Principles of Marketing: Starbucks - Case Study Example

 Principles of Marketing Submitted To – Dr Effi Raftopoulou Submitted by – NAME OF STUDENT Table of Contents Introduction – Starbucks 2 Market Segmentation and its Prominence 3 Advantages & Disadvantages of Market Segmentation 4 Marketing strategy of Starbucks 6 Segmentation at Starbucks 6 Targeting 6 Positioning 7 Development of Marketing Mix for Starbucks 7 Product 8 Price 8 Distribution and Service 8 Promotion 9 Conclusion 9 References 10 Introduction – Starbucks It is ascertained by Schultz (2012) that Starbucks Corporation was established by 3 entrepreneurs in Seattle in the year 1971. Initially the company was selling only whole bean coffee in the city of Seattle but from 1982, they opened 5 stores for selling coffee beans along with establishing a roasting facility and another wholesale business pertaining to local restaurants. Finding from Dorn et al. (2016) indicates that Howard Schultz was then recruited as manager of retail and marketing and he suggested new ideas to original owners of the company which were mostly turned down by them. Owing to the constant rejection Howard opened his own coffee bar named II Giornale which sold brewed Starbucks and it expanded by three stores in 1987 and he bought Starbucks from its original owners for a price of 4 million dollars and changed the name of his company from II Giornale to Starbucks. By the year 1991 according to statistics by Harrington et al. (2017) it has cleared all its debt and sales increased by a volume of 94% and Starbucks expanded to 20 stores in 1988 and by 1996 to 870 stores and to more than 27000 stores globally in the year 2017. Market Segmentation and its Prominence STP is one of the most prominent strategies applied by organization globally in the modern marketing world. According to Venter et al. (2015) it is employed for the creation of the marketing communications plans as this enables the marketers for prioritizing different propositions and also for the development and delivery of personalized as well as relevant messages for the engagement pertaining to different audiences. Figure: Detailing of the STP Model (Wang, 2015). STP focuses on the audience rather than product pertaining to communication and this ensures that the delivery of the messages to the appropriate audience occurs in the requisite manner as it was intended by the company. Figure: Flow of any plan when using STP approach (Cross et al., 2015). It is also been analyzed via Wang (2015) in support of findings from Cross et al. (2015) that STP primarily focuses the commercial effectiveness choosing the segments for any business that are valuable in nature and then develops a marketing mix along with product positioning strategy pertaining to every segment. Advantages & Disadvantages of Market Segmentation It is ascertained by Canhoto et al. (2013) that market segmentation enables a marketer to both spot as well as compares the marketing opportunities. Figure: Merits and De-merits of Market Segmentation (Canhoto et al., 2013). The knowledge pertaining to various segments also helps in proper allocation of the complete marketing budget. It further facilitates the setting of realistic selling targets along with priorities. Anderson et al. (2008) lends more support stating that management helps in the identification of new profitable segments requiring special attention. Leonidou et al. (2002) provides contradictory views than Anderson et al. (2008), and Canhoto et al. (2013) indicating that segmentation increases the cost owing to shorter runs of production along with product variations also leading to proliferation pertaining to the products. It also requires a larger inventory via the manufacturer along with the distributor and also increases promotion along with distributing costs as separate programs is adopted pertaining to different market segments. Varadarajan (2010) too added that as characteristics pertaining to a market change then investments which have already been made become useless. Marketing strategy of Starbucks Starbucks implemented the Differentiation Strategy which enabled it for providing product/service which offered benefits and also remained varied in comparison to its competitors adding value for the products (Armelini & Villanueva, 2011). The primary motive pertaining to adoption of this strategy according to Harrington et al. (2017) was the achievement of advantage via offering of better products/services at the same price as its competitors. Marketing contributes to different aspects of organizational competitiveness in the form of innovation along with competitive analysis. Starbucks wanted innovation as well as recreation of experience of visiting an Italian coffee bar in its cafes globally and therefore it focused on both new products along with establishing stronger connection with customers along with expansion of its stores globally. Segmentation at Starbucks Market segmentation can be adjudged to be a process pertaining to dividing market into separate groups of varied needs as well as characteristics requiring different products or marketing programs (Datta et al., 2017). Starbucks had in its initial stages focused on Socio-Economic segmentation base pertaining to the consumer markets owing to it being focused on the social class which primarily comprised of business class working at offices requiring a cup of coffee along with better facilities and a good ambience and atmosphere. Starbucks has shifted its focus to different segments in its present and future plans now focusing on shoppers, students, office goers and regular individuals included in their product placement strategies now and for future plans both. Targeting According to Jang and Jung (2013) target marketing is the concept pertaining to evaluation of every market segment’s attractiveness along with selecting one or more than one segments for entering. It is added by Datta et al. (2017) that most of the companies initially target only a single segment for targeting which is also the case with Starbucks which targeted the business class and then after its success later added young children, college goers, shoppers, parents with young children along with developing its product ranges for accommodating the identified targets effectively. Positioning Market positioning as deduced from viewpoints of Armelini and Villanueva (2011) and Harrington et al. (2017) can be adjudged to be an arranging of products for occupying a clear and as well as a distinct place pertaining to any competing products in the mindset of the target customers. Starbucks has already established itself as a very reputed brand and this provides them strategic advantage for their target markets. Its positioning strategy is to provide customers the best of service which is better than their expectations from Starbucks. It also has gained competitive advantage pertaining to customer and employee satisfaction via providing customers the best layouts, furniture, music, internet, lounges and ambience along with making employees partners to Starbucks via its varied initiatives to reassure them of their personal security. The positioning strategy remains constant for both the present as well as future. Development of Marketing Mix for Starbucks A company which has made decision pertaining to its marketing strategy requires planning the details pertaining to the marketing mix. A marketing mix cane be adjudged to be set of controllable as well as tactical marketing tools (4Ps namely Product, Price, Place and Promotion) which the company combines for the production of the response it wishes from its target market. Product Starbucks employs the use of brand name along with variety, quality and services as the product tools as it has an excellent brand value accompanied with provisioning of best quality and variety will ensure that the target markets are always catered in every manner intended by Starbucks (Harrington et al., 2017). Starbucks has already adopted the Quality Improvement Strategy and it is offering products like non-fat milk for coffee along with cold blended beverages. Starbucks has started to offer seasonal offerings like Strawberry and Cream Frappuccino along with gingerbread latte along with other seasonal cookies as well as pastries. Prior to launching of any such products Starbucks has been taking approval from its customers and will continue to do so. Price Starbucks has always had higher prices than its competitors as per Datta et al. (2017) but its luxurious image, excellent facilities and high brand value has justified its applied costs and the benefits along with facilities as well as best quality of the products are sufficient to justify the high prices. Distribution and Service Starbucks has ensured better distribution channels and in its initial strategies it sold coffee beans only and focused only on wholesale business pertaining to the local restaurants. Starbucks has expanded in such a manner that it has a direct reach to its intended customer targets in terms of its service delivery as well as location selection. This present as deduced from findings from Haskova (2015) strategy needs to be continued globally to ensure more dominance and market capture across the globe along with ensuring more extensive training to its employees to ensure best customer service delivery by its employees. Promotion Starbucks has not implemented any advertising tools pertaining to promotion of their intended products to the planned targeted segments but only public relations accompanied with personal selling tool both enabled it to achieve its intended targets. However Bruhn et al. (2012) evaluated that in future promotion using advertisements in newspapers, internet and web marketing, television along with campaigns must be done to ensure that brand value remains strong for Starbucks in the minds of its consumers. Conclusion The discussion entailed an overview pertaining to Starbucks along with the evaluation of market segmentation along with its merits and demerits and further critically evaluated the STP strategy of Starbucks accompanied by the evaluation pertaining to the development of the marketing mix for Starbucks reviewing its previous, current and future marketing mix strategy in terms of price, product, distribution and service along with promotion for supporting its positioning strategy. References Andreasen, A.R., Kotler, P. and Parker, D., 2008. Strategic marketing for nonprofit organizations (pp. 44-53). Upper Saddle River, NJ: Pearson/Prentice Hall. Armelini, G. and Villanueva, J., 2011. Adding social media to the marketing mix. IESE insight, 9(9), pp.29-36. Bruhn, M., Schoenmueller, V. and Schäfer, D.B., 2012. Are social media replacing traditional media in terms of brand equity creation?. Management Research Review, 35(9), pp.770-790. Canhoto, A.I., Clark, M. and Fennemore, P., 2013. Emerging segmentation practices in the age of the social customer. Journal of Strategic Marketing, 21(5), pp.413-428. Cross, J.C., Belich, T.J. and Rudelius, W., 2015. How marketing managers use market segmentation: An exploratory study. In Proceedings of the 1990 Academy of Marketing Science (AMS) Annual Conference (pp. 531-536). Springer, Cham. Datta, H., Ailawadi, K.L. and van Heerde, H.J., 2017. How Well Does Consumer-Based Brand Equity Align with Sales-Based Brand Equity and Marketing-Mix Response?. Journal of Marketing, 81(3), pp.1-20. Dorn, M., Messner, C. and Wänke, M., 2016. Partitioning the choice task makes Starbucks coffee taste better. Journal of Marketing Behavior, 1(3-4), pp.363-384. Harrington, R.J., Ottenbacher, M.C. and Fauser, S., 2017. QSR brand value: Marketing mix dimensions among McDonald’s, KFC, Burger King, Subway and Starbucks. International Journal of Contemporary Hospitality Management, 29(1), pp.551-570. 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Performing market segmentation: a performative perspective. Journal of Marketing Management, 31(1-2), pp.62-83. Wang, C.H., 2015. A market-oriented approach to accomplish product positioning and product recommendation for smart phones and wearable devices. International Journal of Production Research, 53(8), pp.2542-2553. Read More