Marketing Plans of starbucks : Starbucks Corporation (NASDAQ: SBUX) is an international coffee and coffeehouse chain based in Seattle, Washington. Starbucks is the largest coffeehouse company in the world,[2] with 17,009 stores in 50 countries, including over 11,000 in the United States, over 1,000 in Canada, and over 700 in the United Kingdom.[1][3]
Starbucks sells drip brewed coffee, espresso-based hot drinks, other hot and cold drinks, coffee beans, salads, hot and cold sandwiches and panini, pastries, snacks, and items such as mugs and tumblers. Through the Starbucks Entertainment division and Hear Music brand, the company also markets books, music, and film. Many of the company's products are seasonal or specific to the locality of the store. Starbucks-brand ice cream and coffee are also offered at grocery stores.
From Starbucks' founding in later forms in Seattle as a local coffee bean roaster and retailer, the company has expanded rapidly. In the 1990s, Starbucks was opening a new store every workday, a pace that continued into the 2000s. The first store outside the United States or Canada opened in the mid-1990s, and overseas stores now constitute almost one third of Starbucks' stores.[4] The company planned to open a net of 900 new stores outside of the United States in 2009,[5] but has announced 900 store closures in the United States since 2008.
Starbucks has been a target of protests on issues such as fair-trade policies, labor relations, environmental impact, political views, and anti-competitive practices.
Market Summary
• Target Markets
o In the early stages of development for Starbucks, Schultz identified their
target market as “affluent, well-educated, white-collar patrons (skewed
female) between the ages of 25 and 44,” (Moon).
o Over time, market research teams have recognized the new target market
as “younger, less well-educated, and in a lower income bracket than their
more established customers,” (Moon).
o Nonetheless, the original target market has not disappeared, but has
expanded into the demographic of the store location. For example,
southern California stores cater to a growing number of Hispanic
customers.
• Market Demographics
o Geographics (Moon) ƒ Data from 2002 showed that in the Southeast there was only one
store for every 110,000 people. Whereas in the Pacific Northwest,
there was one store for every 20,000 people. Hence, the company
was far from reaching existing markets.
ƒ International plans showed Starbucks was operating in over 300
company-owned stores in the United Kingdom, Australia, and
Thailand. Also, 900 licensed stores were operating in Asia,
Europe, the Middle East, Africa, and Latin America.
o Demographics
ƒ Young, affluent, tech-savvy customers (Hoovers)
ƒ A 1999 estimate showed that 70% of customers were internet
users, and today the estimate has exceeded 90% (Hoovers).
ƒ Moms with strollers (Hoovers)
ƒ People combining work and a coffee break (Hoovers)
ƒ The most frequent customers average 18 visits per month, whereas
the typical customer visits five times per month (Moon).
ƒ Average age for an established customer was 40, new customers
was 36 (Moon).
ƒ Customers that started visiting Starbucks in 2002 were 45%
female, 55% male (Moon).
• Market Needs
o Starbucks wants to create an experience for their customers that combine
their on-the-go schedule, as well as a place to relax. Senior vice president
of administration in North America Christine Day explains that, “people
come here for the coffee, but ambience is what makes them want to stay,”
(Moon).
o Selection
ƒ Starbucks menu contains brewed coffee, espresso traditions and
favorites, cold beverages, coffee alternatives, frappuccinos, and the
sale of whole beans.
o Accessibility ƒ Starbucks operates over 10,000 retail stores. Most of the 4,200
franchised stores are located in shopping malls and airports.
Starbucks coffee brands are also marketed through grocery stores
in the form of beans and even ice cream flavors.
o Customer Service
ƒ Starbucks employees are referred to as “partners.” As of 2002,
Starbucks employed 60,000 partners worldwide, 50,000 of those in
the United States. From the beginning when Howard Schultz took
over Starbucks, he believed, “Partner satisfaction leads to customer
satisfaction,” (Moon).
o Competitive Pricing
ƒ For North American stores in the 2002 fiscal year, the average
price of an order was $3.85. The drinks come in three sizes: tall,
grande, and venti (Italian for small, medium, and large). The least
expensive price for a tall drink is $1.40 for brewed Coffee of the
Day. The most expensive price for a venti is $4.15 for
frappuccino. Whole beans are sold in half and whole pound bags
ranging from $5.20 to $15.95 (Moon).
ƒ Starbucks brand coffee sold in grocery stores are similar to these
prices found in the cafes.
Starbucks Marketing Strategy
Proper implementation and execution of a strategic marketing plan is essential to the success of any company. A company may have an ideal product, but without proper positioning, identification of a target market, and a proper marketing plan a company would not be able to successfully market its products to consumers. Starbucks has been successfully able to convert an activity carried out at home to a commercial success through proper implementation and execution of its strategic intent. The firm has been able to convince consumers that its stores provide more than just coffee, but rather a rich experience that they should indulge in on a recurring basis. The company has been able to translate this consumer "experience" of its products into a highly profitable business.
This paper will discuss the marketing strategy being implemented by Starbucks, and will evaluate the company's current marketing plan, including positioning strategies, targeting strategies, competitive environment, and various other factors that affect its marketing strategy. The paper will further attempt to provide recommendations to Starbucks on the course of action it should purse to remain viable and maximize profitability - whether it is through improvements to its existing marketing strategy or implementation of a new strategy.
Starbucks Information
Starbucks Target Market
Starbucks Competitors
Starbucks Marketing Mix
Starbucks Experience
The marketing principles, or the four P's, also follow the differentiator marketing strategy. Starbucks is competing in an industry where marketing principles has to follow the differentiator strategy, or it risks losing market share. The company must create value to its customers, or the customers will find another place to spend their money. The marketing principles of Starbucks, can be argued, are the basis of the company's competitive advantage within the industry. Starbucks products are associated with quality, and the company has differentiated itself during the years as being committed to producing high quality products. Because of this association with quality, Starbucks has been able to charge a premium for its product.
Until recently, Starbucks did not face the type of competition it is experiencing today. Not too many companies that were as large as Starbucks were in the gourmet coffee business. Starbucks, though its promotions was able to create a perception of a premium gourmet coffee. Originally, this was what gave Starbucks a huge advantage over any potential competitors. The place or location of each outlet is also in line with the company's differentiator strategy. With 17,000 outlets worldwide, Starbucks individualized each outlet based on the surrounding communities. In addition, Starbucks also prides itself on innovation of new products, which further differentiates it from other competitors. Each of these aspects of the marketing principles that Starbucks utilizes helps to contribute to its differentiator strategy.
Starbucks SWOT
Starbucks Analysis
As we recommend strategies to orchestrate a turnaround for Starbucks, we will accomplish this in two forms. First, we will identify the particular strategy that will be addressed, and then we will provide specific scenarios where it is appropriate. The three strategies that we will address are the corporate strategy, business strategy and the marketing strategy.
In our attempt to orchestrate a turnaround, we first examine the Corporate Strategy. We identify Starbucks as existing in the service industry, particularly the "Fast Casual Restaurant "sector. This is a highly competitive and fragmented industry. While there are major players in this sector such as McDonalds and Dunkin Donuts, no one is in the competitive position to set industry prices for products. The customers are price sensitive and brand loyalty is normally low. Because Starbucks has established a strong brand and a moderate amount of brand loyalty, we recommend focusing on increasing profitability and return on investment. We have chosen this particular action because we want to strengthen our recognition as a provider of premium beverages.
Another corporate strategy that we recommend for the turnaround of Starbucks is the strategy of acquisition. The strategy of acquisition would allow us to purchase other competitors in the fast casual industry that will allow us to increase profits and gain market share (Mullins, 2009). Organizations such as Caribou Coffee currently have market capital of $170 million dollars and are currently trading on the stock market at less than $8 per share ("Caribou Coffee Company, Inc."). By acquiring Caribou Coffee, Starbucks can take advantage of several factors. First, Starbucks can merge administrative costs of both organizations into one. Second, since there is low R & D in the beverage industry, Starbucks can merge that operation in addition to their distribution system. Marketing functions will originate from one central location. Caribou Coffee can be repositioned in the market below Starbucks. The lower price point of their products would serve a larger market than the market segment that Starbucks would target, therefore, the higher volume revenues can be generated and directed towards the parent company.
We will now make our recommendations regarding the business strategy of Starbucks. We recommend the "differentiator "and "defender "strategy to be pursued at Starbucks. The fast casual sector of the industry has products and services that are provided in high volume and low profit margin, which contributes to the low brand loyalty. As a defender, Starbucks will try to protect its domain by providing higher quality and superior service therefore maintaining a secure position (Mullins, 2009). We recommend that Starbucks differentiate themselves from the others in the market. The differentiation strategy would allow Starbucks to establish a clear difference between themselves and their competitors. They must create a perception that the customer is actually receiving superior value from a Starbuck's product that cannot be provided by Tim Horton's, Panera Bread or Dunkin Donuts. This can be accomplished by focusing on providing superior customer service and reinforcing the idea that they are providing the highest quality products in the industry. Differentiating themselves successfully from the competition will provide Starbucks with a competitive advantage and allow them to charge a premium for the products and services.
The product market that we recommend Starbucks focus on is high quality brewed coffee, coffee beans, select food items, branded equipment and providing food service. We do not recommend that Starbucks attempt to provide full line of food items which would create a situation that may make it hard for the customer to distinguish between themselves and Tim Horton's or McDonalds. Their products and services should continue to support a feeling of exclusivity.
Our final recommendations would apply to the area of marketing strategy. Our recommendations attempt to address each one of the four P's. Regarding the product, we recognize and would continue the practice of carrying an extensive line of coffee and coffee beans. We recommend extending the line of food that is offered at the retail stores. The focus should concentrate on fresh baked goods, sandwiches and pastries with natural ingredients such as blueberries and nuts. New and different combinations should be introduced in limited markets and the products that deliver the best results should be retained and added to the permanent menu. The line of personal equipment products by Starbucks can be extended and offered at the retail level or on the company's web site. We recommend that Starbucks introduce a line of premium fruit drinks. New flavors of energy drinks should be introduced and marketed towards teens.
We recommend that the price for Starbuck's products and services be set approximately 10% higher than comparable products of their competitor. In establishing Starbucks as a provider of premium products and pursuing a differentiator strategy, the organization must not try to compete on price against organizations such as McDonalds. The price should be reflective of an exclusive product of high quality. Although we do recommend that Starbucks create greater value by packaging brewed coffee products and fresh baked goods and sandwiches.
In our attempt to analyze the issue of place, we recommend that Starbucks focuses on exclusivity. By this, we mean in order to establish yourself as premium, and different, you must reduce the accessibility of the product and service. This would require Starbucks to reduce the number of stores that it has in operation. The practice of having multiple stores existing in a 1-mile radius must be cease. The strategy of rapid expansion can no longer continue at this point. We recommend that stores in high volume and business districts be redesigned. These new designs should incorporate a comfortable feel for the customer and encourage large gatherings. In the targeted areas, the new store should be able to accommodate a small conference of up to 15 people. Ultimately, what you want Starbucks to do is be able to host gatherings for business meetings, college student groups, book signings, etc.
The final area of our recommended strategy changes would apply to promotion. To differentiate themselves from the competitor, Starbucks must conduct more aggressive promoting. Customers can be rewarded with free cups of coffee for accumulating a certain amount of points on their Starbucks card and coupons could be issued. We recommend that television commercials be created perpetuating a distinct difference between Starbucks and their closest competitors. The point must be driven that premium coffee shipped from around the world cannot be substituted by McDonalds or Dunkin Donuts. We further recommend that Starbucks sponsor events that are in line with the interests of customers who purchase premium products. This would include sponsoring professional golfing events, college games, the arts and business conventions. College students, young professional adults and those with more disposable income should be targeted. In order to increase traffic into the stores, we recommend that they focus on promoting some of their existing products at a limited time rate. This would include allowing customers the opportunity to use the Wi-Fi service free with the purchase of a premium sandwich and specialty beverage for an hour. We recommend allowing the purchase of new release music at a discounted rate on release day through their website.
A Starbucks Marketing Plan is the first thing that any Starbucks owner should think about when starting their business. Many Starbucks owners start into their adventure without ever taking the time to even think about planning. What they do not realize is that planning is the first and utmost important thing they need to do.
After all how can you manage something if you haven’t even outlined your objectives and drawn up a budget? You do not have to make the same mistake that a lot of Starbucks owners make. You can start to develop your very own Starbucks Marketing Plan today.
Some people might tell you this is a difficult task, but there are many things that can help you to simplify your undertaking that most people do not know about. Never find yourself in the dark like many other business owners again. Using the tips in this workbook, you can give your Starbucks business the edge on the leading competition that you have always dreamed about by taking full advantage of the use of a Starbucks Marketing Plan.
David Frey has many years of experience in the business field and knows what it takes to become a successful business owner. Using the secrets and tips he has compiled into his marketing plan workbook you can develop an incredible Starbucks Marketing Plan. Just imagine how much of an advantage you can have over your competition.
• Market Forecast (Moon)
o Over the next few years, an estimate for the U.S. retail coffee market
expects specialty coffee to have a compound annual growth rate (CAGR)
between 9%-10%.
o Starbucks was also estimated in 2002 to grow at a CAGR of about 20%
top-line revenue growth.
o As of 2002, coffee consumption had risen with more than half of the
population (about 109 million people) drinking coffee everyday, and an
additional 52 million drinking coffee on occasion.
• Market Growth
o Reports show in 2002, the number of specialty coffee drinkers has become
the market’s biggest growth.
o An estimated one-third of all U.S. coffee consumption takes place outside
of the home and in places such as offices, restaurants, and coffee shops
(Moon).
SWOT Analysis
• Strengths
o The company is good at taking advantage of opportunities.
o Starbucks is very profitable and has a strong financial base, therefore allowing
the company to undertake new business ventures.
ƒ Revenue increased to $5294.2 million in 2004, a 29.9% increase from
2003 (DataMonitor)
ƒ Profits increased to $610 million in 2004, a 43.7% increase from 2003.
ƒ Net earnings increased 46% (SWOT). o The company is internationally recognized and has a global presence.
ƒ Their reputation is one of fine products and services.
Almost 9,000 cafes in almost 40 countries (SWOT)
ƒ Widespread brand recognition, which in turn becomes brand
preference, and ideally eventually brand loyalty
ƒ Strong customer base
o Respected employer
ƒ Values its workforce
ƒ Voted onto Fortune’s “Top 100 Companies to Work For” (2005)
o Strong ethical values and mission statement
o Disciplined innovator
ƒ Understands the Adapt-or-Die theory of marketing
ƒ Has the ability to roll out new products relatively quickly, which
translates into a considerable competitive advantage
o Clusters company units
ƒ Expands business with the continuing growth of the coffee market,
especially in areas where the company is already well established, and
groups stores in an area, therefore able to dominate the region
ƒ Leads to considerable financial reward without suffering from
cannibalism (DataMonitor)
ƒ Focus on opening stores that have convenient access for pedestrians
and drivers
ƒ Helps the company capture an increasing share of the coffee market
• Weaknesses
o Reliance on beverage innovation
ƒ Vulnerable to the possibility that their innovation may falter over time ƒ Company growth is mostly driven by beverage innovation.
ƒ If U.S. store growth decreases, stock is lowered in value.
ƒ Diminishing return from beverage innovation would have an adverse
effect (DataMonitor).
• Opportunities
o In 2004, created a CD-burning service where customers can create their own
music CD
o Opportunities for revenue growth by expanding its global operations
ƒ New markets for coffee are beginning to emerge; for example, in India
and the Pacific Rim (SWOT).
ƒ Targeting 15,000 international stores in the next few years
• Expansion potential questionable in Brazil, India, and Russia
• China could be one of the largest markets, and therefore the
company will focus on Beijing and Shanghai.
o Large urban population
o Rising economy
o Increase in coffee consumption
o Co-branding with other manufacturers of food and drinks and brandfranchising to manufacturers of other goods and services
ƒ Creates loyalty for Starbucks brand
ƒ Recently signed agreement with Jim Beam Brands to develop and
market a Starbucks-branded coffee liqueur drink (DataMonitor), which
has strong revenue potential because:
• Liqueurs represent $4-5 billion opportunity (DataMonitor).
• Liqueurs with coffee represent a considerable segment of the
liqueur market.
• There is a significant overlap between consumers of liqueurs
and consumers loyal to the Starbucks brand (DataMonitor).
o Growth in coffee markets: Starbucks has a market share of over 40% of the
special coffee market (DataMonitor). Therefore growth in this category would result in considerable opportunities for further growth and expansion in the
near future.
• Threats
o Coffee may not stay in favor with customers, and another type of beverage or
leisure activity could replace it.
o Rises in the costs of dairy products could affect the company’s margins.
o Competition
ƒ Competitive coffee shops
ƒ Copy cat brands
ƒ Restaurants
ƒ Street carts
ƒ Competition could enter the market at any time.
• The U.S. specialty coffee market continues to grow, and an
increasing number of firms are looking to enter.
• At any time, a company with greater financial, marketing, and
operating resources could enter the market and compete
directly with Starbucks.
• Competition
o Competition comes in several forms:
ƒ Independent/Local coffee shops
ƒ Social and inclusive
ƒ Diverse and intellectual
ƒ Artsy and funky, typically cozy and very welcoming
ƒ Liberal and free-spirited
ƒ Lingering encouraged
ƒ Particularly appealing to younger coffee house customers
ƒ Wide variety of beverages/food
ƒ Appeals to the non-traditional crowd
ƒ Franchise/Large Companies
o Generally well-recognized names (McDonald’s, Krispy Kreme,
Dunkin’ Donuts, etc.)
o More convenient and accessible
o Easy access in and out
o Appeals to the more mainstream coffee drinkers
• Services (Company)
o Starbucks purchases roasts of the highest quality of whole bean coffees.
o Fresh and rich brewed Italian espresso
o Offers pastries and other appetizing confections
o Sells coffee-related accessories (mugs, coffee makers, cups, espresso, etc.)
o Expanded sales into supermarkets of whole bean coffee o Introduction the widely popular drink, Frappuccino, to the public
o Strives for satisfied customers and a welcoming environment
o Works to have highest standards of excellence in way of business
o Offers newspapers and other reading material, popular music, and Internet
access (provided by T-Mobile)
• Keys to Success (Company)
o Rapidly expand retail operations
o Growth in its specialty sales and other operations
o Selectively pursue opportunities to leverage the Starbucks brand through the
introduction of new products
o Continue to be widely available and welcoming
o Maintain reputation for having specialty and gourmet coffee
o Make customers feel welcome with friendly service
Starbucks sells drip brewed coffee, espresso-based hot drinks, other hot and cold drinks, coffee beans, salads, hot and cold sandwiches and panini, pastries, snacks, and items such as mugs and tumblers. Through the Starbucks Entertainment division and Hear Music brand, the company also markets books, music, and film. Many of the company's products are seasonal or specific to the locality of the store. Starbucks-brand ice cream and coffee are also offered at grocery stores.
From Starbucks' founding in later forms in Seattle as a local coffee bean roaster and retailer, the company has expanded rapidly. In the 1990s, Starbucks was opening a new store every workday, a pace that continued into the 2000s. The first store outside the United States or Canada opened in the mid-1990s, and overseas stores now constitute almost one third of Starbucks' stores.[4] The company planned to open a net of 900 new stores outside of the United States in 2009,[5] but has announced 900 store closures in the United States since 2008.
Starbucks has been a target of protests on issues such as fair-trade policies, labor relations, environmental impact, political views, and anti-competitive practices.
Market Summary
• Target Markets
o In the early stages of development for Starbucks, Schultz identified their
target market as “affluent, well-educated, white-collar patrons (skewed
female) between the ages of 25 and 44,” (Moon).
o Over time, market research teams have recognized the new target market
as “younger, less well-educated, and in a lower income bracket than their
more established customers,” (Moon).
o Nonetheless, the original target market has not disappeared, but has
expanded into the demographic of the store location. For example,
southern California stores cater to a growing number of Hispanic
customers.
• Market Demographics
o Geographics (Moon) ƒ Data from 2002 showed that in the Southeast there was only one
store for every 110,000 people. Whereas in the Pacific Northwest,
there was one store for every 20,000 people. Hence, the company
was far from reaching existing markets.
ƒ International plans showed Starbucks was operating in over 300
company-owned stores in the United Kingdom, Australia, and
Thailand. Also, 900 licensed stores were operating in Asia,
Europe, the Middle East, Africa, and Latin America.
o Demographics
ƒ Young, affluent, tech-savvy customers (Hoovers)
ƒ A 1999 estimate showed that 70% of customers were internet
users, and today the estimate has exceeded 90% (Hoovers).
ƒ Moms with strollers (Hoovers)
ƒ People combining work and a coffee break (Hoovers)
ƒ The most frequent customers average 18 visits per month, whereas
the typical customer visits five times per month (Moon).
ƒ Average age for an established customer was 40, new customers
was 36 (Moon).
ƒ Customers that started visiting Starbucks in 2002 were 45%
female, 55% male (Moon).
• Market Needs
o Starbucks wants to create an experience for their customers that combine
their on-the-go schedule, as well as a place to relax. Senior vice president
of administration in North America Christine Day explains that, “people
come here for the coffee, but ambience is what makes them want to stay,”
(Moon).
o Selection
ƒ Starbucks menu contains brewed coffee, espresso traditions and
favorites, cold beverages, coffee alternatives, frappuccinos, and the
sale of whole beans.
o Accessibility ƒ Starbucks operates over 10,000 retail stores. Most of the 4,200
franchised stores are located in shopping malls and airports.
Starbucks coffee brands are also marketed through grocery stores
in the form of beans and even ice cream flavors.
o Customer Service
ƒ Starbucks employees are referred to as “partners.” As of 2002,
Starbucks employed 60,000 partners worldwide, 50,000 of those in
the United States. From the beginning when Howard Schultz took
over Starbucks, he believed, “Partner satisfaction leads to customer
satisfaction,” (Moon).
o Competitive Pricing
ƒ For North American stores in the 2002 fiscal year, the average
price of an order was $3.85. The drinks come in three sizes: tall,
grande, and venti (Italian for small, medium, and large). The least
expensive price for a tall drink is $1.40 for brewed Coffee of the
Day. The most expensive price for a venti is $4.15 for
frappuccino. Whole beans are sold in half and whole pound bags
ranging from $5.20 to $15.95 (Moon).
ƒ Starbucks brand coffee sold in grocery stores are similar to these
prices found in the cafes.
Starbucks Marketing Strategy
Proper implementation and execution of a strategic marketing plan is essential to the success of any company. A company may have an ideal product, but without proper positioning, identification of a target market, and a proper marketing plan a company would not be able to successfully market its products to consumers. Starbucks has been successfully able to convert an activity carried out at home to a commercial success through proper implementation and execution of its strategic intent. The firm has been able to convince consumers that its stores provide more than just coffee, but rather a rich experience that they should indulge in on a recurring basis. The company has been able to translate this consumer "experience" of its products into a highly profitable business.
This paper will discuss the marketing strategy being implemented by Starbucks, and will evaluate the company's current marketing plan, including positioning strategies, targeting strategies, competitive environment, and various other factors that affect its marketing strategy. The paper will further attempt to provide recommendations to Starbucks on the course of action it should purse to remain viable and maximize profitability - whether it is through improvements to its existing marketing strategy or implementation of a new strategy.
Starbucks Information
Starbucks Target Market
Starbucks Competitors
Starbucks Marketing Mix
Starbucks Experience
The marketing principles, or the four P's, also follow the differentiator marketing strategy. Starbucks is competing in an industry where marketing principles has to follow the differentiator strategy, or it risks losing market share. The company must create value to its customers, or the customers will find another place to spend their money. The marketing principles of Starbucks, can be argued, are the basis of the company's competitive advantage within the industry. Starbucks products are associated with quality, and the company has differentiated itself during the years as being committed to producing high quality products. Because of this association with quality, Starbucks has been able to charge a premium for its product.
Until recently, Starbucks did not face the type of competition it is experiencing today. Not too many companies that were as large as Starbucks were in the gourmet coffee business. Starbucks, though its promotions was able to create a perception of a premium gourmet coffee. Originally, this was what gave Starbucks a huge advantage over any potential competitors. The place or location of each outlet is also in line with the company's differentiator strategy. With 17,000 outlets worldwide, Starbucks individualized each outlet based on the surrounding communities. In addition, Starbucks also prides itself on innovation of new products, which further differentiates it from other competitors. Each of these aspects of the marketing principles that Starbucks utilizes helps to contribute to its differentiator strategy.
Starbucks SWOT
Starbucks Analysis
As we recommend strategies to orchestrate a turnaround for Starbucks, we will accomplish this in two forms. First, we will identify the particular strategy that will be addressed, and then we will provide specific scenarios where it is appropriate. The three strategies that we will address are the corporate strategy, business strategy and the marketing strategy.
In our attempt to orchestrate a turnaround, we first examine the Corporate Strategy. We identify Starbucks as existing in the service industry, particularly the "Fast Casual Restaurant "sector. This is a highly competitive and fragmented industry. While there are major players in this sector such as McDonalds and Dunkin Donuts, no one is in the competitive position to set industry prices for products. The customers are price sensitive and brand loyalty is normally low. Because Starbucks has established a strong brand and a moderate amount of brand loyalty, we recommend focusing on increasing profitability and return on investment. We have chosen this particular action because we want to strengthen our recognition as a provider of premium beverages.
Another corporate strategy that we recommend for the turnaround of Starbucks is the strategy of acquisition. The strategy of acquisition would allow us to purchase other competitors in the fast casual industry that will allow us to increase profits and gain market share (Mullins, 2009). Organizations such as Caribou Coffee currently have market capital of $170 million dollars and are currently trading on the stock market at less than $8 per share ("Caribou Coffee Company, Inc."). By acquiring Caribou Coffee, Starbucks can take advantage of several factors. First, Starbucks can merge administrative costs of both organizations into one. Second, since there is low R & D in the beverage industry, Starbucks can merge that operation in addition to their distribution system. Marketing functions will originate from one central location. Caribou Coffee can be repositioned in the market below Starbucks. The lower price point of their products would serve a larger market than the market segment that Starbucks would target, therefore, the higher volume revenues can be generated and directed towards the parent company.
We will now make our recommendations regarding the business strategy of Starbucks. We recommend the "differentiator "and "defender "strategy to be pursued at Starbucks. The fast casual sector of the industry has products and services that are provided in high volume and low profit margin, which contributes to the low brand loyalty. As a defender, Starbucks will try to protect its domain by providing higher quality and superior service therefore maintaining a secure position (Mullins, 2009). We recommend that Starbucks differentiate themselves from the others in the market. The differentiation strategy would allow Starbucks to establish a clear difference between themselves and their competitors. They must create a perception that the customer is actually receiving superior value from a Starbuck's product that cannot be provided by Tim Horton's, Panera Bread or Dunkin Donuts. This can be accomplished by focusing on providing superior customer service and reinforcing the idea that they are providing the highest quality products in the industry. Differentiating themselves successfully from the competition will provide Starbucks with a competitive advantage and allow them to charge a premium for the products and services.
The product market that we recommend Starbucks focus on is high quality brewed coffee, coffee beans, select food items, branded equipment and providing food service. We do not recommend that Starbucks attempt to provide full line of food items which would create a situation that may make it hard for the customer to distinguish between themselves and Tim Horton's or McDonalds. Their products and services should continue to support a feeling of exclusivity.
Our final recommendations would apply to the area of marketing strategy. Our recommendations attempt to address each one of the four P's. Regarding the product, we recognize and would continue the practice of carrying an extensive line of coffee and coffee beans. We recommend extending the line of food that is offered at the retail stores. The focus should concentrate on fresh baked goods, sandwiches and pastries with natural ingredients such as blueberries and nuts. New and different combinations should be introduced in limited markets and the products that deliver the best results should be retained and added to the permanent menu. The line of personal equipment products by Starbucks can be extended and offered at the retail level or on the company's web site. We recommend that Starbucks introduce a line of premium fruit drinks. New flavors of energy drinks should be introduced and marketed towards teens.
We recommend that the price for Starbuck's products and services be set approximately 10% higher than comparable products of their competitor. In establishing Starbucks as a provider of premium products and pursuing a differentiator strategy, the organization must not try to compete on price against organizations such as McDonalds. The price should be reflective of an exclusive product of high quality. Although we do recommend that Starbucks create greater value by packaging brewed coffee products and fresh baked goods and sandwiches.
In our attempt to analyze the issue of place, we recommend that Starbucks focuses on exclusivity. By this, we mean in order to establish yourself as premium, and different, you must reduce the accessibility of the product and service. This would require Starbucks to reduce the number of stores that it has in operation. The practice of having multiple stores existing in a 1-mile radius must be cease. The strategy of rapid expansion can no longer continue at this point. We recommend that stores in high volume and business districts be redesigned. These new designs should incorporate a comfortable feel for the customer and encourage large gatherings. In the targeted areas, the new store should be able to accommodate a small conference of up to 15 people. Ultimately, what you want Starbucks to do is be able to host gatherings for business meetings, college student groups, book signings, etc.
The final area of our recommended strategy changes would apply to promotion. To differentiate themselves from the competitor, Starbucks must conduct more aggressive promoting. Customers can be rewarded with free cups of coffee for accumulating a certain amount of points on their Starbucks card and coupons could be issued. We recommend that television commercials be created perpetuating a distinct difference between Starbucks and their closest competitors. The point must be driven that premium coffee shipped from around the world cannot be substituted by McDonalds or Dunkin Donuts. We further recommend that Starbucks sponsor events that are in line with the interests of customers who purchase premium products. This would include sponsoring professional golfing events, college games, the arts and business conventions. College students, young professional adults and those with more disposable income should be targeted. In order to increase traffic into the stores, we recommend that they focus on promoting some of their existing products at a limited time rate. This would include allowing customers the opportunity to use the Wi-Fi service free with the purchase of a premium sandwich and specialty beverage for an hour. We recommend allowing the purchase of new release music at a discounted rate on release day through their website.
A Starbucks Marketing Plan is the first thing that any Starbucks owner should think about when starting their business. Many Starbucks owners start into their adventure without ever taking the time to even think about planning. What they do not realize is that planning is the first and utmost important thing they need to do.
After all how can you manage something if you haven’t even outlined your objectives and drawn up a budget? You do not have to make the same mistake that a lot of Starbucks owners make. You can start to develop your very own Starbucks Marketing Plan today.
Some people might tell you this is a difficult task, but there are many things that can help you to simplify your undertaking that most people do not know about. Never find yourself in the dark like many other business owners again. Using the tips in this workbook, you can give your Starbucks business the edge on the leading competition that you have always dreamed about by taking full advantage of the use of a Starbucks Marketing Plan.
David Frey has many years of experience in the business field and knows what it takes to become a successful business owner. Using the secrets and tips he has compiled into his marketing plan workbook you can develop an incredible Starbucks Marketing Plan. Just imagine how much of an advantage you can have over your competition.
• Market Forecast (Moon)
o Over the next few years, an estimate for the U.S. retail coffee market
expects specialty coffee to have a compound annual growth rate (CAGR)
between 9%-10%.
o Starbucks was also estimated in 2002 to grow at a CAGR of about 20%
top-line revenue growth.
o As of 2002, coffee consumption had risen with more than half of the
population (about 109 million people) drinking coffee everyday, and an
additional 52 million drinking coffee on occasion.
• Market Growth
o Reports show in 2002, the number of specialty coffee drinkers has become
the market’s biggest growth.
o An estimated one-third of all U.S. coffee consumption takes place outside
of the home and in places such as offices, restaurants, and coffee shops
(Moon).
SWOT Analysis
• Strengths
o The company is good at taking advantage of opportunities.
o Starbucks is very profitable and has a strong financial base, therefore allowing
the company to undertake new business ventures.
ƒ Revenue increased to $5294.2 million in 2004, a 29.9% increase from
2003 (DataMonitor)
ƒ Profits increased to $610 million in 2004, a 43.7% increase from 2003.
ƒ Net earnings increased 46% (SWOT). o The company is internationally recognized and has a global presence.
ƒ Their reputation is one of fine products and services.
Almost 9,000 cafes in almost 40 countries (SWOT)
ƒ Widespread brand recognition, which in turn becomes brand
preference, and ideally eventually brand loyalty
ƒ Strong customer base
o Respected employer
ƒ Values its workforce
ƒ Voted onto Fortune’s “Top 100 Companies to Work For” (2005)
o Strong ethical values and mission statement
o Disciplined innovator
ƒ Understands the Adapt-or-Die theory of marketing
ƒ Has the ability to roll out new products relatively quickly, which
translates into a considerable competitive advantage
o Clusters company units
ƒ Expands business with the continuing growth of the coffee market,
especially in areas where the company is already well established, and
groups stores in an area, therefore able to dominate the region
ƒ Leads to considerable financial reward without suffering from
cannibalism (DataMonitor)
ƒ Focus on opening stores that have convenient access for pedestrians
and drivers
ƒ Helps the company capture an increasing share of the coffee market
• Weaknesses
o Reliance on beverage innovation
ƒ Vulnerable to the possibility that their innovation may falter over time ƒ Company growth is mostly driven by beverage innovation.
ƒ If U.S. store growth decreases, stock is lowered in value.
ƒ Diminishing return from beverage innovation would have an adverse
effect (DataMonitor).
• Opportunities
o In 2004, created a CD-burning service where customers can create their own
music CD
o Opportunities for revenue growth by expanding its global operations
ƒ New markets for coffee are beginning to emerge; for example, in India
and the Pacific Rim (SWOT).
ƒ Targeting 15,000 international stores in the next few years
• Expansion potential questionable in Brazil, India, and Russia
• China could be one of the largest markets, and therefore the
company will focus on Beijing and Shanghai.
o Large urban population
o Rising economy
o Increase in coffee consumption
o Co-branding with other manufacturers of food and drinks and brandfranchising to manufacturers of other goods and services
ƒ Creates loyalty for Starbucks brand
ƒ Recently signed agreement with Jim Beam Brands to develop and
market a Starbucks-branded coffee liqueur drink (DataMonitor), which
has strong revenue potential because:
• Liqueurs represent $4-5 billion opportunity (DataMonitor).
• Liqueurs with coffee represent a considerable segment of the
liqueur market.
• There is a significant overlap between consumers of liqueurs
and consumers loyal to the Starbucks brand (DataMonitor).
o Growth in coffee markets: Starbucks has a market share of over 40% of the
special coffee market (DataMonitor). Therefore growth in this category would result in considerable opportunities for further growth and expansion in the
near future.
• Threats
o Coffee may not stay in favor with customers, and another type of beverage or
leisure activity could replace it.
o Rises in the costs of dairy products could affect the company’s margins.
o Competition
ƒ Competitive coffee shops
ƒ Copy cat brands
ƒ Restaurants
ƒ Street carts
ƒ Competition could enter the market at any time.
• The U.S. specialty coffee market continues to grow, and an
increasing number of firms are looking to enter.
• At any time, a company with greater financial, marketing, and
operating resources could enter the market and compete
directly with Starbucks.
• Competition
o Competition comes in several forms:
ƒ Independent/Local coffee shops
ƒ Social and inclusive
ƒ Diverse and intellectual
ƒ Artsy and funky, typically cozy and very welcoming
ƒ Liberal and free-spirited
ƒ Lingering encouraged
ƒ Particularly appealing to younger coffee house customers
ƒ Wide variety of beverages/food
ƒ Appeals to the non-traditional crowd
ƒ Franchise/Large Companies
o Generally well-recognized names (McDonald’s, Krispy Kreme,
Dunkin’ Donuts, etc.)
o More convenient and accessible
o Easy access in and out
o Appeals to the more mainstream coffee drinkers
• Services (Company)
o Starbucks purchases roasts of the highest quality of whole bean coffees.
o Fresh and rich brewed Italian espresso
o Offers pastries and other appetizing confections
o Sells coffee-related accessories (mugs, coffee makers, cups, espresso, etc.)
o Expanded sales into supermarkets of whole bean coffee o Introduction the widely popular drink, Frappuccino, to the public
o Strives for satisfied customers and a welcoming environment
o Works to have highest standards of excellence in way of business
o Offers newspapers and other reading material, popular music, and Internet
access (provided by T-Mobile)
• Keys to Success (Company)
o Rapidly expand retail operations
o Growth in its specialty sales and other operations
o Selectively pursue opportunities to leverage the Starbucks brand through the
introduction of new products
o Continue to be widely available and welcoming
o Maintain reputation for having specialty and gourmet coffee
o Make customers feel welcome with friendly service
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