Number One Position of Starbucks - Case Study Example

 Number One Position of Starbucks Introduction In today's competitive world marketing is the key for the success of any organization. Adopting and implementing appropriate marketing strategy is crucial in order to make an organization and its brands successful. Effective marketing strategies would include strategy regarding the target market, product, price, distribution, after sales service and promotion. These strategies are more important when a company is getting launched in the market. Starbucks, a Washington based coffee giant, is one of the most talked about success stories in the field of marketing. Currently there are almost 15,800 Starbucks stores employing near about 140,000 individuals (Larson, 2008). Starbucks, from the time of launching, focused on various aspects of marketing. Company has identified appropriate strategies on its product, price, distribution and promotion. This paper provides an overview of different decisions taken by Starbucks regarding its target market, products, price, promotion, distribution and service. Background Starbucks started its journey in 1971. It was started by Jerry Baldwin, Gordon Bowker and Zev Siegl, who were entrepreneurs in Seattle. They started with only one store located in the Pike Place Market in Seattle. They were actually into selling of whole-bean coffee in that market. The name Starbucks came from 'Moby Dick'. By 1982, they manage to increase the number of stores from one to five. Apart from these stores there were a wholesale business of selling coffee and a roasting facility. The first recruitment of star bucks was Howard Schultz in retail marketing and sales division of star bucks. But after one year when Schultz wanted to expand the business by opening a chain of star bucks stores, three founders were not agree with him. In 1985 Schultz decided to start his own coffee bar named Il Giornale. By 1987 there were three more Il Giornale stores. In the same year Starbucks owners decided sell their company to Schultz. It was a $4 million deal and the most importantly all the stores including four Il Giornale were named Starbucks. Schultz adopted some aggressive sales and marketing strategies in order to make the company a successful one, but in spite of all his efforts it was not profitable for first three years. But Schultz believed in long term success rather than short term profit and he decided to stick back to his expansion strategy. As a result by the end of 2002 there were 5,688 star bucks outlets employing more than 60,000 individuals in 28 different countries (Starbucks Corporation: Competing in a Global Market, n.d.). Literature Review Starbucks' target customers are those people who want to have a cup of premium quality coffee in order to take a break from their busy daily life (Navarro, 2005). Ages of these people generally fall in range of 25 to 55 and they are working persons who have high or middle income. It has been found that target customers of Starbucks want an attractive coffee bar where they can have wide range of top quality coffee as well as bakery products. Starbucks stores are also meant for those who want to enjoy their social interaction in an affordable, casual as well as luxury place (Dorf, Byers, 2005) Target Market Starbucks target young and middle aged people whose income level falls in the high and middle level and most importantly who want to enjoy a cup of premium quality coffee in the process of taking a break from day to day activities. Starbucks target customers are found to be those who want to have a social gathering in such a place which would be casual but luxury and where they would have special quality coffee and other bakery products. Positioning Starbucks positioned itself as a high quality coffee provider in the mind and heart of its target customers. Apart from premium quality coffee, Starbucks is also renowned for providing an attractive in store atmosphere which is just perfect for any young or middle aged person who is tired in his day to day activities and want to spend some quality leisure time (Thomas, 1995). Starbucks want to be the ‘third place’ (after the home and work place) for each and every Americans. In the positioning map Starbucks is placed at the upper right position. Starbucks has been successful to make coffee an integral part of daily life of every American. Starbucks redefined the experience of drinking coffee. In the positioning map given below position of Starbucks is very good. It is quite clear from the positioning map that in Starbucks environment is the second best thing after coffee that customer get although the range of choice of products is quite limited because in Starbucks can only have coffee or other bakery products. (Foundation Degree South West, n.d.) Product Starbucks offers a wide range of products. Products offered by Starbucks are decaffeinated and regular coffee beverages, cold blended beverages, Teas, Iced Shaken Refreshment Beverages, Sodas and Juices, Italian Style Espresso Beverages, Whole Bean Coffees, coffee making accessories and equipment. Apart from coffee Starbucks also deal with music, film DVD and book through its entertainment division (Foster School of Business, n.d.). Starbucks always focus on the quality of the coffee and that is why they always select those suppliers who maintain strict standards regarding quality, environment and economy in the processing and growing of coffee. Starbucks has been successfully differentiated its coffee related products and coffee in order to gain long term strategic advantage (Kim, July 03 2002). Price Prices of coffee in a Starbucks store are much more than its competitors, but still customers are ready to pay that extra money because they get the value for their money. Customers' such a feeling is actually the result of the quality of coffee sold by Starbucks. Normally Starbucks customers pay almost $2.80 for a regular cup of coffee and $4 for a specialty cup of coffee. This price is much above the average price but still customers are ready to pay this price because in Starbucks they get much more than a cup of coffee. Distribution Starbucks main distribution channel is its stand alone stores, but apart from these stores company has established various carts and cafes in banks, hospitals, super markets and office buildings. In the year 1992 Starbucks got into an agreement with Nordstrom. At that time Nordstrom was running 48 espresso bars and 62 restaurants. According to the deal between Starbucks and Nordstrom, Starbucks was supposed to supply coffee to all the Nordstrom restaurants, catering operations and employee lunch rooms. Starbucks was even named as the exclusive supplier of coffee for Nordstrom. After one year there was another agreement between Starbucks and Barnes & Noble in order to implement a new plan called "cafe-in-a-bookshop". There are many other agreements which involve airlines, hotels and offices coffee suppliers. In 1995 Starbucks involved in an agreement with United Airlines as a result of which 75 million passengers of United Airlines were provided Starbucks coffee. Even Sheraton Hotel is involved in a deal with Starbucks. So it is quite clear that Starbucks has a strong distribution network which is actually a part of its aggressive strategy. Services Starbucks has actually made coffee drinking a beautiful experience by providing excellent ambiance. Company not only sell premium quality coffee but also sell a great in store atmosphere which actually provide a peace of mind to its customers. As far as various customer services like order taking, presentation of beverages are concerned, Starbucks is much ahead of its peers. Starbucks train all its new recruits in order to deal with complaints which are related to its products. These new trainees deal with the customers on the spot without any assistance from manager. Moreover company trains them to customize every single espresso drink and to describe the detail of different coffees to the customers. Promotion Starbucks generally does not believe in traditional promotional method which involves giving advertisements in electronic and print media. This is because company thinks that there is already intense competition between different firms in order to gain the consumers' attention. Instead of electronic or print media Starbucks select two or three events or charities in order to reach its target customers. It has been found that Starbucks use two strategies, push and pull strategy. In the push strategy Starbucks choose wholesalers to promote and in the pull strategy they directly promote their product to their customers. Summery Starbucks, Today, is holding the number one position as far as the specialty coffee industry is concerned. Both in terms of number of stores and sales it is far ahead of its competitors. Starbucks is still focusing on the implementing different aggressive marketing strategies which include retail expansion, product and service innovation in order to achieve its objective which is to become the most respected and recognized brand in the world (Tewell, Odom, Snider, December 12, 2006). Company has various plans regarding its product development, pricing, distribution etc. in order to achieve the above mentioned objective. Currently Starbucks stores are located in 7500 locations in more than 30 different nations (Paunikar, n.d.). So, finally it can be concluded that Starbucks is a great success story in the book of marketing and the story is still getting written. References CASE 35: Starbucks Coffee Company, No Date, Warrington College of Business Administration, [online] Available at: www.cba.ufl.edu/mkt/.../docs/TeachRetail_CaseNoteExample.pdf [Accessed on October 24, 2009]. Dorf, R. C. Byers, T. H. 2005, Technology ventures: from idea to enterprise, McGraw-Hill Professional Foster School of Business, No Date, Business Analysis, Starbucks Corporation, [online] Available at: www.business.auburn.edu/~mclelaj/Handouts/.../Case3.doc [Accessed on October 24, 2009]. 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