Starbucks Cafe Marketing - Case Study Example

Starbucks Café’ Marketing Plan

Introduction

Marketing plan is the reviving step for any organisation to give the new directions to their business activities. A marketing plan must have a defined objective and vision on how to obtain the objectives (Aminattaheri, Sorooshian, and Aghabakhshi, 2013). This marketing plan will provide the overview of the Starbucks Café’ (existing organisation) and describe the new services that should be considered. Additionally, the plan will carry out the SWOT analysis of the new services, positioning, market objectives, target markets, financial and non-financial goals, marketing mix, and the financial projections. Starbucks Corporation is the American company that was founded in 1971. The company is the leading premier roaster, retailer and marketer of the speciality coffee across the world. Starbucks has approximately 182,000 employees in across 62 countries (Starbucks Annual Report, 2014). Their product mix include the handcrafted and roasted premium priced tea, coffee, a variety of the fresh food products and the other beverages. Starbucks markets its product mix with the other brand names within the company’s portfolio of the companies, which include Tazo, Starbucks VIA, Teavana, Starbucks Refreshers, Verismo, and Evolution (Starbucks Annual Report, 2014). As of September 2015, Starbucks had the total revenue of $19.162 billion.

Starbucks Marketing Environmental Analysis

The market environmental analysis is vital for the understanding what the organisation should do in consolidating its position in different target markets.

Situation Analysis

Starbucks Mission

Starbucks Coffee has the mission statement of achieving the objective of the company. Starbucks Café’ mission statement is to continually inspire and nurture the human spirit-one person, one cup and one neighbourhood at a time. Additionally, this marketing plan will also ensure that Starbucks Café’ mission statement also include the provision of the highest quality, healthy products and services to the customers in an environment that is safe, attractive and comfortable. This will encourage the customers to make frequent visits.

Core Competencies

Vitez (2009) asserted that the core competencies are the specific skill sets that are aimed at bringing the competitive advantage to the business operating in the economic market. The core competencies are vital factors that improve the end products that are produced by the company. Some examples of the core competencies include capability for the specific knowledge and innovate, customer or the employees’ relationships that can develop Starbucks to be the market leader, production processes, and brand awareness. One of the main core competencies of the Starbucks Café’ is based on the quality coffee that are sold at the premium prices. Starbucks applies their strengths with the core competencies. The main core competencies of Starbucks Café’ include Starbucks brand awareness, unique products and human resources. Additionally, Starbucks places its core competencies to bring up their business a competitive advantage.

Competitive Advantage

Competitive advantage can be defined as the circumstance that puts the organisation in a favourable position in the market or business. Starbucks Café’ will maintain the competitive advantage through the following ways;

New ideas- at the beginning of Starbucks, the company didn’t provide the free Wi-Fi facility. However, today the company has free Wi-Fi facilities that makes the customers to feel more comfortable.

New products-since its foundation, Starbucks has continually introduced new products into the market. For instance, Starbucks make a coffee sachet and among other new products.

New experiences for the guests-the company hires new designers that are constantly coming up with the artwork for the commuter mugs. Thus it can be conclusively said that Starbucks applies the concept of the competitive advantage that is solely focused on the differentiation advantage to apply in its business activities as well as the cost advantage. Other sources of Starbucks competitive advantage include differentiate advantage and cost advantage.

Financial and Non-Financial Goals

The financial goals for the Starbucks Café’ will be mainly to identify the needs and goals for the future. The main goal of this marketing plan will be to provide all the available financial intelligence so as to equip the managers with tools for the decision making. However, these goals also determine the amount that is required and the timeframe in which the money will be made. Other financial goals include: develop the effective return on the marketing investment through the allocation of the funds programs and campaigns that will ensure higher return, and demonstrate an increase in the lifetime customer value (LCV) through the sale of more to the present customers and the strengthening of the relationship so as to ensure the strong foundation for the future sales. As with its non-financial goals, the company will be actively involved in the social responsibilities matters such as conservation of the environment, strict adherence to the laws and regulations, and among others. As its non-financial and financial performance came into fruition, the company can credit its shared objectives for the enhanced policies and practices.

Industry and Environmental Analysis

Starbucks Cafe primarily competes and operates in the retail coffee and snacks store industry. The industry experienced a major slowdown in 2009 owing to the changing consumer tastes and the economic crisis. This led to the industry revenue to decline by 6.6% in the U.S. since then the industry has grown at a low annualised mean growth of 0.9% from 2008 to 2013 with the present industry revenues at $29 billion in the United States. The sector improvement in the industry can be mainly attributed to the improving economies, the increased consumer confidence and the expanding menu offerings within this industry. Notably, Starbucks dominates the industry with an approximate market share of 36.7%, Dunkin Brands 24.65 and the other competitors, such as Costa Coffee, McDonalds, Tim Horton’s, among others.

Pest Implications

Political factors implication: the main political factor that impacts the industry is the sourcing of the raw materials. This has attracted a lot of attention from the politicians from across the world and from the source countries. As such, companies in this industry have been forced to adhere to the environmental and social norms. Another implication is the need to follow the laws and the regulations in the states where the Starbucks buys the raw materials. The increased political awareness and activism in the developing countries has made this particularly essential. Other implications include the tax policy, and the employment laws.

Economic Factors Implication: the ongoing global economic recession is the main external economic driver for the Starbucks and the industry at large. The industry has to deal with the increasing operational and labour costs. Additionally, the inflationary environment and the falling profitability that has characterised the industry for some time now has caused a lot of stress. Other economic factors that directly or indirectly impacts the industry include the local currency exchange rates, taxation levels, and the local economic environment in various markets.

Socio-Cultural Factors: the socio-cultural factors that are facing the industry include the changing family patterns in Europe and USA, changing work patterns, customer preferences, changing levels in the lifestyle of the population, the level of the education, and changing values among the population. These socio-cultural factors are impacting the industry negatively.

Technological Factors: Starbucks is strategically positioned to enjoy the benefits of the emerging mobile wave. The company’s partnership with Apple in bringing the app-based discount coupons is making it easier to ride the mobile wave easily. Other technological factors that implicates Starbucks and the industry at large include; the emergence of the innovative technology, development in agriculture, biotechnological developments, among others.

The key drivers for change in the industry are the inputs and the customers. As the coffee beans are the primary input in the value chain, the prevailing volatile prices of the coffee beans determines the profitability margins and the market costs (Fagerstrøm, and Arntzen, 2015). For instance, the price of the coffee has risen sharply in the recent past owing to the growing demand and the resulting shortages. Attitudes towards health is also a key driver in the industry. This has played an important role in determining the demand in the industry. For instance, there is expected shift towards the healthy diet and eating among the consumers. This act as a big threat to the industry.

Competitor Analysis

Starbucks Café’ is faced with the more and well-established competitors in the international markets with the increased competition in the United States of America. The intensity of the competition in the industry increase as the firms are trying to improve their position in the industry. In order for the companies to gain the new customers, they have reduced prices, introduced new substitutes or products, and increased the marketing efforts. For instance, 2008, Starbucks was forced to close its operations for some time in order for it to conduct the employee training (Chua, and Banerjee, 2013). The types of the pricing, food choices, and the restaurant ambiance leads to the creation of the diversity among the competitors. For instance, some of the competitors offer the full menu while others are offering bakery-café menu. Starbucks pricing is considered relatively higher than its competitors.

Competition in the coffee industry can be categorised into two; direct and indirect competition. The direct competition include the firms that are manufacturing and producing the hot drinks. These firms can be the retailers of the ready-to-drink coffee and the tea products, supermarkets, large multinational companies that produce instant coffee and ground coffees, and the quick-service restaurants. The main direct competitors for the Starbucks Café’ include McDonalds, KFC, Costa and Nestles (Chron, 2013).

Customer Analysis

In conjunction with the Starbucks Café’ mission statement that is to continually inspire and nurture the human spirit-one person, one cup and one neighbourhood at a time, this market plan’s target customers will be of all ages. The primary target customers will mainly comprise of the men and women that are aged between 20-40 years that will account approximately 49%. Besides that, the plan will also target the college students and the young adults that will account about 40% of the sales. The teenagers and children aged between 13-17 years will also be part of the Starbucks Café’ customer base accounting for about 2% of the sales.

Marketing Strategies

Starbucks Café’ marketing strategy will mainly be based on the development of the visibility with-in community. This marketing strategy will be accomplished in two ways. First, there will be targeted advertisements campaigns. These types of the advertisements will mainly include the direct mail letters, flyers, banners ads, newsletters, among others. Additionally, radio ads, and TVs can be used. The other marketing strategy that will be used will be tom develop a good relationship with the target customers. This will also include setting the cafes in the strategic and attractive areas where the customers can easily access them.

SWOT Analysis

Strengths-some of the Starbucks strengths include rapid pace of growth, both internationally and domestically, a market leader in the coffee industry, financially sound, and strong brand recognition.

Weaknesses: higher prices, majority of the company’s profits are based off its coffee products and the other speciality beverages (this means that with the increasing price of the coffee beans, the company will take a direct hit every time the price increases).

Opportunities: some of the opportunities for Starbucks include expansion into the international markets providing the company with a lot of growth opportunities, opportunity and the ability for the profitable expansion globally owing to the company’s continued improvement in terms of revenues, and technology innovations providing the opportunity for more investments.

Threats: many consumers are seeking more cost effective budgets and cut spending, this pushes the coffee consumers towards the cheaper alternatives. Other threats include the differing routines and tastes in the foreign cultures, negative affectivity, and the customers becoming more ethically conscious.

Part B: Marketing Plan for Starbucks Café

Marketing and Product Objectives

The marketing and product objectives for the Starbucks’ marketing plan include:

• Reduce the long lines that are created during the peak hours at the retail stores
• Enhancing the company’s experience through the creation of more convenience in terms of ordering process
• Increasing the sales through the increasing of the number of the business transactions per hour
• Reaching out the tech-savvy customer base through the development of the mobile phone application for the paying and the placing of the orders
• Giving the customers more control through the elimination of the customer wait time after the ordering.
• Maintain the positive, steady growth every month
• Develop the brand awareness through the steady month to month increase in the number of the customers.

Target Market

The target market for the Starbucks coffee can be divided into three groups, the college students, the local residents and the tourists. These groups can be further broken down into the smaller groups. The company expects that the sales will generate from the committed coffee drinkers, who will be able to immediately recognise the quality of the products and the services. Starbucks has developed its brand to be the leader in the communities with the coffee being the daily morning beverage for many people. Additionally, the company is adapting with the technology and has identified the need to shift to the mobile technology. The company’s target market in line with its shift to the mobile technology will mainly consist the individuals that are aged between 18-40 years and that they live in the cities and suburbs that have the smartphone. Additionally, through its market plan, the company has identified that 49% of the sales will come from customers that aged from 25-40 years and 40% of the sales will come from 18-40 years olds. The reason behind this target market is because this is the group of the customers that are young and they have an interest in the technology.

Positioning

It is imperative that Starbucks Coffee is positioned as the leader in terms of innovation. The company plans to achieve this by using the leading edge as an early adapter with reference to the technology inclusive of the company’s experience and the continued dedication to its customers. The company leads and serves the community through the provision of the quality services and innovation. The company is able to use its acquired experience over the years in the food industry to identify the expertise and the efficiencies so as to be able to develop the application through the innovation of the mobile technologies for all the customers.

Starbucks will also position itself through the provision of the exceptional customer satisfaction. By giving priority to the customer satisfaction, the local and international customers will come to appreciate the attention and be able to share their experiences about Starbucks products with the relatives and friends. Additionally, exceeding the customer’s expectations will be part of the positioning strategy of the company. This will inevitably result in the company gaining more customers each time the coffee exceeds the expectations of the existing customers.

Differentiation

Starbucks Café’ differentiation will provide the upscale environment. In order to differentiate itself from the competitors, the pricing will be of great competitive advantage (Lemus et al., 2015). Starbucks Café’s must provide the consumers with the same level of the product as its completion, but at the reduced discounted price. The consistent popularity of the coffee, together with the ever increasing interest value for the money have proven time and again to be the winning concepts in the rest of the markets and will produce the same results in this case (Geereddy, 2014).

Marketing Programmes

Marketing Mix

Starbucks’ Café’ marketing mix will consist of the following categories: delivery, pricing, promotion and advertising, and the customer service.

Pricing

The orders that will be placed at the Starbucks App and that at the shop will remain the same. The pricing strategies for the products and the services will be determined by the prices that are set by the similar competitor products. For instance, the products such as the gift baskets will be priced once the buyer decides on the ingredients he or she wants. To make this easier, a projected pricing table will be set.

Place/Distribution

Starbucks Café’ products may be imported or rather purchased from the wholesalers. They will then be made available to the customers. The drinks will be paid and ready for the pickups at the convenience of the buyer and the location of his or her choice. The direct channel of distribution will be used. Some of the distribution methods that will be used include postcards, letters, brochures, and the newsletters. Other methods of distribution include paid marketing like the print (newsletters, magazines and the newspapers), televisions, radios, the yellow pages and through the chamber of the commerce.

Customer Service

The customers will be accorded the same excellent services that the company has provided for years. The services that the customers will receive from the stores will be enhanced greatly as the customers will not be waiting in the queues for long time. Additionally, the customers’ cup of the coffee will be readily available when they arrive, something that will free up their busy schedules.

Promotion and Advertisement

The promotional objectives of the Starbucks Café’ will be to develop the awareness, build the customer loyalty and generate the traffic. The main types of the promotions that will be used include the student, the community, and the in-house promotions (Harris, and Leseane, 2015). The advertisement channel will mainly be carried out through the media outlets. Additionally, the company’s new ordering system through the Starbucks app will be advertised through the app, YouTube and the Social Medias. The advertisements will mainly be aimed towards the customers that have limited time/busy schedules. There will be a few television advertisements but mainly stay in the cyberspace as our intended market will be for the customers that rely and feel comfortable using the internet.

Financial Data and Projections

Starbucks Café’ will provide the overview of the financial activities with regards to the sales forecast, and how they relate to the marketing activities.

All Values in USD Millions

Period Ending

Sep 27, 2015

Sep 28, 2014

Sep 29, 2013

Sales/Revenue

19.15B

16.45B

14.89B

Gross Profit

11.28B

9.59B

8.48B

Operating Income/Loss

3.60B

3.08B

(0.33B)

Source: Euromonitor International. (2015)

Sales Forecast

The excellent customer service and innovation are expected to grow which will lead to the higher sales revenue and customer satisfactions. Over the last three years, sales have steadily increased by about 10% over the last three periods. For instance, in 2012, the company launched its new product that was called Starbucks Via Ready Brew. In that year the sales grew by 13.7% vs. 2011. As such, it is the company’s expectations that with the new product or the improvement in the old product, the sales are projected to increase by about 3% over the regular growth. Thus, it’s the company expectation that through its innovation and improved customer services, its anticipated revenues/sales for the years 2016, 2017 and 2018 will grow by 13%, 15% and 16%. The rationale behind the increased percentage growth can be attributed to the fact that the new technology such as the mobile app will not only be used as the means for line elimination and faster order placing, but also as an important tool for the communication especially on the new promotions thereby engaging the customer on daily basis. Additionally, it’s expected that the company will expand globally to more countries thereby increasing the sales revenue.

Expense Forecast

Starbucks is famous for successfully achieving the advertising goals through the relatively small marketing budget. The cost of creating the app to implement and expand the Starbucks Café’ is anticipated to be about $100K plus the additional yearly spending for maintenance, hosting, and updates of about $25K. These are not significant expenditures that can greatly impact and enhance the revenue. Looking at the Starbucks income statements, it can be noted that historically, with the increasing sales, the cost of the revenue, such as materials and labour also grows at a higher rate than even the revenue itself. For instance, a close study on the 2011 income statement shows that 9% increase in the revenues resulted to increase in the cost of revenue by 11% and 6% increase in the expenses (Euromonitor International, 2015). Further analysis shows that increase of the sales by the additional 5% (from 9% to 14%) resulted to the cost of the revenue to increase by 7% (from 18%-11%). This is a valuable data to put into consideration. The cost of the sales revenue for 2015 was $14.59B. For the purposes of gross and operating profit forecasting, the operating expenses for 2016, 2017, and 2018 will be $9,000,890, 7,098,456, and 8,009,465 respectively.

Projected Annual Sales, Gross and Operating Profit

Period Ending

2018

2017

2016

Expected Sales

28.85B

24.87B

21.63B

Gross Profit

5.11B

4.92B

4.72B

Operating Income

4.31B

4.21B

3.82B