Starbucks: a Strategic Analysis Past Decisions and Future Options - Case Study Example

Starbucks has started out as a Seattle company beginning with 17 shops and has quickly turned itself into a visible sight in the American market. It has more than 11,500 franchises in the United States and this saturation has led to decrease in market growth prompting the brand to expand globally. The United Kingdom and Canada currently stands as its highest profit contributor representing about 69% of foreign revenues from its more than 5,000 stores in 40 countries after its globalization in the entry to the new millennium (Mueller 2011). The marketing mix unifying product, promotion, place and pricing (Hair, Lamb & McDaniel 2009) to cater to the target market is essential in the goals of the plan. The numbers provide the immense potential of the brand as a widely-recognized global company to garner positive reception in the local market. This however must be coupled with deliberate marketing that assimilates the inherent qualities Starbucks has in relation to the clientele that its Stafford branch aims to attract. The new Starbucks in the area must take advantage of its potential to become a familiar spot in the community. Mueller (2011) further emphasizes the advent of Integrated Marketing Communications (IMC) in the marketing mix. This amalgamates a number of communication aspects such as public relations, advertising and sales promotion to establish contact with the customers. In this area, customer response is an invaluable part of strengthening the presence of the product in the consumer’s consciousness. An eight-step IMC marketing plan is enumerated step-by-step as follows: Step 1. Global Customer/ Prospect databases; Step 2. Customer Prospect Valuation; Step 3. Contact Points and Preferences; Step 4. Brand or Organization Relationships; Step 5. Message and Incentive and Development and Delivery; Step 6. Estimate on Return on Customer Investment; Step 7. Investment and Allocation; Step 8. Marketplace Measurement. Starbucks is widely credited for adopting IMC as part of its success in the international scene. “The Starbucks brand signifies much more than just coffee in the minds of its various stakeholders: it represents a sense of community and shared ideals among employees, customers and the world at large” (Mueller 2011: 80). The strategy of the company in simple terms is to saturate the market with its presence through a blanket approach despite the probability that it results to internal competition. At its rate in the United States, a typical customer is quantified to have purchased from the store about 18 times a month with little to no marketing. On the average, the company in its earlier days in 2003 is said to have spent only 1% of its annual revenue on advertising, a far cry from the 10% average retailers spend for advertising (UW Business School 2003). IMC can be utilized in such a way that it integrates grassroots marketing and the company’s global marketing perspective to implement a locally efficient approach. Stabucks’ Vice President of Marketing, Starbucks Coffee International Karin Koonings herself stresses the success of the company in the international is largely based on its global identity reinforced by local marketing. “The Support Center understood our markets and developed programs that we would implement with local creativity and surround with local marketing initiatives. This is why the brand is so well connected with the communities in which we operate” (Effective Brands 2008: n.p.). The sense of community has always been at the heart of the brand. It continuously associates itself as an active part of development by including in its platform the need to shed light to the contributors in its success. This includes the farmers who grow and crop the coffee beans it is known for, the employees that are treated fairly through various programs for their welfare thus creating an atmosphere of family relations, and the communities in which it becomes assimilated in. This branding technique that Starbucks has employed made it a force to be reckoned with and its longevity proves testament to the customer loyalty it has gathered through years. Starbucks’ brand integrity makes it easy to market where £3,000 may just be enough to set up a 3-month media plan. The media strategy will mainly revolve around a predominantly push policy with the message coming from the PR strategy. But it also has certain elements of pull such as those in the internet where customer response can be posted. Starbucks has been identified as the familiar go-to neighbourhood coffee shop (UW Business School 2003). This is perhaps the main selling idea of Starbucks and its position in the market. The prices of their products make its main clientele to range from middle income to high income earners. This is compensated with consistency in the quality of their beverages and food items toward customer satisfaction. These consumers are the main target audience who live active and on-the-go lifestyle. They also involve specialty coffee and tea aficionados who value quality in a cup. The main goal is to induce local coffee and tea drinkers to keep on coming back for their daily dose. Consistent to the Lavidge & Steiner (2007) model discussed, focus will be given on the conative, affective and cognitive aspects to develop the PR objectives. Conative is applied by stimulating audience response through the media strategy, affective will not be as necessary since there no need to change audience attitudes, and cognitive will be enhanced by working on creating awareness over the new product offerings. Brand relationship is an important aspect of this promotion and the same needs to be applied in the plan. This emanates from strong organization relationship which the customers could perceive. The existing pitfalls in the economy make cutbacks on spending by consumers a logical effect. This is where locally-specific plans would be advantageous. Determining the income brackets of the target population pinpoints the specific products that will be most appealing to them. The new line of ‘home baked’ products, such as cakes and pastries which includes traditionally English staples, tug on the comfort food quality that connects itself with the brand giving it a more homey atmosphere. The sizes made available including miniature portions encourage customers to try out a variety of sorts and flavors to eventually identify as the distinctive Starbucks item they ought to have. This expands the target market of the store to entice more middle income earners to purchase. The necessity to encourage locals to partake of the Starbucks experience is the primary goal of the franchise upon its opening. This could be achieved concurrently with the AIDA model. Awareness of the opening of the Stafford branch is of utmost import. Interest must be initiated mostly on how this Starbucks branch is a bit different. Desire should be buildup prior to the opening to attract customers. Finally, action does not stop on the opening day but must be sustained throughout the enforced media plan. It is inevitable that the local clientele keep on going back as they will serve as the backbone of the store’s subsistence. In consonance with this, the products offered must cater to what the market fancies while staying true to the brand. This advertising plan incorporates various media in subtle and tolerable frequency. Coherent with the overall distinctiveness of Starbucks as evasive with overtly aggressive advertising, its Stafford branch will employ low-key but nevertheless effective marketing strategies. Applying Porter’s Differentiation Focus Strategy, the focus is on the specific market niche that the company caters. Starbucks is perceptively a high cost product for specialty coffees and teas with an equally premium price. “Starbucks does not aggressively market the company through traditional means but instead focuses almost entirely on high-level marketing and branding of word-of-mouth and key alliances and partnerships” (Lingley Larson 2009: 4). This is based on the fundamental role of PR to develop goodwill, affect public opinion and improve reputation discussed in the module. Starbucks has consistently worked in the inclusion of corporate social responsibility in the brand while also integrating ethical advertising. The Differentiation Focus Strategy of Starbucks is delineated to the two concepts of word of mouth marketing and forming strategic alliances through brand partnerships. This should be employed but must be reinforced with more assertive advertising models but without having to overexpose the brand. Thus, association with environment centered non-profit organizations and similar advocacies will enhance brand consciousness. The use of the store of recycled materials and promotion of ecofriendly products establishes consistency. This will position the Starbucks Stafford as a quintessential Starbucks but distinctively homegrown. The ideal Media Vehicles are press, radio, and online. These are all the most ideal in terms of reaching the target audience in the most economical and effective way possible. The responses desired encompass Cognitive, Feel (emotion) and Do (action) as proposed by Duncan (2005). Awareness as the main purpose of cognitive is necessary especially because it will the first Starbucks in the area. Feel will primarily depend on the audience’s response to the new store and its new products. By buying and eventually repeating their Starbucks trips will be the goal of the media plan. Press will be first to be used, print media such as local newspapers and other community publications, second, local radio stations, program promotions especially to announce opening and third online, i.e. generating online community-based marketing. In addition, out of home will be utilized through sponsorships which will form a major part of the plan through participating in events, especially environment centered advocacies, to show support to the stakeholders. In-store advertising will be invaluable through POS displays, Signage and perhaps other promotional attention grabbers. The last one will center on promoting the new products and blends of the store. The £3,000 budget shall be divided with the biggest portion going to Events sponsorship as part of a mixed media strategy promotion which shall span over the given three months at £1,000. This will be a different take on the existing PR programs of competitors and essential in positioning the product apart from similar enterprises in the area as a major selling idea that goes beyond product identity. Over the course of the quarter, the store will generate strategic exposure specifically for the target audience. The reason for the relatively bigger allocation shall include a major event at the end of the third month much likely to be a fun run with the Starbucks Stafford as the main organizer where the proceeds will go to a partner non-profit organization. The remainder of the £1,000 shall go to this event and to fill up the possible shortage to execute the event, partnership with other establishments will be solicited all toward a good cause. The next highest percentage of the budget will go to print with £700 over the entire period. EXPOUNDThe same shall also coincide with the public relations event where £500 shall be apportioned to hosting an intimate one-day event for local media practitioners to acquaint them with the opening of Starbucks Stafford, encouraging them to write about the store. To keep true to the financial plan and as coherent to the media plan, the store itself will cater the event and the members of the organization will be involved. This affair will also be the occasion to launch the various offerings, specifically the new line of home baked products and its convenient sizes. This should create interest in the local consumers by reading them prior to the opening of the store. Throughout the length of three months, the £700 shall be spent to maintain an assertive presence in print and radio media. This is for upholding media presence but no actual commercial will be produced toward this end. The bulk will go to press releases for articles and on-site promotion by disc jockeys of the new store and the products itself. In-Store advertising is another significant part of the public relations and advertising plan which constitutes £600 of the budget. This shall include, other than the common sight of posters and other signage, giving customers postcards, membership cards or other personal items sent or given to them. Correlatively, other usual strategies within the store may be implements as well as providing customers within the store the opportunity to taste their new products in small portions. Finally, £200 will go to online marketing. This is the smallest percentage but is hoped to be one of the most effective. Creating an online community expressly for Starbucks Stafford, mainly in online social networking sites, will not only be inexpensive it will also be efficient. The impact of contemporary PR approaches through the online media cannot be emphasized more. The traffic on the internet as a brand message expander ensures that the product will be reached by more audience in no time at all and this costs virtually nothing except for time to manage the site and the enthusiasm to keep it going. There is also the fact of its interactivity where audience response is automatic and earnest which translates to easy feedback and a means of quick evaluation of PR effectiveness. Subsequent to the three month plan, this may continue to be a low-cost strategy that the crew could carry out effortlessly. Main Public Relations Events Description Objective First Public Relations Event Meet and dine with local media prior to actual opening of the franchise store Establish media contacts and introduce the franchise and its products Branch Opening Launch of the store Store opening, take advantage of initiating customer loyalty Sponsored Event A culmination of the 3-month plan through a fun run for charity Determine customer participation after the first quarter while raising funds to foster community relations and corporate social responsibility Description/ Platform Details Estimated Cost Distribution of the Budget Sponsorship Sponsoring several events consistent with environment consciousness of the brand £1, 000 over the 3-month period Print Press releases in the lifestyle section of local publications £700 over the 3-month period Radio Store advertising incorporated in local radio programs Internet Social networking sites Virtual website £200 over the 3-month period In-Store Starbucks postcards Displays Signage £600 over the 3-month period WEEK Media Vehicle Frequency 1 2 3 4 5 6 7 8 9 10 11 12 Newspaper (Local/Community Papers) X X X X Radio (Local Stations) X X X Posters (Indoor & Outdoor) X X X X X X X X X X X X Website X X X X X X X X X X X X Social Media X X X X X X X X X X X X Membership Cards X X Postcards X Event Sponsorship X X X X Evaluation will be necessary in determining the effects of the media plan and knowing whether the advertising messages were transferred appropriately to the desired audience. In this regard, pre-testing will be initially conducted to the press conference and within the organization. Post-testing will be done in various ways such as through the internet by posts, comments and feedback from customers. An in-house survey may also be conducted where consumers may provide input which focuses on awareness, issues, response and position. Primarily, it must be kept in mind that any good marketing plan is an ongoing process to warrant sustained success. An evaluation of the applied strategies may be through some simple measurements such as customer feedback and sales analysis to verify if customer satisfaction is achieved and to recognize the sales profit of Starbucks Stafford. These tools can be easily effected in the regular conduct of the business during or after the 3-month program and even at the course of the major events contemplated within the marketing plan. The proposals contained herein will be effective because it simply integrates an already marketable brand by infusing it with relatively evident modifications to make it a familiar local specialty coffee shop. Bibliography ‘Effective Brands’ (2008) Starbucks Abuzz About Global Growth , viewed 2 April 2013, http://www.effectivebrands.com/downloads/bulletin_starbucks.pdf Lamb, C. W., Hair, J. F. and McDaniel, C.D. (2009) Essentials of Marketing. Mason,OH: South-Western Cengage Learning Lancaster, G. and Whitney, F. (2006) The Official CIM Coursebook 06/07 Marketing Fundamentals. Oxford: Elsevier Ltd. Larson, R.C. (2008) Starbucks a Strategic Analysis Past Decisions and Future Options. Brown University Economics Department (online Coe.brown.edu ). Lingley Larson, R.J. (2009) Marketing Strategy and Alliances Analysis of Starbucks Corporation. Liberty University Faculty Publications and Presentations, Paper 10 (online DigitalCommons). Mueller, B. (2011) Dynamics of International Advertising: Theoretical and Practical Perspectives. 2nd Ed. New York: Peter Lang Publishing Inc. Starbucks n.d., Being a Responsible Company, viewed 1 April 2013, http://starbucks.co.uk/responsibility ‘UW Business School’ 2003, Starbucks Corporation: Competing in a Global Market, viewed 1 April 2013, http://www.foster.washington.edu/centers/gbc/globalbusinesscasecompetition/Documents/Cases/2003Case.pdf Read More