Marketing of Starbucks in the UK - Essay Example

Introduction to Marketing Starbucks in the UK Executive Summary The report provides a brief analysis of the food and beverage market in the UK and discusses the major trends in the industry. The major trends identified are the following: shift of consumer’s behavior from more expensive meals to cheaper alternative; continuously increasing shift of the consumers’ behavior towards healthier options; and growing popularity of mobile and online technologies in promoting the brands and offering online ordering and delivery service. Competition in the industry is fierce in relation to both pricing and product offering and requires from industry operators development of thoughtful and effective marketing campaigns. Further there is provided an overview of the Starbucks Corporation and its current business activity. Based on the key findings of the food and beverage industry and marketing strategy of the Starbucks Corporation there have been developed several recommendations for the American-based coffee retailer operating in the UK market. These recommendations included the following: putting more efforts towards promoting the uniqueness and special Starbucks experience offered to the British customers; focusing more on the development and promotion of the healthy food; developing more flexible pricing strategy, special offers and discounts to the British consumers. Introduction: Company overview Starbucks Corporation has a long history of the transformation and business growth. The company began its existence in 1971 as a roaster and retailer of ground and whole bean coffee, spices and tea in Seattle, US. Nowadays, the company has global presence and its overall business is operated through almost 20, 000 retails stores worldwide (Starbucks Company Profile 2014). The mission of the company is “to inspire and nurture human spirit – one person, one cup and one neighborhood at a time” (Starbucks Company Profile 2014, 1). The company has aligned its business strategy with the sustainability and has undertaken a set of initiatives aimed at ethical sourcing, environmental stewardship and involvement of community (Starbucks Company Profile 2014). Analysis of the Food and Drink Markets, The food and Drink Market Size, Competition Key trends Starbucks is operating in the food and drink sector, namely in the Takeaway and Fast-Food restaurants industry. While the industry has faced a recession during the past few years as a result of global financial crisis, majority of operator have benefited from this as consumer’s behavior shifted from more expensive meals to cheaper alternatives (Connel 2014). Another shift of the consumers’ behavior is continuously increasing towards low-fat, low-salt, and low-sugar meals and many operators are adjusting their menus to healthier options to meet the increasing demand for this type of products. One more trend that is definitely influencing the industry is popularity of mobile and online technologies in promoting the brands and offering online ordering and delivery service (Connel 2014). It is estimated that the industry revenue will grow during the following five years at a compound annual rate of 2, 4%. This growth is referred to the increasing consumers’ demand towards value and convenience (Connel 2014). Key statistics: Revenue: 5, 5, bn pounds Annual growth: 1, 7% Profit: 231,0 bn pounds Businesses: 27, 540 (Connel 2014). Competition Competition in the industry is fierce in relation to both pricing and product offering. The major players in the industry are: McDonald’s Restaurants Limited (24%); Subway UK Limited (14, 6%); Domino’s Pizza Group plc 11,1%, and Yum! Restaurant Holdings (9,3%). These four major players are expected to gain 59% of total industry revenue during 2014-2015 (Connel 2014). Consumption of coffee in the UK also is estimated to grow at a compound annual rate of 3% and reach 2 bln pounds. Currently, the coffee market is dominated by the instant coffee – 70,7%, however, there is observed an obvious shift towards premium coffee beans and grounded coffee (Connel 2014). The top market players of the UK coffee market are Nestle UK Ltd (16,9%) and Mondelez UK Ltd (12,5%)(Connel 2014). Segmentation, Targeting, Positioning and Customer Value Proposition Starbucks is targeting people who enjoy coffee and non-coffee premium beverages and who is ready to pay for its unique experience. This audience is comprised of both males and females, either working in the offices or studying at universities, who enjoy spending their time sipping a tasty beverage. The company’s premium pricing strategy is automatically filtering the category of consumers based on their income levels. However, Starbucks continues to develop new products and promote it through retail stores making it massively affordable and accessible (Starbucks Company Profile 2014). This business development initiative significantly broadens the target audience of the company. Starbucks has a developed a quite unique strategy of its brand positioning, as the company’s stores are perceived as a neighborhood gathering place for meetings with colleagues, family and friends (Starbucks Company Profile 2014). The overall company’s strategy is built around the idea of the friendly environment in which customers gain not only excellent and rewarding coffee experience but also an opportunity to chat, work or meet up in comfortable environment (Starbucks Company Profile 2014). Starbucks offers a unique experience to its consumers where they can enjoy their premium quality beverages and food and can spend hours. The overall unique experience is especially supported by unique service elements that are used in the store networks. For example, defining sizes of the cups by a Short, Tall, Grande or Venti instead of commonly used small, medium, large and extra large definitions. The process ordering a drink at Starbucks is also unique (ordering, providing the name, moving down to the counter, and waiting for your name called) also is a significant part of the Starbucks unique experience that contributes to the customer value proposition (Chapter 05 - What Is Your Message? 2008). Also, the company offers Starbucks card to its loyal customers. Marketing Review of Current activities: The Marketing Mix - The 7P’S Product The company offers a range of products that are available for drinking/eating in the store, taking home or on the go. This product range is comprised of more than 30 single-origin premium coffee and blends; handcrafted beverages (including: fresh-brewed coffee, refreshers. Teas, smoothies, Frappuccino coffee, and non-coffee blended beverages); merchandise (including: tea- and coffee brewing equipment, accessories, mugs, music, gifts, books , packaged goods, etc); and fresh food (including: salads, yoghurt parfaits, baked pastries, fruit cups, sandwiches, etc) (Starbucks Company Profile 2014). Promotion In order to promote its products Starbucks is using the elements of personal promotion in its stores and also is actively engaging its customers through the online environment by interacting through the website, applications for Android and iPhone, social networks, etc. As the online promotion is becoming more and more popular, the company puts more efforts on the digital marketing (Starbucks.com). Price Starbucks’ pricing is referred to the category of premium pricing as the company’s coffee products cost more than the substitute products offered by the competitors. This pricing position is tied with the overall company’s positioning strategy of the premium brand value, the quality of its coffee products and the overall customer experience gained through the visiting of company-owned locations (Starbucks Annual Report 2013). Starbucks has created a supreme value to its customers, and decided to charge premium prices for this value (Griffin & Lowenstein 2001). Place Starbucks’ locations are selected based on the criteria of high traffic and visibility. The company is capable to vary the format and size of the stores, locating them near or in downtown, office buildings, suburban retail centers, select off-highway locations, or university campuses (Starbucks Annual Report 2013). For non-pedestrian customers, Starbucks offers Drive Thru stores in certain locations. The company’s stores are the locations with special friendly environment and interior, specifically developed in accordance with a corporate strategy. Processes As it has been mentioned already, the company puts a lot of efforts to individualization and personification of the customer’s experience in the store. However, a significant focus is made also on smoothing customers’ experience through well established processes of sale, customer care, etc. The processes are supported with the innovative IT technologies. Thus, for example, the company has simplified the life of its consumers by developing special apps which allows searching for the nearby store, paying for purchases through a Smartphone, tracking rewards, getting free Pick of the Week songs, and creating custom drinks (Taylor and Bio, 2014). Physical evidence The company’s stores represent the physical evidence of the brand. Starbucks’ locations have common features of interior and corporate style of the company but still each store is individualized and looks distinctively local (Starbucks Coffee Company, 2014). There are three major design interiors used by Starbucks: heritage coffeehouses, artisan stores, and regional modern (Starbucks Coffee Company, 2014). Moreover, the coffee retailer perceives that soft chairs and stylish sofas together with relaxing music tuned in the air are not enough for comfortable time of the consumers. Starbucks offers various IT platforms and free wireless Internet for its consumers in order to improve their experience and make them spend more time at the coffee shop. Another unique feature of Starbucks is its sales contact experience, whereas the approach to customer highly personalized being asked for his/her name while making order (Starbucks Coffee Company, 2014). People Starbucks is a company actively promoting diversity on every level of its business activity. The four key categories of people involved include: partners, suppliers, customers and communities. Partners of the company or in other words employees are an integral part of the business. The company promotes diversity among the workforce and focuses on employee’s professional development by providing education and training opportunities (Starbucks Coffee Company, 2014). In relation to customers Starbucks is focused on ensuring best customer service making stress on cultural factors. Existing Product Management and New Product Development The company officially claims that continuous development of new coffee and other products in various formats, and across new categories is part of the company’s strategy (Starbucks Annual Report 2013). This approach enables the company to attract new customers and retain the old ones offering them new assortment. The company also is quite innovative in launching its new products. Thus, for example, recently Starbucks has launched a promotional campaign for new products specifically offered for its members. “Members: Try it before its on the menu” is an extremely strong offer and value the company is sharing with its loyal customers. Thus, Starbucks invited its consumers to try two Teavana® Shaken Iced Teas before it has appeared in menus. This marketing initiative highlight the exclusivity offered by Starbucks to its customers and illustrates the unique Starbucks experience (Starbucks.com). Recommendations Customer loyalty is considered to be one of the most critical success factors in food and beverage industry (Connel 2014). Taking into consideration this fact, Starbucks should focus even more on building brand and customer loyalty. In order to succeed here, the company is recommended to develop more innovative promotional ideas similar to “Try it before it’s on the menu” campaign. Also, taking into consideration the market trends and changing customer needs Starbucks is recommended to offer good-quality food and beverage products that meet healthy concerns of the British consumers. Definitely the product launch should be supported by a great marketing campaign devoted to healthy eating. Taking into consideration recent economic downturn and its impact on the consumers’ behavior and shift towards less expensive location, Starbucks might reconsider its pricing strategy, focusing more on high turnover but low margins (Connel 2014). While the company should not adjust its whole pricing strategy to this tendency as the market is forecasted to recover soon, the company could give special discounts or offers for certain products, while prices for other products may stay the same. This initiative could help the company to attract new customers and increase loyalty among returning customers. In addition to the above given recommendations, Starbucks has also focus even more efforts on IT innovations and online presence as this shift is a great opportunity and effective tool for the business development and marketing promotion. Conclusion Starbucks has proved to be successful business by achieving an impressive business expansion globally. The company has been operating in the UK market for quite long period of time, and is still looking for the opportunities of business growth. Increasing consumption of coffee in the UK is a good sign not only for Starbucks but also for its competitors. While Starbucks’ positioning strategy and customer value proposition are unique on the market, strong competition in the food and beverage market is a significant challenge for the company. Starbucks has put more efforts towards promoting its uniqueness and special Starbucks experience offered to the British customers. The company should focus more on development and promotion of its healthy food using IT and social communities as a great tool for communication. Also, the company could play more with its pricing strategy on selective basis. While this initiative could be undertaken temporarily, it could attract new customers who with further marketing efforts could be transformed into the army of loyal Starbucks clients. References Chapter 05 - What Is Your Message? 2008. New York: The McGraw-Hill Companies, Inc., The Professional Book Group. Connel, S. (2014). IBISWorld Industry Report I56.104 Takeaway & Fast-Food Restaurants in the UK. IBIS World. Connel, S. (2014). IBISWorld Industry Report C10.832 Coffee Processing in the UK. IBIS World. Griffin, J, & Lowenstein, M 2001, Customer Winback : How To Recapture Lost Customers And Keep Them Loyal, San Francisco: Jossey-Bass, eBook Collection (EBSCOhost), EBSCOhost, viewed 23 June 2014. Starbucks.com 2014. Main Page. http://www.starbucks.com/ Starbucks Coffee Company, 2014, Diversity at Starbucks. [online] Available at: http://www.starbucks.co.uk/about-us/company-information/diversity-at-starbucks Starbucks Company Profile, 2014, The Starbucks story. Available at http://www.starbucks.com/about-us/company-information Starbucks Coffee Company, 2014, Store Design. [online] Available at: http://www.starbucks.co.uk/coffeehouse/store-design Taylor, K. and Bio, (2014). From Chipotle to Starbucks: 6 Chains That Do Mobile Apps Right. [online] Entrepreneur. Available at: http://www.entrepreneur.com/article/231261 Read More