Success of Starbucks Marketing Strategy in United States - Case Study Example

Success of Starbucks’ Marketing Strategy in United States Starbucks, which is now one of the most recognized brands in the world, was started as a small coffee shop in the year 1971 in Seattle, Washington. It is now one of the largest coffee shop franchises in the world with more than 17,000 stores operating in over 55 countries, and more than 11,000 of those are in United States. Though the company had been through toughest times as a result of recession, it is still the world’s best coffee brand. This tremendous growth in US was achieved because of a well-planned marketing strategy that carefully integrated the four marketing mixes – Product, price, place and promotion to satisfy the needs of its targeted customers. Though Starbucks is a US company, it had to adopt various strategies in order to achieve tremendous success in the United States. (Bhaskar, 2009) Product Starbucks has always positioned itself as a premium brand by providing high standard and innovative products coupled with a good customer service. They bought high quality coffee beans from places like Kenya, Costa Rica, Ethiopia, etc.; processed them with their high end technology equipment and sold only through the company owned outlets. What initially started as just another coffee shop started selling sandwiches, pastries, cookies etc. They also started offering many seasonal varieties like gingerbread latte in Christmas and Strawberry Frappuccino in summer. They also delivered coffee to offices without any restriction to coffee size. Starbucks did not limit themselves to be a coffee shop. They also sold smoothies, oat meals, etc. in order to satisfy a large group of customers. Moreover, the products of Starbucks are never stagnant. They research on more and more combinations and introduce new menus on a timely manner. Starbucks always upgraded their products and introduced new products mostly on yearly basis. Price Starbuck have always positioned itself as a high end product served at a very expensive price compared to that of the competitors. The public’s general perception that high quality comes at a high price has worked well in their favour. They always used high quality beans, had very well trained staff and also served their coffee at exceptionally maintained shops. They always tried to justify their high price by giving high quality products and never intended to bring the prices down. The upscale image associated with their brand name also helped them in maintaining those high prices. Higher price for products were not a restriction in a country like United States where people have enough disposable income. Also, the spending habit in US culture is much higher when compared to other countries. Therefore, the customers are never turned off by the high price charged by them. Place Starbucks have more than 11,000 stores spread around different parts of US. They could be found in any street where there is a perceived high traffic in their stores. Many times Starbucks have bought competitors leases, to get prime locations even though initially they operate at a loss. You could see multiple Starbucks store in the same street where there is high traffic. Even though this has been accused as a strategy to drive out smaller shops, it has worked in the company’s favour, as Starbucks holds majority of the coffeehouse market in US. Starbucks also started having their outlets in major retail chains like Barnes & Noble, Target, etc. Moreover, they are present in all major shopping malls across the country. Starbuck also started naming their stores by the street name wherein they are located. They also started selling products without any logo of theirs appearing in their products. Instead they just used the street names in an attempt to localize the stores. Promotion Starbuck always organized community events and hired ambassadors from the local community before they opened a new store. The artworks and architecture of their stores were designed to suit the personality of the city in which each store was operating. Such arts were also used on the coffee mugs and T-shirts. One of the main promotional drives by Starbucks has been the use of ‘Starbucks Card’. These cards not only helped them to boost sales but also served as a referral for attracting prospective customers. It was a form of free advertising for Starbucks. Starbucks also introduced a system of flavours by geography. They branded the products based on the region from where the coffee beans are sourced. The customers are given an option to choose the flavour they require. This also helped the company to be popular among the diverse cultural population in the United States. The success of Starbucks has been convincing their customers that they provide an enriching experience which is more than just having coffee. They provided high quality products to its customers, and charged premium prices. The company succeeded in providing extra value to its customers with well-maintained stores and excellent customer service. They also succeeded in localizing each of their 11,000 stores with the surrounding community. They were a master at innovating new products that would attract new customers and also retain the existing ones. (Tewell et. al, 2006) Starbucks in China “Starbucks Coffee International (SCI) entered the Greater China market in 1998 with the opening of its first store in Taipei, Taiwan. The first Starbucks store located in mainland China was opened in Beijing in January 1999 through a licensing agreement with Mei Da Coffee Co. Ltd.” (Starbucks, 2011) Though it was a challenge for Starbucks to capture the tea drinking Chinese market, through its well charted marketing strategies, it managed to succeed in this huge market. “Contrary to its usual trend of maintaining strict standardization techniques, Starbucks's strategy in China involved adapting the business to the local culture and market conditions.” (ICMRIndia, 2011) One successful move on this ground is to source coffee from the country itself. The company assists the Chinese farmers in coffee cultivation to increase their yield. Starbucks spent very less for advertisements in the Chinese market. The company believed that word of mouth publicity was the best suited strategy for the country. Unlike other countries, in China, building trust is the most important factor. The company believed that trust can be established easily through word of mouth publicity rather than commercial advertisements. The immense success of Starbucks in China shows that this strategy worked well for them. Another strategy adopted by Starbucks was to provide more space in the stores. People of China would like to have coffee from inside the store than take away orders. Therefore, the company provided more space for the customers to gather with their friends and acquaintances. This caught the interest of the customers at large. Also, this strategy was enough to turn around the traditional tea drinking people to coffee lovers. Now, the company is so successful in China that it even sees the Chinese market to be their major profit centre in the future. The greatest challenge that Starbucks had to face in China is to penetrate into its strong cultural heritage. Starbucks in Europe It was in 1998 itself that Starbucks entered the European market. Penetrating the European market was not as difficult as that of the Chinese market mainly because of the fact that Europe is a coffee drinking territory. Unlike that of the Chinese market, the major differentiation that Starbucks performed in Europe is to enter the ready-to-drink coffee segment. Starbucks partnered with Arla foods of Europe to sell ready-to-drink coffee in Europe. Selling ready to drink coffee is a potential business in Europe because it is traditionally a coffee drinking region. “Extending the Starbucks brand into new distribution channels globally is part of Starbucks long-term plans to target international growth in key regions such as Europe.” (Starbucks, 2010) Starbucks expanded in Europe through a partnership and licensing agreement with a domestic entity. One of major marketing strategies adopted by Starbucks in Europe is to open outlets at airports and railway stations. (BBC, 2008) This strategy is entirely different from what they practiced in China. Customers of Europe do spend time at the outlets like that of the Chinese customers, but they would equally like to have quick snacks and coffee during their busy schedules. Having outlets at airports and railway stations enable the customers to have a quick breakfast or lunch as per their convenience. European culture also consists of meeting people and spending time at pubs. (Linnskog, 2008) Starbucks leveraged on this characteristic of European culture to expand in the market. This is one strategy they adopted similar to that of China. Outlets at major locations provided more space for the customers to have coffee and spend time with friends. Therefore, Starbucks had adopted a mixed approach in Europe when compared to that of the China. The company just had to fill the difference in the cultural gap between United States and Europe. It was much easier for Starbucks to do so when compared to that of Chinese market. Starbucks in Latin America Latin American market is one of the most successful profit centres for Starbucks International. It was nine years ago that Starbucks entered the Latin American market. On November 17, 2011, Starbucks opened its 500th store in Latin America. “The region’s 500th store, located on Huerfanos, the busiest pedestrian street in downtown Santiago, showcases Starbucks new store design concept, which aims to create an authentic, yet locally-relevant Starbucks Experience.” (Starbucks, 2011) In Latin America, Starbucks had adopted a China like strategy of sourcing the coffee beans from the region itself. A comparatively low income nature of the region has made Starbucks to focus more on the pricing decisions. Starbucks adopt various cost cutting measures so that they can provide the products at low price. Sourcing coffee from the region is a move on this ground. The company has also set up roasting plant in Latin America which enabled them to cut the cost further. In China, localization was the motive behind sourcing coffee from the country itself whereas in Latin America cost is the motive that drove the strategy. Like Europe, the Latin American advantage for the company is their coffee drinking habit. (Tice, 2002) Unlike that of Europe and China, Starbucks adopted as series of in store promotional activities in Latin America. Starbucks decided to make the customers acquainted with the origin of the coffee beans through the campaign. The intention of the company was to make the customers to build a geographical attachment with the products. They displayed paintings and posters of the farmers inside the store so that the customers could associate them with the people of their region. The company even sold the posters at attractive prices to the customers. (Bloomberg, 2007) This strategy worked well for the company and lead to more customer inflows into the Starbucks outlets. It can be seen that for both China and Latin America, the company had used localization strategies but through entirely different methods. A proper understanding of the nature of the market and formulating the strategies that best fits the market is the primary responsibility of any international brand. Starbucks now generate significant amount of profits from international markets. Each and every market is distinct. There can even be regional difference within a single market. But Starbucks was very much successful in identifying the cultural differences and adopting the strategies that best fit the country. References Bhaskar, 2009. Starbucks Marketing Mix. [Online] Available at: [Accessed 4 December 2011] Tewell, K., Odem, B., Snider, K, 2006. Starbucks Marketing Plan. [Online] Available at: [Accessed 4 December 2011] Starbucks, 2011. Greater China. [Online] Available at: [Accessed 4 December 2011] Icmrindia, 2011. Starbucks’ Success Story in China. [Online] Available at: [Accessed 4 December 2011] Starbucks, 2011. Starbucks Corporation to Make First Entry into the Ready-to-Drink Coffee Category in Europe with Arla Foods. [Online] Available at: [Accessed 5 December 2011] Starbucks, 2011. Starbucks opens 500th Store in Latin America. [Online] Available at: [Accessed 5 December 2011] Tice, C, 2002. Starbucks upbeat about Latin American Strategy. [Online] Available at: [Accessed 5 December 2011] Bloomberg, 2007. Saving Starbucks’ Soul. [Online] Available at: [Accessed 5 December 2011] Read More