumers of Starbucks are assured of high quality coffee served at the store counters and excellent ambience within the outlets. The essence of the Starbucks business model lies in its ability to promote revenues and profits through improved customer experience (Tewell, Odom & Snider, 2006). Recently, the company introduced the Starbucks Card that enables the customer to avail Starbucks menu offerings by simply swapping the stored value card. This card is linked to the customer’s credit card and the card can be recharged through the credit card, thus saving the customer from any cash transaction in the counters. The card strategy has promoted the marketing plans of Starbucks Coffee and helped in expanding its market shares (ERS, 2008). The paper provides an insight into the marketing planning approach taken by Starbucks and analyses the possible strategies that could have provided the company with a more effective model of customer retention and market share expansion plan. The first part of the paper provides an assessment of the marketing audit techniques followed by an assessment of the main barriers to marketing planning, the process of formulating a marketing plan and the ethical issues that underline marketing plans. Marketing audits Marketing environments and operating conditions within which businesses operate are deeply influenced by the political, economic, social and technological factors that drive business efficiencies. The rapidly changing consumer tastes and evolving consumption patterns are strongly impacted by increasing purchasing power, improved standards of living, and growing consumerism promoted by the influx of global brands and alternative products in the market. The dynamic market environment today is driven by the globalisation of economies, new product launches, increased competition in markets and a host of alternative product choices available to the end consumers. Marketing audit is a structured approach adopted by businesses to study and highlight the operational challenges and define new opportunities for its products and services (Kotler, Gregor & Rodgers, 2005). The term marketing audit can be defined as “a comprehensive, systematic, independent, and periodic, examination of company’s – or business units – marketing environment, objectives, strategies, and activities with a view to determining problem areas and opportunities and recommending a plan of action to improve the company’s marketing performance” (Kotler et al., 2005). Marketing audit framework (Boone & Kurtz, 2008) The diagram here illustrates the key variables driving the defined market segments for specific products and services. A study of the marketing environment involves the analysis of political, economic, technological and social factors that have a strong linkage to marketing strategies and marketing mix framework adopted by organizations. Environmental analysis Marketing audit mandates an in-depth screening of the operating environment and this can be done using the PEST analysis. It is important to note in this context that environmental analysis plays a significant role in identifying operational challenges and requirements that can help businesses improve its profitability. PEST analysis provides “an overview of the environment that your business is in, the factors that might affect it, and hence issues that should be addressed in the strategy” (Turner, 2010). However, the accuracy and effectiveness of such analysis is widely dependent on the ability of the marketing team in recognizing and identifying the key parameters that drive markets and industry trends. The success of this strategic tool lies in the accuracy of environmental assessment (Turner, 2010). In the beverage industry, political factors comprise of legislative changes, regulatory practices and government support to industry segments. The economic factors encompass the target market demographics, purchase habits, financial market indicators that outline the financing strategies in business operations. Social factors involve the changing lifestyle, trends, and culture within communities that define consumption patterns and purchase behaviour. Technology factors are vital parameters that define the efficiency and capability of firms to deliver exceptional products or service to its targeted customers (Turner, 2010). The success of Starbucks is attributed to the enabling political regime that supports the growth and expansion of consumer goods and services. The phase of globalisation and market liberalization has helped the company in promoting its brand worldwide and register itself as a global brand that provides value to customers in terms of money spent and quality of services received in return. The economic factors plays a critical role in determining the market growth and sales of the coffee across Starbucks stores. The changing lifestyles and reduced time available for cooking at home contributed immensely to the growth and popularity of Starbucks across countries. The company helped meet its objectives of growth and expansion through the incorporation of innovative technology to help its outlets serve higher number of customers within the shortest possible time-frame (Starbucks website, 2011). Thus, political, economic, social and technology factors contributed to the Starbucks market expansion and growth objectives. Based on these observations, it can be concluded that Starbucks operates in a highly competitive market with new players entering the market and offering the customers with well-equipped outlets and wide variety of beverages on the menu card. The key factors distinguishing the competitive strengths of players in this industry are location, product mix, service quality and ambience within the stores. Technology and manpower play a pivotal role in defining operational efficiencies and ability of outlets to cater to the customer demands more efficiently (Baker, 2003). The consumption pattern of beverages in the coffee and other beverages have evolved over the past few decades to include premium tastes and quality (Beverage Industry, 2011). “Demand for premium tastes as well as for competitively priced products helped contribute to growth in the coffee category” (Beverage Industry, 2011). The sales of coffee has increased to nearly $4 billion in US in the year 2010, as per sales statistics from supermarkets, drug stores, gas, convenience stores, and merchandise outlets (Beverage Industry, 2011).Product range and variety of choices available to the customer are primary factors driving sales and revenues for beverage service companies. Starbucks has promoted its services and customer appeal through a wide range of products that include coffee, tazo tea, soda, juices, pastries, whole coffee beans, coffee mugs and CDs. The product lines have been adapted to the locational preferences and seasonal demand for specific products in their outlets. The popularity of Starbucks is accountable to its pleasant ambience and friendly outlets that offer its customers with coffee, music and books. Organizational analysis The Starbucks Mission statement reads as “to inspire and nurture the human spirit – one person, one cup and one neighbourhood at a time” (Starbucks website, 2011). The statement reflects its commitment to customer choice and preference through their services. The company has so far adopted retail expansion, product innovation and service excellence as its strategies to achieve its business goals. The company identifies the affluent and educated population segment as its primary target market but the product range also caters to the younger generation having limited income (Tewell, Odom & Snider, 2006). The competitive strategy adopted by the company focuses on promoting unique service features and product differentiation to serve the needs of the target consumers (Bhaskar, 2009). Thus while the retailing strategy of the company remains uniform across geographic locations, the products are modified to adapt to the cultural diversity and customer habits in different outlets. A combination of localization and standardization marketing approach is used to promote Starbucks brand across different countries over the globe. The emphasis of the company has been on enhancing customer experience through high quality service, wide choices in menu, and pleasing ambience that prompts the return visit of customers to the Starbucks outlet. “In 1987, Starbucks began its rapid ascent by selling quality beverages tailored to individual tastes and by promoting an image of luxury and sophistication” (ERS, 2008). A study of the BCG matrix and its application to the Starbucks model provides interesting insights into the viability of this business model. The BCG (Boston Consulting Group) matrix is a strategic framework used to evaluate the performance of strategic business units (SBU) (Kurtz, McKenzie & Snow, 2009). “This market share/market growth matrix places SBUs in a four quadrant chart that plots market share – the percentage of a market that a firm controls – against market growth potential” (Kurtz et al., 2009). Fig – BCG Matrix (Source: netmba.com, 2011) As the figure above illustrates Stars represent business units having high market shares and high growth rate potentials; cash cows represent high market shares but low market growth rate; question marks represent low market share but high potential growth rate; and dogs represent low market share and low growth rate units. Thus, while stars generate high revenues, cash cows generate strong cash flow, question marks have the potential to become stars or cash cows, dogs contribute very less to company profits and potentials (Kurtz et al., 2009). Based on these observations, Starbucks can be placed in the stars quadrant since the company has high market shares coupled with high growth potentials. The orgnaization needs to continue its emphasis on global growth and expansion strategies to meet its business goals and market leadership position. The card strategy offers a lucrative model for growth and expansion of its services through improved service and increased customer appeal. Barriers to marketing planning for Starbucks There are very few organizations who are able to ensure successful implementation of their marketing plans. This is mostly due to the lack of coordination and integration between the marketing activities and team members responsible for executing the plan. Often, a low level of participation of the top management in supporting the marketing plan reduces its credibility and potentials in achieving the desired outcomes. Some of the other factors leading to ineffective results in marketing planning operations are lack of proper planning, inaccurate market assessments, missing out important details involved in planning functions, failure to integrate the marketing strategies to corporate goals and objectives, ineffective delegation of tasks and responsibilities, and inadequate leadership capabilities to lead the planning initiative (Meldrum & McDonald, 2007). Managing and leading changes can be a tough task for organizations provided the management lacks the capability to harness existing resources and implement innovative work practices for effective results. The key drivers to market performance and sales are significant parameters that need to be considered in order to develop and build strategic frameworks that promote sales and profitability in operations (Beamish & Ashford, 2007). Starbucks has an efficient management that devises effective marketing strategies. One of the strategies that have worked well for the company is the decision is to keep the stores company owned and not franchise them to outsiders. This enables the company to maintain its brand image and deliver uniform products and services throughout all its stores (Bhaskar, 2009). Starbucks management has makes optimal use of its resources. It makes use of internal cash flow to fund its expansion plans. The company spends only 1% of its revenues on marketing and advertising. It allocates a major portion of its marketing budget on product launches and introducing new coffee flavors. Starbucks mainly relies on word of mouth publicity and its unique store experience (Bhaskar, 2009). The company has also been successful due to the top quality of personnel particularly in the management. It has been able to attract and retain the best talent. This ensures that the most capable people are in charge of operations and decision making. Starbucks has always looked to diversify its revenue streams by introducing items apart from coffee on its menu. This includes breakfast items like sandwiches and pastries. The company derives its revenues from different product lines, such as beverages, food items, whole beans coffee and coffee making equipment and accessories. It is also looking for different channels of distributing its products, including foodservices, grocery and licensed stores (Tewell et al., 2006). The best marketing strategies cannot be successful without proper implementation and execution. Starbucks has been able to convert a household activity into a commercial success because of its effective implementation and execution of its strategic objectives. The company has been able to convince customers that they provide more than just coffee but a unique experience. Starbucks has been able to position itself as the go between place from home to office. The company has created a brand image of a luxury coffee brand that delivers superior quality products. This has enabled it to charge a premium for their coffee. Starbucks positioned itself as a premium brand and targeted a niche market (Tewell et al., 2006). It started with college students, social classes and neighborhoods that would be willing to buy a $3 coffee and spend time in the store. The company slowly expanded this customer base to include individuals from all age groups. Starbucks targeted small towns, rural communities, ethnic neighborhoods and success in penetrating markets already filled with coffee shops. Over the years, Starbucks has been able to expand its customer base to include customers from all age groups and all walks of life (Bhaskar, 2009). Starbucks has been able to combine the four elements of the marketing mix: product, price, place and promotion in order to deliver value to its customers. Starbucks product line includes 30 varieties of whole bean coffees to eco-friendly cappuccino, coffee makers, and other Starbuck paraphernalia (Starbucks website, 2011). The company has diversified its food items from sandwiches and pastries to include oatmeal, smoothies, and wraps to meet the needs of the customers. Starbucks has introduced new items, such as Instant via Ready, Full Leaf Tazo Tea Lattes and Tazo Tea Infusions (Starbucks website, 2011). The company’s products are priced higher due to its image as a luxury brand. However, it has adopted strategies to introduce inexpensive coffee products in order to attract price sensitive customers. For instance, Starbucks introduced $3.95 breakfast pairings, including breakfast items paired with a coffee. This helped the company to shift focus from the expensive specialty brews to the $2 brewed coffee (Tewell et al., 2006). The marketing plan Over the past few decades, Starbucks has successfully launched new products and services in order to create and deliver increased value to its customers. The company’s strategic focus has been on enhancing and delivering high value and satisfaction to its customers to ensure customer retention and brand loyalty for a longer period of time. The company has successfully managed to promote its range of beverages through continued focus on providing the customer with a wide variety of choices and new flavours to cater to the evolving tastes of the customers. “Starbucks executives know that a key ingredient of the marketing management process is the formulation of insightful, creative strategies and plans to guide marketing activities effectively” (Kotler & Keller, 2007). It must be noted in this context that the effectiveness of marketing strategies are determined by its ability to identify and meet customer needs, expectations and add value in terms of customer experience and their money (Kotler & Keller, 2007). In order to analyze the effectiveness of marketing planning process, it is important to define the company perspective in context of evolving industry trends and competitive landscape. The beverage industry has evolved over the decades to define new trends in consumption and a growing demand for new flavours. Marketing experts and practitioners in the field of business management acknowledge the fact that marketing strategies and product positioning approach used by firms must streamline with the evolving industry trends and customer needs to ensure the delivery of desired outcomes (Rajagopal, 2007). The focal point of Starbucks’ long-term growth and success has been the quality of its products and services. The Starbucks’ coffee is the main draw for customers with its rich and strong taste and aroma. The customers are willing to pay a little extra for this superior product. The company’s marketing strategy has worked towards creating a third place to go for customers between home and office. Starbucks has worked hard to create a relaxing atmosphere and unique experience for customers. With this new concept, the company has been able to attract and retain customers (Fassnacht, 2004). Starbucks spends a lot of energy and time on satisfying the customers. The company’s main focus from the point of entrance to the end is achieving customer satisfaction. Starbucks ensures the each customer feels the unique Starbucks coffee experience. The company has even been successful in creating a community based on their brand image and equity. On the company’s website, customers share their unique Starbucks experience. This serves as a tool for Starbucks to directly connect with their customers and communicate (Fassnacht, 2004). Starbucks has also adopted the strategy of investing in viable partnerships. These partnerships have helped the company to grow and be successful over a long period of time. The company has always emphasized on creativity and innovation. Over the years, they have introduced new flavors of coffee and new food items on their menu. They have also innovated the way the business operates by connecting to the worldwide web and having Internet connectivity with their stores (Fassnacht, 2004). The company has worked hard to create their brand identity, image and equity. Word of mouth publicity is one of Starbucks main reasons for success. Starbucks focuses on delivering superior quality products and services to their clients. The good quality of the products attracts new clients and help in retaining the older customers. The company has successfully adopted specific marketing techniques to suit its brand and customers (Tewell et al., 2006). The company has worked towards creating a unique retail experience where customers can feel relaxed and refreshed. It has created a unique store ambience. This combined with innovative product ideas has helped the company to expand its business. Starbucks has also focused on diversifying their product line. They have introduced sandwiches and pastries to take along with coffee. This encourages customers to spend more in Starbucks stores. The idea of providing Internet connectivity in all Starbucks stores is also aimed at increasing the time spent by customers in stores and the amount they spend while in there (Tewell et al., 2006). Starbucks has also used the cluster concept in store locations where there is more than one stores in the same area. This helps in reducing the waiting time for customers to get their coffee. They have also been very quick and efficient in introducing new ideas and innovative products (Tewell et al., 2006). The company has introduced the prepaid Starbucks cards. These are priced between $5 and $500. In the card system, the customers make a prepayment and after each sale the card is swiped to deduct from the prepayment. Starbucks has also introduced an ordering program where clients can order and prepay for products either through the phone or the Starbucks Express Website. This shows the Starbucks has been able to keep abreast of new trends in the market and adopt suitable strategies in a time efficient manner (Starbucks website, 2011). Ethical issues In the present context social and ethical marketing play an important role in promoting business goals and helping organizations achieve the pre-defined objectives. This follows the growing realization that consumers are more aware and sensitive to the social, cultural and ethical issues related to products and services. “The indications are that the upcoming generations are more aware and more likely to buy from companies they see as socially responsible” (Beamish & Ashford, 2007). There are a number of external factors that have a deep impact on the sales and revenue earnings of Starbucks outlet. The changing demographics, shift in consumer taste and preference, eating habits, increase in cost of supplies and labor, economic condition of the geographical area in which the outlets are located – all these are some of the factors that affect the profitability of the business (Tewell et al., 2006). However, the corporate social responsibility of the organization in adhering to local customs, traditions and laws cannot be ignored. There are various contradictions regarding the social responsibilities of multinational corporations operating in global context. Some of them include views that a multinational corporation is merely obligated to comply with the laws pertaining to the country in which it operates. Few others feel that corporations have negative obligations to respect human rights, while still others perceive that corporations have additional positive obligations to promote just background institutions (Donaldson, 1991). Starbucks outlets can be found in any neighborhood where there is a perceived high traffic for its stores. The company’s stores are also located in-store of various large chains, such as Barnes & Noble and Target. It mainly targets locations that are suitable for individuals that are on the go and for those who enjoy reading or listening to music. Starbucks has also introduced the concept of stealth outlets. These stores are named after the street it is located on. The main idea behind this concept is to localize Starbucks stores with no Starbucks logo on any of the products but has the specific street address as the brand name (Lussier, 2006). Starbucks has always come up with innovative techniques to promote their products and services. One such innovative idea is the Starbucks card. Starbucks Card is an initiative where customers can buy a gift card. It is a unique way to promote company's products through a referral system. The purchase of gift card not only creates brand loyalty but also serves as an opportunity for free advertising for the company and helps in bringing new customers. The company provides a card for corporate sales, which can be rewarded to employees for good performance or gifted to a client or vendor (Starbucks website, 2011). The company also delivers coffee services to offices without size restrictions. Starbucks has taken steps to diversify its customer base by introducing international teas and coffees to appeal to a wider audience and bring in new customers. Starbucks has been able to use charity as a way of promotion. The company has contributed to various non-profit organizations. It has fulfilled its corporate social responsibilities and this has helped to boost its brand image (Starbucks website, 2011). Conclusion Starbucks has been able to differentiate itself from its competitors due to its fine products and services and unique store ambience and environment. The company can maintain its competitive edge as long it can deliver value to its customers and satisfy their needs. Starbucks has to build on its superior brand image and equity. It has come to acquire a perception that it is not a company solely aiming at profits but also has broader social goals. Starbucks should focus on building this strong image further by adding more valued in its stores. As long the company is able to innovate and continue to satisfy its customers, Starbucks can retain its competitive advantage and continue to be the market leader. References 1. Baker, Michael John 2003, The Marketing Book, 5th edition, Butterworth-Heinemann. 2. Beamish, K. & Ashford, R. 2007, Marketing Planning, The Official CIM Coursebook, Butterworth-Heinemann. 3. Bennett, Roger & Blythe, Jim 2005, International marketing – strategy planning, market entry & implementation, 3rd edition, Kogan Page Ltd. 4. Beverage Industry 2011, State of the Industry 2011, available from http://www.bevindustry.com/articles/84818-2011-state-of-the-industry 5. Bhaskar, C. 2009, Starbucks marketing strategy, available from http://blogs.indews.com/business/starbucks_marketing_strategy.php 6. Boone, L.E. & Kurtz, D.L. 2008, Contemporary marketing, Cengage Learning. 7. Cateora, Phillipe R., Salwan, P., & Graham, John L. 2008, International marketing, Tata McGraw Hill. 8. Donaldson, R.J. 1991, Ethics and multinational corporations, Oxford University Press. 9. Doole, I., & Lowe, R. 2008, International marketing strategy – analysis, development and implementation, 5th edition, South Western, Cengage Learning. 10. ERS 2008, Twenty years of competition reshape the US food marketing system, available from http://www.ers.usda.gov/AmberWaves/April08/Features/FoodMarketing.htm 11. Fassnacht, M. 2004, Loyalty is about relationships, not transactions, available from http://www.thewisemarketer.com/features/read.asp?id=41 12. Kotler, P. & Keller, K. 2007, Framework for marketing management, Pearson Education Ltd. 13. Kotler, P., Gregor, W.T., & Rodgers, W.H. 2005, The marketing audit comes of age, Hamilton Consultants. 14. Kurtz, D.L., MacKenzie, K.F., & Snow, K. 2009, Contemporary marketing, Nelson Education. 15. Lussier, R.N. 2006, Management fundamentals: concepts, applications, skill development, Thomson Business and Economics. 16. Meldrum, M. & McDonald, M. 2007, Marketing in a nutshell – key concepts for non-specialists, Butterworth-Heinemann. 17. Mooji, M.K. 2009, Global marketing and advertising – understanding cultural paradoxes, Sage Publications. 18. Moutinho, L., & Chien, C.S. 2008, Problems in marketing, Sage Publications Ltd. 19. Mudie, Peter and Pirrie, A. 2006, Service Marketing Management, Butterworth Heinemann. 20. Netmba.com 2011, The BCG Growth share matrix, available from http://www.netmba.com/strategy/matrix/bcg/ 21. Rajagopal 2007, Marketing dynamics – theory and practice, New Age International Publishers. 22. Starbucks website 2011, Our Starbucks mission statement, available from http://starbucks.co.uk/about-us/company-information/mission-statement 23. Tewell, K., Odom, B., & Snider, K. 2006, Starbucks marketing plan, available from http://www.franklincollege.edu/pwp/BOdom/SampleWorkStarbucks.pdf 24. Turner, S. 2010, The little book of management: essential tools for getting results NOW, McGraw Hill Publishers. Read More