Service Marketing: Starbucks Coffee Company - Term Paper Example

Service Marketing Starbucks Coffee Company is a household offering a line of fresh, rich-brewed, espresso beverages, pastries and confections,and coffee-related accessories and equipment. It opened its first store in Vancouver, BC, Canada in 1987; Starbucks has become an expansive chain globally. Their mission is stated as "To be a global company, making a difference in peoples' lives by leveraging our brand and the coffee experience to foster human connections." It addition to its wide presence in the USA, it is globally expanded into Canada, Switzerland, South Korea, and Japan. The company has been globally accepted and has a high visibility of their brand. (Source from website http://instruction.bus.wisc.edu/obdemo/may%20not%20need_2/starbucks.htm) Starbucks has been renowned for its customer service. A "service" is any act of performance that one party can offer to another, that is essentially intangible and does not result in the ownership of anything. Its production may or may not be tied to a physical product. ( Kotler, 2000) By creating a unique atmosphere, Starbucks has differentiated themselves from their competitors and catered to their customer's preferences. Service Mix Categories A company's offering to the market place will include some kind of service. It may be a major or minor part of the product. It may be purely tangible goods that require no service, a mix of goods and services in varying proportions, or just pure service. Services can be equipment based or people based. Some services require the client's presence while some do not. Services may be a personal need or a business need. It could be for profit or non-profit and be private or public depending on ownership. ( Kotler, 2000) Characteristics of Service Organizations Services are unique and therefore the marketing strategies of service organizations are adapted to their characteristics. Intangibility- Services cannot be seen, tasted, felt, heard or smelled. This makes evaluating service quality very difficult. Service quality is therefore ascertained by the potential consumers by perusal of other evidences like place, people, equipment communication etc. as indicators of quality. Inseparability- Services are produced and consumed at the same time and cannot be separated from their providers. There is no stocking or distribution. The provider and client must interact for the service to occur and therefore both parties become part of the service provided. Both of them influence the outcome of the service. Variability - As the consumer and producer are both part of the service, the quality of services depends largely on who, when, where and how they are provided. Therefore, service providers become the representative of the organization as a whole and service quality depends on the quality of the service providers themselves. Perishability- Services must be consumed as they are provided and cannot be stored for future use. Therefore, a missed opportunity will create a loss of service that needed to be rendered. The demand and supply needs to be carefully monitored and services offered as needed during the time period. Non-Transferability- Services cannot be owned by the user. An excellent service has good retentivity though and acts as an incentive to the customer to opt for the same service again. Starbucks has survived and grown in the new economy because of its innovative capability to adapt to a dynamically changing environment. Their customer-focused strategy has allowed them to garner sales selling the humble coffee at a premium value due to the perception of value inculcated in the customer. Quality of Service Providing the level of service to desired expectations is of prime importance. Quality management is a way of doing business that allows an organization to design products and services that meet or exceed customer needs and build operational processes that achieve high levels of performance and quality. A good service company understands the psychology of the consumer, adds in a qualitative physical product, materialized intangibles, and is aided by flexible information technology to cater to current demands efficiently. Customers' expectations are the best measure of the quality of service. When the management understands the customer needs, it is able to strategize the delivery of that level of service through its employees. Quality of Service is determined by the following factors. Reliability is the ability to perform the required service accurately, Responsiveness is providing prompt service, Assurance offers consistency in service levels, Empathy provides individual attention, and Tangibles offer the perception of brand value and image. ( Kotler, 2000) Marketing Strategies Marketing strategies of service organizations need to be beyond product marketing. In addition to the four P's of marketing, that include Product, Price, Promotion and Place, services marketing also includes, People( that include service personnel and other consumers), Process management (how the service is delivered) and Physical evidence ( proof that contributes and validates the quality of service offered and received). (Source website http://www.buseco.monash.edu.au/depts/mkt/mtp_online/sevenps.php) Source from website http://ocw.mit.edu/NR/rdonlyres/Sloan-School-of-Management/15-778Summer-2004/9906C1D6-AF3C-44F3-B75D-915F09369E5C/0/lec5_july261.pdf Starbucks has unerringly identified its target segment of upscale, affluent, college-educated, gainfully employed consumers and set about creating an ambience and level of service that has translated into its appeal. Its unique branding names, its product mix of beverages, pastries and newly introduced flavored and blended teas has been popular. It has also now diversified into Starbucks cafs to cater to the after office and college crowds. It sells coffee accessories and beans in supermarkets. Personnel and their Contribution In a service organization, the employees live the company's brand. In today's competitive world, every company tries to create that extra edge that would bring business to itself. When the employee focus is aligned to the company goals, the company is able to provide a more sustained, credible, efficient and differentiated brand value to the service. This, when ably supported by an advertising campaign creates a winning combination as Starbucks does and gives it the competitive edge that it desires. Starbucks has more than 1,400 stores and 25,000 employees, who are known as "partners". Starbucks has understood that its employees are its ambassadors and takes sufficient measures to train them. Each "barista" receives sufficient training to discuss various coffees with the customers in detail, leadership skills training as well as communication guidelines. "Coffee Calling" is a strategy that has been adopted by Starbucks to serve the customer accurately. "It's a drink-calling system designed to offer a consistent pattern," explains Alan Gulick, a spokesperson for Starbucks. "Drink orders can get pretty complicated," says Gulick, "with requests like 'a touch,' or 'chocolate' or 'extra, extra hot'." He notes the system not only helps Starbucks' baristas, or coffee pourers, but it also "ensures the customers get the drinks they order." Gulick says Starbucks trains all its partners. The calling system also is valuable when workers transfer to other stores, he notes, " because they already know the system." Additionally, the marks now placed on the side of cups mirror the calling system. "That reinforces the consistency and quality of service," Gulick says. (Source from website http://www.mmc.com/views2/lebard2006.php) In fact, in order to preserve the quality, Starbucks does not allow franchises. A satisfied employee is invaluable and Starbucks provides its workers with incredible benefits called "Blend" because it can be tailored to employee needs. It offers regular salaries, 14% stock options and medical and dental insurance even for part time employees. It provides retirement benefits and adoption assistance. Discounted merchandise and a pound of coffee every week are benefits as well! ( Source from website http://www.starbucks.com/aboutus/jobcenter_thesbuxexperience.asp) Technology Starbucks has always efficiently used ICT for its growth. It was one of the first to provide wireless Internet access in its stores that succeeded in bringing more customers especially students and office employees in search of a network and of course a cup of coffee in the process. Recently Starbucks offers downloadable music in its stores. Starbucks became the first business to buy GE Security tool "CommerceGuard," an electronic system that monitors the movements of shipping containers and when they are opened, according to GE. Shipments of green coffee beans from Guatemala will be monitored to detect whether there is any tampering, whether it be from thieves, competitors, terrorists or others. (Source from website http://www.eubusiness.com/Rd/060317024532.45qmfy3f) " Starbucks uses radio-frequency identification technology as part of a proposed plan to let its 40,000 suppliers drop off pastries, milk, coffee beans, and other supplies at night, after stores have closed." This will ensure that its employees do not leave the counter to collect supplies when customers are being attended to during business hours. ( Source website http://www.informationweek.com/news/showArticle.jhtmlarticleID=55300781) Sources Kotler, Philip, Principles of Marketing, Millennium Edition, Prentice Hall Dunham, Randall B Professor, Organizational Behavior, " A Latte profit in Japan" Dec 5, 2001 University of Wisconsin [Online] Retrieved from website http://instruction.bus.wisc.edu/obdemo/may%20not%20need_2/starbucks.htm on May 9, 2006 "Marketing Mix- Services" Business and economics, Monash University [Online] Retrieved from website http://www.buseco.monash.edu.au/depts/mkt/mtp_online/sevenps.php on May 9, 2006 Clark, Kathryn F, " Say It Again, Sam" Dec 1997, Human Resource Executive Magazine [Online] Retrieved from website http://www.hrdq.com/content/articles/article5.htm on May 9, 2006 " The Starbucks Experience" Starbucks.com [Online] Retrieved from website http://www.starbucks.com/aboutus/jobcenter_thesbuxexperience.asp on May 9, 2006 "Starbucks to use tracking devices to monitor coffee shipments " Mar 16, 2003 EU Business.com [Online] Retrieved from website http://www.eubusiness.com/Rd/060317024532.45qmfy3f on May 9, 2006 Sullivan, Laurie, "Starbucks RFID Plan" Dec 13, 2004 Information Week [Online] Retrieved from website http://www.informationweek.com/news/showArticle.jhtmlarticleID=55300781 on May 9, 2006 Bitran, Gabriel Professor, Summer 2004, Characteristics of Service and Service Guarantees [Online] Retrieved from website http://ocw.mit.edu/NR/rdonlyres/Sloan-School-of-Management/15-778Summer-2004/9906C1D6-AF3C-44F3-B75D-915F09369E5C/0/lec5_july261.pdf on May 9, 2006 Read More