Consumer Behavior in Starbucks and Costa Coffee - Assignment Example

Buyer behavior research project + Supervisor Modified In recent years, companies have embraced the essence of marketing in helping them achieve segmentation and reaching out to a broader customer base. Different marketing strategies, which combine all the marketing goals into a single comprehensive plan, are being integrated into companies to enable them stay ahead of competition. A good marketing strategy will be focused on intense market research to understand the optimal product mix that will achieve maximum profit potential and thereby sustain the business. This paper analyzes the subsets of consumers who have similar needs and priorities in relation to research conducted on Starbucks and Costa Coffee. The methodology used in the research entailed a practical approach whereby raw results were used to formulate the hypothesis. In addition, evaluation of the companies’ profits in view of their production capacity indicated the need for companies to develop an effective marketing plan that will be able to capture either the entire market or a specific niche of customers. The research indicated that the two companies used marketing as a means to capture the target population for their products and services. It was also established that initial market research would provide the best alternative for the companies to obtain an in depth understanding of the market and buying trends. Another important aspect in controlling consumer behavior included the need to attract new customers and to retain them. Given that the companies sell similar products such as coffee, it is important for them to have an effective marketing plan that will create a diversified customer base. Section 1: Background Information Starbucks is a coffeehouse chain and a global coffee company located in Seattle, Washington. The company was started in 1971 as a coffee bean roster and retailer and has grown rapidly over the time. It is one of the largest coffee companies in the world, with 13,049 in the USA while in other countries as China, Canada, Japan and the UK there are 1,909, 1,555, 1,089, and 927 stores respectively. Overseas stores constitute up to one third of the entire company indicating its wider geographical range to potential customers (Michelli, 2007). The company serves both hot and cold beverages including Whole-bean coffee, full-leaf teas, micro-ground instant coffee, pastries and snacks. Also, their evening locations offer a wide variety of beers, appetizers and wines after 4 pm. On the other hand, Costa Coffee is a multinational coffeehouse company based in Dunstable, United Kingdom. It is also a worldwide coffeehouse and its major competitor is Starbucks. It was founded in London in 1971 as a wholesale operation specialized in supplying roasted coffee to caterers and specialist Italian coffee shops. The company has over 2,860 stores across 30 countries with 1,755 in the UK and the rest overseas. The company has put more emphasis in express vending facilities with over 3,500 units in the UK and a further 1,106 facilities overseas (Cowan, 2005). Both companies have invested extensively in expanding their businesses through increasing outlets and express facilities. Given that the coffee industry is saturated both in the UK and USA they face similar challenges in marketing, however their identifiable specific marketing strategies have helped in outshining competitors (Cadogan, 2009). In comparison of the two companies, Starbucks has a wider market share and geographical capacity than Costa Coffee. This is because Starbucks has segmented its market through product differentiation and quality while Costa Coffee benefits only through high-volume, low-margin sales. Further, Starbucks have introduced coffee made using rare luxurious coffee beans thus creating a low-volume, high-margin approach which has enabled them to attract and retain a diverse market segment. The main marketing advantage of Starbucks over Costa Coffee is the product mix and wider reach to customers thereby making it attain higher profits. Starbucks also sells its products in a higher price but ensures that quality is met to keep the customers satisfied. Both companies have ventured into online marketing which also enables them to reach to new customers and develop an additional niche (Nair, 2009). Section 2: Analysis In order to rule out gender as a basis for evaluating the market sub sets of the companies, the research focused on a proportionate number of gender respondent in data collection. Gender of participants Customers were evaluated on the basis of age to identify which specific customers mostly visited the companies for their products or services. As shown in the pie chart below, most customers who bought coffee or snacks in such companies were below the age of 20 with a 50 percentage ratio while those between 21 and 25 years covered a 35 percent ration. Smaller ratios were identified in people aged between 26 and 30 years and those in their mid thirties with ratios of 10 and 5 percent respectively. Percentage of customers based on age Source: www.lfs252group11.wordpress.com An average on the number of years of customers was as follows: Averages of ages of customers Source: www.lfs252group11.wordpress.com Given that Starbucks provides high quality coffee regardless of time, its prices as relatively higher in comparison to Costa Coffee as shown below. However, their basis for a higher market penetration is quality and segmentation. Prices range of products in the companies Source: www.lfs252group11.wordpress.com Hypothesis 1: Product quality does not influence consumer behavior. Hypothesis 2: Product quality influences consumer behavior. Results of raw data According to the coefficient results, there is a strong correlation between the product quality and consumer behavior whereas packaging has very minimal influence on consumers. Similarly to the t statistic of 3.4 it is evident that most successful companies in market segmentation rely on quality diversification in order to suite all the identifiable niches. Section 3 Research methodologies used The study used interviews and questionnaires on participants who availed primary reliable data to understand the customer behavior for the two companies. By using a practical approach rather than a theoretical design enabled the research to gather adequate evidence on product differentiation and quality. By going directly to the customers in the companies’ outlets will provide the researcher with additional information that may not be attained through interviews. Face to face communication will enable use of judgmental and behavioral approaches in collecting data from participants. Additionally, it is possible for the research team to identify other factors that influence consumer behavior including; hygiene, noise, customer service, convenience, reliability and other additional services (Blythe, 2008). For example, in some coffee outlets it was identified that they had installed a system to maintain coffee freshness for a longer period while still hot. In conclusion, the marketing managers in any given company have to focus on their strengths, weaknesses, opportunities and threats to enable them formulate the most suitable plan in implementing marketing strategies. Each company has the capability to create wider market segmentation provided the manager makes creative decisions that are yet to be ventured into by competitors in the industry. References Blythe, J. (2008). Consumer behaviour. London: Thomson Learning. Cadogan, J. W. (2009). Marketing strategy. London: SAGE. Cowan, B. W. (2005). The social life of coffee: The emergence of the British coffeehouse. New Haven [Conn.: Yale University Press. Michelli, J. A. (2007). The Starbucks experience: 5 principles for turning ordinary into extraordinary. New York: McGraw-Hill. Nair, S. R. (2009). Marketing research. Mumbai: Himalaya Pub. House. Read More