Segmentation and Marketing for Starbucks and Jamaica Blue Mountain Coffee - Research Paper Example

?Segmentation and Targeting In the current competitive environment, every business is aiming at attaining a higher competitive advantage. Segmentation and targeting is important in the achievement of this. One of the advantages of segmentation is that it enhances the levels to which a business matches its products with customer needs. Segmentation is also key in brand positioning and enabling a business to maximize its profitability (Smith, 1956). The purpose of this paper is to show the effectiveness of proper market segmentation and targeting in brand positioning, customer retention and maximizing profitability. Starbucks coffee and Jamaica Blue Mountain coffee company are used as the bases of reference. Target markets for Starbucks coffee and Jamaica Blue Mountain coffee Starbucks coffee targets a general local market. Its initial target market was young college students, neighborhoods and social classes that would spend time with friends at their stores and gladly accept the idea of buying a $3 a cup of coffee. The initial focus included small towns, ethnic neighborhoods, highway rest shops, rural communities and even towns saturated with coffee shops. As a result of rapid growth, this target market has expanded quickly to include local buyers of all ages. On the other hand, the Jamaica Blue Mountain focuses on the export market. Its main target market is Japan though it wants to expand to include Canada. How the choice of target market influences the company's promotion and pricing A company has to consider the buying power of its market. Miller (2006) explains that customers have different disposable income and this means they are different in terms of their sensitivity to prices. Market segmentation is therefore important in determining if a company can raise its prices or not. If the company has to raise its prices, the type of target market will determine the level to which the company will raise its average prices. If the target market is very sensitive to prices, then a company could consider dropping its prices slightly so as to gain an extra market share. If it is insensitive to prices, then a slight increase for purposes of increasing profits margins will benefit since the increase will be indiscernible. According to Aaker et al (2000), the type of target market also determines promotion methods used. A company has to choose the promotion methods that will enable it to reach its target market quickly and adequately. Alternative methods include the TV, radio, billboards, direct marketing mail shot or the Internet. At the same time, the company has to consider how competitors do their promotions. They should then evaluate the efficiency of these methods and compare with those they use or intend to use. The type of target market also determines the frequency of these promotions. For example, markets that are highly competitive require frequent promotions in order to retain customer loyalty. Effects of introducing a new target market on consumer perceptions A company can introduce a new target market in a market that is already captured by its competitor. For example, Starbucks coffee can start producing brands for export to Japan, a market segment that is already captured by Jamaica Blue Mountain coffee. According to Kotler (2003) the perception here will be that the company has performed well in terms of pricing and its expansion is a sign that it is now focusing on the quality of its products and expansion of its image. As a result of this, customers will tend to associate more with the company products so as to enjoy the anticipated high quality products and form part of this international or wide region market. The influenced of economic changes on purchase trends of customers The customers will not be influenced by changes in the economy because they will have already formed a perception that the company is already working on the quality of its products. This means that at fair prices, they will be enjoying more quality products and variety as well. This situation is reinforced by the fact that consumers are increasingly trading up hence they might not be alarmed by any possible changes in prices if the quality of products produced dictates so. Such consumers are ready to pay for something extra for emotionally rich, high-quality and high-margin products. The influenced of social environment on purchase trends Peer pressure has a big role to play in the buying patterns of customers. This market contains college youths as well as working people. All these groups have their own social groups that influence their choices of brands of products in the market. These could also be aspiration reference groups. In such a case, even if the prices increase, some consumers will stick to the company products because members of their aspiration reference groups or their social group purchase them. This can also be due to the influence of peer pressure concerning trading up. Role of product brand and store name play a role in the purchase decision Doyle and Stern (2007) states that the product brand and store name play critical roles in the purchase decision among customers. This is because different groups of consumers like to associate themselves with particular brands or stores. To some customers, buying products that bear a certain brand name and purchasing from certain stores is a mark of social status. This means they will always skip similar products in other shops and ensure they get brands of the same product at their choice shop. For example, certain consumers will always pick on Jamaica Blue Mountain coffee even if Starbucks coffee produced coffee brands with similar tastes and sold them at similar or lower prices. As for Starbucks coffee, its target market does not shop for bargains because of the notion of social status and peer pressure. Those of Jamaica Blue Mountain coffee are purely influenced by social status. This makes them to always want to associate with product brands and shops that will portray this status. As a result of this, they will not go for a cheaper brand offered by a competing company or similar brands sold at fair prices by other shops. To them, loyalty is also a strong virtue and moving from products of one company or store to another is a sign of economic distress yet they do not want to be associated with this. If a weaker company is venturing into such a target market, it could have to produce products bearing a similar name in order to confuse and win such customers. Conclusion Segmentation and targeting are key in overcoming the effects of competition. Although Starbucks coffee and Jamaica Blue Mountain coffee companies operate from the same country, they have been able to overcome local competition and maximize their profits be choosing different market segments. For example Starbucks coffee targets the local market especially students, highway restaurants, towns and rural villages while Jamaica Blue Mountain coffee specializes on export market. This ensures that the two companies enjoy high profit margins without eliminating one another from the business scene. It has enabled them to attain their customers, position their brands and maximize profitability. References Aaker, J. Brumbaugh, A.,and Grier, S. (2000). “Non-target Markets and Viewer Distinctiveness: The Impact of Target Marketing on Advertising.” Journal of Consumer Psychology. (3) pp 127. Doyle, P. and Stern, P. (2007). Marketing Management and Strategy. Harlow. Prentice-Hall. Kotler, P. (2003). Marketing Management. Upper Saddle River, New Jersey. Prentice Hall. Miller Linda (2006). “Understanding Price Sensitivity in Marketing: One of the four keys in marketing mix.” Online: http://www.associatedcontent.com/article/17430/understanding_price_sensitivity_in.html Smith, W. (1956). "Product Differentiation and Market Segmentation as Alternative Strategies," journal of Marketing. (25) pp 3-8 Online: http://www.mateoaboy.com/f6/blog_files/1ca41f5fa3d5788c25e65eb029d0e127-50.html. Viewed on 13th July, 2011. Read More