Marketing Planning for Starbucks - Essay Example

MARKETING PLANNING PROCESS FOR STARBUCKS STARBUCKS BACKGROUND Founded in 1971 by Jerry Baldwin, Gordon Bowker, and Zev Sieg, the first Starbucks location opened in Seattle's Pike Place Market. Named after Herman Melville's first mate in Moby Dick, Starbucks has become the world's leading brand of roaster and specialty coffees. About thirty-five million customers visit a Starbucks coffeehouse each week. With 5,028 company-operated and 2,633 licensed-location coffeehouses in the United States and international locations in thirty-six countries, consumers are enjoying the Starbucks experience in every part of the world. Peet's Coffee & Tea, located in Berkeley, California, was the inspiration for Starbucks. The three original Starbuck founders bought their first coffee beans from Peet's; eventually, Starbucks became Peet's competition. "You get more than the finest coffee when you visit a Starbucks - you get great people, first-rate music, and a comfortable and upbeat meeting place," says Starbucks chairman Howard Schultz. "We establish the value of buying a product at Starbucks by our uncompromising quality and by building a personal relationship with each of our customers. Starbucks is rekindling America's love affair with coffee, bringing romance and fresh flavor back to the brew." Source: Starbucks Homepage, February 2006 For the thirteen-week period ending January 1st, 2006, Starbucks revenues increased 22% to $19.3 billion. Increase in net income was by 20% to $174.2 million. Starbucks employees total 115,000. Howard Schultz is Chairman of the Board, and James L. Donald is Chief Executive Officer and Director, with corporate headquarters located in Seattle, Washington, where the Starbucks experience all began. Source: Answers.com/starbucks Because Chairman Howard Schultz deems music to be an integral part of the Starbucks experience, a business wire released on May 1st of this year is of importance. A never-released 1972 album of jazz standards recorded by Diana Ross was discovered in the Motown vault nearly three decades later. This album will make its exclusive debut at Starbucks on May 16, 2006. Source: Guru Net News Alert, May 1, 2006 Also of importance is to note that along with a quality selection of thirty blends of coffees from around the world and espresso, Starbucks also offer, in some markets, Tazo teas, Ethos water, salads, sandwiches, and pastries. A premium line of ice cream also adds to their diverse product line. STARBUCKS MARKETING POLICY Since Starbucks customers include people of diverse ethnic, age, and income groups with varying interests and tastes, the company embraces the art of providing excellent customer service by serving relevant products to their customer base, including some products which will dictate appeal to the youth group. Measures are taken to not only target marketing to the young consumers. A review process is put into place prior to the approval and distribution of materials and campaigns. A panel consisting of key employees reviews the marketing materials to provide written and verbal input. The company goes to great lengths to avoid materials that could possibly be offensive or insensitive, racially and culturally. Starbucks has implemented instructions to its advertising agency to choose media campaigns whose composition aligns with its adult customer base. Policy dictates that materials targeting to the youth population be shared with all staff employed in the marketing division. Diversity is synonymous with Starbucks in believing that diversity is a way of life. Prominent in the company's mission statement is their main goal"to establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principle as we grow." Education and recognition in diversity are Starbucks priorities. Diversity Learning Journey workshops are offered to all partners. Source: Starbucks Homepage, 2006 The importance of market planning is evident in the fact that Starbucks continues to open an average of three stores daily. Starbuck's marketing strategy is to "blanket an area completely, even if the stores cannibalize one another's business." Starbucks works hard to be the company everyone wants to work for, where health benefits and stock options are even given to part-time employees. This philosophy nurtures the employee's belief in the organization, its products, and its sense of community. This, in turn, exudes an atmosphere that is key to the success of any service company. Putting stores very close to each other can cut down on delivery and management costs. It helps to shorten customer lines, and therefore add to total customer traffic. Surveys show that, in a given week, twenty million customers will buy a cup of coffee from a Starbucks location. The typical patron will also visit four to five times weekly. Multiple stores in one area provide a sense of presence to the customer. With Starbucks being everywhere, this concept introduces its brand awareness with minimal spending on advertising. In contrast to typical retail advertising expenditure at close to ten percent, Starbucks allots only one percent of its annual revenue on advertising. Planning is a key to any successful undertaking, and all the more important in business. Marketing is a crucial business activity that needs planning. The marketing plan describes the nature of the business and what it will do to satisfy its customers' needs. Marketing directs. This part of the plan points to what has to be done to get the products and services to their customers. Marketing evolves the specific activities to be done. The planning process involves creation and distribution of the services and goods from the customers' perspective. Marketing's major concern is with customers and meeting their needs. Specific needs for specific customers is the target and focal point of the Starbucks marketing planning process. These steps must be taken from the customer's perspective to be successful. A well thought out product or service makes the rest of the marketing planning process much easier to tackle. A targeted segment of the market is crucial. As with Starbucks, coffee drinkers become the focal point, even though other products are available at their stores. Planning is an ongoing process that both precedes and follows other activities. Starbucks is a prime example of this feature, adding stores to their total daily. Planning has the advantage of being prepared to seize opportunities as they arise. Planning is also a valuable tool to eradicate any foreseeable problems. Planning may also have disadvantages. One is that the abundance of work involved may exceed its contributions. Another is that, sometimes, problems are best resolved as they arise instead of predicting their arrival. However, in spite of this, planning is still critical. Source: Marketing Planning Guide, Haworth Press, 2006 In the early days, Starbucks was simply a coffee bean roaster selling whole beans to coffee suppliers in the northwestern USA region. It was an excellent niche enterprise. When Howard Schultz cam aboard with his vision for the company, he proclaimed that Starbucks was limiting its potential. His book, Pour Your Heart Into It, tells how the Starbucks team moved from a niche destination to the Starbucks experience of today. Source: Why Create A Market, Doug Ducey STEPS TO AN EFFECTIVE MARKETING Product Definition, Target Group Identification, Objectives and Goals, Brand Definition, Pricing, Specific Budgeting, Strategies, Tactics including Timelines, and Tracking and Results Evaluations Source: Marketing Source, article: Barbara K. Mednick We can see from data in this report that Starbucks definitely adhered to and followed these effective steps when creating their business plan. Their ultimate goal is to be the #1-provider to coffee enthusiasts all over the globe. Their strategy is to cover as many areas as possible with their stores and coffeehouses. They have identified their brand just by being everywhere. Starbucks has also impacted communities' views on coffee. A $3 cup of coffee was once viewed as a fad that wouldn't last. However, it has become evident that their premium pricing strategy appeals to a specific group of the coffee market. The Starbucks experience has become a neighborhood addition. STARBUCKS COMPETITION Diedrich Coffee has over 200 coffeehouses in the United States, and is the #2 coffeehouse company behind Starbucks. They also supply wholesale coffee to various restaurants, such as Ruby Tuesday, and to office coffee suppliers, hotels, and specialty retailers. We also have to consider New World Coffee & Bagel, Dunkin Donuts, McDonald's, and Krispy Kreme. Their competition is working hard to improve their coffee; however, none are an immediate threat. Clearly, Starbucks is in a league of its own. Besides their coffeehouses and stores worldwide, they also service grocery stores with their coffee products. Starbucks also owns and franchises Seattle's Best Coffee and Torrefazione Italia chains in the United States. PLANNING AND STRATEGY Let's examine Starbucks' strategy further. They became a public company in June 1992. With the capital now afforded the company, they immediately developed a three-year geographic expansion plan. For their targeted regions, they chose a large city to serve as its hub. Professional teams were placed in the hub cities with the goal of opening twenty or more stores in each hub within two years. After the hubs were blanketed with stores, Starbucks concentrated on the surrounding areas of each city and kept 'spreading their blanket'. In 1991, Starbucks started its in-house team of designers and builders to make sure each store would portray the appropriate character and image. Each store would be unique in size and shape, not copying McDonald's and Walmart's structure of sameness. High-traffic coffeehouses provided a place to meet and chat, with leather seating, fireplaces, and exuding ambience. A large part of this planning process cut costs significantly by ordering the exact amount of equipment each store needed, ordering in bulk at 20-30% discounts, and having the deliveries made on time directly from the vendors. A research team was coordinated to study not only the art of coffee-brewing and espresso-making, but also the vision of a Starbucks coffeehouse ..a comfortable gathering place that made the customer feel welcome. STARBUCKS DIVERSITY A report cannot be written without mentioning Starbucks' interest in the entertainment industry. As mentioned before, music is an important Starbucks factor. Customers have commented on the background music, and Starbucks saw another opportunity. Many of their stores sell the CD's that the customer hears while enjoying the Starbucks experience. Also, this year, Starbucks announced their model for marketing and distribution of Lionsgate's new film, Akeelah and the Bee. NEGATIVITY IN STARBUCKS PLANNING With all that Starbucks has accomplished by adhering to a diverse and economical marketing planning process, we must also consider the negativity surrounding the coffee mogul. We have to discuss Fair Trade coffee. Time Magazine has labeled it "politically correct coffee." Selling for a minimum of $1.29 per pound, this goes directly to the farmer and helps to increase their annual income. The public in the know tends to support it. However, global advertising is the only way to accomplish this. According to coffee fanciers, Starbucks will brew a pot of Fair Trade coffee, but only if specifically asked, not a daily or weekly brew as most of their competitors are doing. Another concern with some consumers is that most Starbucks stores are still using milk where dairy cows are injected with a Bovine Growth Hormone (rBGH). This is done to force the cows to give more milk. However, the hormone is in question related to higher cancer risks. The Organic Consumers Association states that Starbucks does now offer non-rBGH milk, but most patrons are unaware of this option. In addition, they assert that Starbucks is still pricing an extra 40 cents per coffee cup for this safer product. The Organic Consumers Association also asserts that most of the money that Starbucks pays for their coffee goes to middlemen and not the farmers, as they had once promised. Source: Organic Consumers Association Perhaps, their marketing planning process needs to delve further into health and environmental issues. In this age, Americans are becoming more health conscious, and Starbucks needs to consider this issue and make the public aware of its intentions to aid in this social responsibility. Another point to consider is if Starbucks is stretching its diversity too much with its expanding journey into the entertainment industry. Is that a direction its marketing should continue to explore WORKS CITED Starbucks Homepage Starbucks Business Profile Starbucks Marketing Policy http://www.starbucks.com Organic Consumers Association Starbucks Fair Trade Coffee Facts http://www.organicconsumers.org/starbucks Marketing Planning Guide The Haworth Press, Inc., Third Edition, 2006 Marketing Planning in Action: Starbucks, page 3 Deidrich Coffee, Inc. Information Hoovers, a D&B Company http://www.hoovers.com Starbucks Corporation Starbucks Case Study http://www.mhhe.com/business/management Guru News Alert Business Wire, May 1, 2006 http://www.guru.newsalert.com Read More