Starbucks Marketing Strategy and Strategic Marketing Issues - Case Study Example

Starbucks marketing Strategy and Strategic Marketing Issues Introduction Starbucks is a symbol of business success and its marketing strategy represents a unique combination that other businesses can actually emulate in enhancing competitiveness. Having established over 17,000 outlets around the globe, Starbucks’ success can be attributed to the management’s commitment towards ensuring customer satisfaction through the provision of quality products and services. Until recently, Starbucks operated in a relatively underexploited market. Accordingly, not too many companies with a magnitude equalling Starbucks, engaged in the gourmet coffee business. The development of other companies therefore denotes that Starbucks is operating in a market that has become increasingly competitive such that it must utilize the differentiator strategy or risk losing its market share. In this respect, the company needs to create value for customers and thus enhance the business’ continuity. Starbucks is often associated with exceptional quality for its products and services, consequently leading to a large market share, especially among the youth and middle age group customers. This form of differentiation has actually allowed Starbucks to charge a premium for its services without being confronted by a corresponding drop in customer base. Starbucks has also benefited greatly from its localization strategy where the company aims at individualizing its outlets depending on the communities where they are located. Starbucks marketing strategy Starbucks mission is to establish the company as the premier purveyor of the world’s finest coffee while maintaining the company’s uncompromising principles as the company continues to expand (Starbucks website). Accordingly, the company adopts effective strategies aimed at ensuring that the company’s mission is accomplished in the best manner possible. The company uses six guiding principles that are used in guiding decision making within the organization and which also plays a significant role in enhancing the company’s market share (Tewell, Odom and Snider, 2006). To begin with, the company endeavours to provide a desirable work environment and requires the organization’s people to maintain respect and dignity when treating each other. Secondly, the company embraces diversity and considers it an important component of the business. Thirdly, Starbucks aims at applying the highest excellence standards in the purchase, roasting and delivery which further promote the quality of their coffee (McCain, 2007). Fourthly, the company seeks to develop enthusiastically satisfied clients by ensuring that they receive quality service all the time. Fifthly, the company ensures that it contributes positively to its communities and environments. The last principle is based on the company’s profitability. Starbucks therefore recognizes the importance of profitability to its future success. Starbucks’ financial objective is to get $20,000 in weekly sales from each of its stores. Starbucks has managed to maintain a favourable niche in the market through various marketing strategies that mostly focus on differentiation. These strategies are discussed as follows: Product quality Starbuck’s history indicates that the business places a great emphasis on product quality such that it remains preferred coffee house for most of its customers (McCain, 2007; Thompson and John, 2006). Despite the fact that Starbuck’s coffee is slightly expensive, its aroma, delicious and rich taste have aided the company in maintaining its market share. The company makes use of perfectly roasted beans that are imported oversees; which gives the company a competitive advantage over other coffee houses (Thompson and John, 2006). Other products provided by the company are also made from high quality ingredients and this ensures that customers are served with the best quality possible. Maintaining high standards in product quality as noted by Backer (2003) and Harper, Mullins and Orville (2006), is expected to attract customers to the company and thus improve profitability. Customer satisfaction Starbucks is totally committed to ensuring that customers get the best experience in its outlets. The customer service experience right from the entrance to the last coffee drop portrays the enthusiasm with which the members of staff are willing to ensure that customers are satisfied. According to Tewell, Odom and Snider (2003), employees are trained to maintain “customer intimacy” so as to enhance connection and thus encourage repeat customers. The “Just Say Yes” policy helps in keeping the company’s customers happy. An example is giving coupons for a free drink if the customer is dissatisfied. The outlets also ensure that customers have access to pamphlets that allow them to share their experiences and thoughts about Starbucks. In order to ensure that customers are treated well, the company uses “Customer Snapshots” to evaluate customer service in retail stores. These resemble mystery shoppers and their role is to evaluate service through making observations such as whether staff greet customers, say thank you and maintain eye contact among other courtesy requirements (Tewell, Odom and Snider, 2003). They also check cleanliness, product quality and the speed of service. Starbucks also ensures that customers can access their products through office delivery services. Third place strategy Starbucks maintains a marketing strategy whereby it focuses on creating the ‘third place’, besides home and work, which provides a good venue for socialization (Vote for us, 2010). It creates a relaxing atmosphere which gives its customers a desirable experience. This is one of Starbuck’s strongest concepts and its customers have become increasingly attracted to the cool ambience which Starbucks aims at making as relaxing and comfortable as possible. According to Paul, Chitraju, Nicole and Sean (2009), Starbucks is keen on ensuring exceptional service, product quality and well selected locations in order to make customers linger in their outlets as opposed to those of competitors. This further promotes the profitability of the company besides providing customers with a place to relax. Starbucks’ loyalty program has played a significant role in enhancing this, through providing special benefits that customers can enjoy if they become regular customers. The program initially used the Starbucks Gold card which was later replaced by My Starbucks Rewards (Starbucks website). Holders of the loyalty card get a birthday beverage, 10 percent discount on most products and other exclusive discounts. This ensures that the company is able to retain a significant proportion of customers, thus maintaining its market position. High-end marketing/Upscale brand It is notable that Starbucks tends to focus on high-end customers in the market. This can be evidenced by the price of their product which is slightly expensive than in other outlets. According to Paul, Chitraju, Nicole and Sean (2009) Starbucks uses the premise of being the premier for a specialty coffee brand to create a notion of ‘not just coffee’, but a ‘rich experience’. This has been Starbucks selling point and has led to rapid growth of the company. Such a strategy may be useful in maintaining a certain class that Starbucks seeks to maintain and thus play a role in attracting customers that prefer that kind of setting as noted by Kurtz, MacKenzie and Snow (2009). Furthermore, most of the company’s customers are youths, middle-aged and are probably working, such that they may seek an ambience resembling that of Starbucks to relax after work. Tewell, Odom and Snider (2006) also note that the company aims at creating customer loyalty around fancy beverages such as cappuccinos and lattes. These are beverages that may not be affordable to regular customers such that Starbucks represents a certain class of customers. Continuous Innovation Starbucks constantly comes up with innovative and creative products aimed at improving value and enhancing customer satisfaction. Their menu is upgraded constantly and Starbucks has managed to maintain its customer base through adding different coffee flavours and adding more food types to the menu (Moon and Quelch, 2003). Starbucks was among the first stores to offer internet capability (Vote for us, 2010). The company is also a pioneer in providing complimentary books and handicapped access among other areas of collaboration (Paul, Chitraju, Nicole and Sean, 2009) Continuous innovation is evident in the range of products offered by the outlets such that Starbucks maintains a favourable market niche. The company for example is testing low fat foods in its stores such as porridge and carrot sticks, with a view of establishing these foods in its outlets (Marketing Week, 2009). In July 2009, Starbucks announced its intentions to start up an unbranded store chain in Seattle which will offer flexibility to the company. This is a fresh approach which will allow flexibility through a change in working hours from other Starbucks branches and through an alcohol selling licence that will be available to their unbranded invention (Golding, 2009). The de-branding strategy is considered to be highly innovative and is likely to increase the company’s revenue to a great extent. The outlet will be named 15th Avenue Coffee and Tea. According to Golding (2009), few brands if any have ventured into such a strategy. It has been branded a necessary step as it will allow the company to revert to the original intention of providing the community with a place to take coffee and also demystify the ‘fast food’ notion created by automated coffee machines that eroded their initial intention of providing people with a place to relax. Brand marketing Notably, Starbucks prefers to use unconventional advertising methods as opposed to conventional methods. These are normally unique methods that are unique and seldom tried by other companies (Kembell, Hawks and Kemberll, 2002).Starbucks advertising is focused on word of mouth and customer experience, where they let their high quality services and products do the marketing for them. This is a strategy that is unique to Starbucks and which has continued to produce positive results for the company. Accordingly, it is common to find that Starbucks rarely advertises on bill boards, newspapers and posters as many other companies are likely to do (Vote for us, 2010). Store expansion/Global strategy Starbucks has managed to establish a significant number of outlets around the world through its store expansion strategy. Starbucks has approximately 17,000 outlets worldwide, with the majority of outlets in the United Kingdom, United States, Thailand and Australia (Paul, Chitraju, Nicole and Sean, 2009). The company targets favourable areas through analysing the presence of favourable demographic profiles and the presence of high-visibility areas (Kembell, Hawks and Kemberll, 2002). The company then establishes various sites to set up stores, with the major city as its focal point. Starbucks global strategy ensures that the company reaches a significant number of customers and is therefore desirable in enhancing the company’s profitability. According to Cravens and Piercy (2006) and Doole and Lowe (2001), a global marketing strategy exposes a company to different market conditions and this is an important factor in selecting the most appropriate markets. Localization strategy Starbucks does not maintain a standard design for its outlets around the world. Instead, each store is custom-made in order to reflect features that characterize the community in which the store is located (Kembell, Hawks and Kemberll, 2002). This way, customers in the area can identify with the outlets thus promoting popularity. In 2009 for example, Starbucks planned to perform major changes in UK stores with a view of giving their stores a local theme. This was aimed at reflecting a greater community feel through implementing local designs (Marketing Week, 2009). These included colours, artefacts, and community notice boards. This was expected to have a positive effect on the company because as Butler (2006) notes, local people are likely to relate with a business if their cultural values and beliefs are expressed. Community involvement Starbucks ensures a great level of community involvement and this is actually included in the company’s mission statement as a guiding principle. Starbucks is the largest corporate contributor to CARE, North America which is a worldwide development and relief program that aids third world countries which normally provide Starbucks’ coffee supplies (Starbucks Coffee, 2006). Starbucks also participates highly in community programs such as literacy improvement, supporting the military and enhancing environmental safety. The company has deigned an environmental committee that is involved in inventing ways of reducing, reusing and recycling waste (Starbucks website). Apart from this, Starbucks Foundation is committed to the creating hope, opportunity and discovery in Starbucks communities. The need for involvement in community activities or community social responsibility (CSR) has become increasingly important for companies to maintain in the contemporary world and this strategy is thus favourable for Starbucks to adopt. According to Upshaw (1995), companies that engage in CSR are likely to attract a large number of customers as opposed to those that do not. This is because such companies appear to be concerned about the welfare of their communities and customers. This strategy therefore plays a significant role in placing Starbucks in a competitive position. Strategic marketing Issues The marketing strategy adopted by Starbucks is highly effective in ensuring that the company maintains its competitive position in the market. Accordingly, it is important for Starbucks to maintain the high quality of products and service, which will be imperative in retaining and attracting customers. This could however be enhanced further through establishing strategic innovations to increase the value of their products and also increase their range of products. Notably, Starbucks’ major focus is on coffee as well as other beverages such as tea, soda and juice. This denotes that while the company has attempted to invest in other products, it has not achieved it full potential and is therefore likely to benefit more through extending its food line as witnessed in competing outlets such as MacDonald. The company should consider providing a wide range of snacks and fast foods in their outlets so as to increase their revenue. Customer satisfaction is imperative and every business must aim at meeting their customers’ needs effectively (Kotler, 2003; Hamel and Prahalad, 2006; De Wit and Meyer, 2004). Starbucks has succeeded in maintaining this aspect of business and should therefore maintain this strategy. The company goes to great extents to make customers satisfied and this is a lesson that could be learned by other businesses that seek to enhance profitability. Competition in the industry has increased greatly which highly threatens the company’s continuity. As noted by Harper, Mullins and Orville (2006), there is dire need for the company to come up with more innovative strategies in order to reduce chances of being overtaken by competitors. One such strategy is through strategic acquisition and mergers with competing businesses. This would allow the company to gain additional market share and enhance reduce competition (Lamb, Hair and McDaniel, 2008). Further, the company would gain from merging administrative costs and purchasing costs. Starbucks brand marketing, although effective for their current needs, could be changed so as to increase the number of customers served by the company’s outlets. In regard to the use of unconventional advertising methods, Starbucks could benefit more by utilizing conventional advertising methods which are likely to reach out to more people (Kotler, 2003). Placing advertisements in the media portraying the great value that customers could get at Starbucks for example would play a significant role in increasing the number of customers coming to the company’s outlets. Notably, the unconventional methods help in controlling the number of customers and thus maintaining the outlets’ class. The company could however respond to this by setting up more outlets to accommodate demand. The internet provides one of the most lucrative avenues of advertising in the contemporary market (Lamb, Hair and McDaniel, 2008). This is an avenue that Starbucks should aim at exploiting in order to increase the number of customers and thus improve on revenue. The company could take up advertising slots in various websites to advertise their products, locations and discounts with a view of attracting more customers into the outlets. Internet advertising is especially useful in attracting young people to Starbucks outlets. Conclusion This discussion portrays Starbucks as a well organized company that uses highly workable marketing strategies to maintain its market niche. Notably, Starbucks continues to enjoy popularity despite pegging a premium on its products. This can be attributed to their exceptional customer service and uncompromised standards that ensure that the company only supplies high quality products. The company’s outlets provide customers with a highly desirable ambience that enhances comfort and relaxation thus increasing its popularity. Besides this, the company is highly involved in community activities; which further promotes its popularity among customers. Notably however, the company should aim at improving its product range, increasing marketing activities and coming up with more innovative strategies in dealing with competition. Overall, Starbucks has managed to differentiate itself from competitors and has essentially proved that the implementation of unique marketing strategies is highly essential for company success. Starbucks is a symbol of business success and its marketing strategy represents a unique combination that other businesses can actually emulate in enhancing competitiveness. Reference List Baker, MJ 2003, The marketing book, Butterworth-Heinemann, Oxford, UK. Butler, AM 2006, Essentials of Marketing in the 21st century, McGrawHill, New York. 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