CUEGIS

Starbucks
Established in Seattle Washington 1971
Known to produce the world’s finest fresh-roasted bean coffee inspired by Italian
tastes
Promotes Coffeehouse experience:
 Selling – the company’s own premium roasted coffee
 Variety – along with a variety of pastries, coffee accessories
teas and other
 Atmosphere – in a tastefully designed coffeehouse setting

Change Change marketing mix to satisfy Chinese and

French Market
The adaptation of business objectives, strategies
and operations to accommodate changes, both Chinese Market:
internal and external, within the dynamic business
environment

French Market:
Strong tradition of the “café noir” (black coffee), avoid French to avoid
coffee with additives such as syrup and honey.

Target extension around young people (High School, College, University

and leisure’s places automatic machines) and workers (automatic
machines at work).

Change in ethical behavior to support local coffee community

improving lifestyle

Collaboration with nongovernmental organizations that have experience

and expertise in working with farming communities.
- Support communities through farmer loans, growing support
centers and ethical sourcing programs such as C.A.F.E
practices.
Benefit: ensuring the long-term supply of high-quality coffee and
other agricultural goods, as well as building stronger, enduring
farming communities.
 Culture
Ideas, customs and social behavior derived from
different values and backgrounds that influence
stakeholder motivations and decisions
Ethics
The socially accepted moral principles that govern
behavior and decision-making.
Globalization
The increase in cross-border trade and the gradual
development towards a unified, integrated and
international market
Adaptive business culture adapting to different consumer needs and
wants. Market research about culture, history and local tastes before
partnering with local coffee companies which serve the needs of locals
without compromising the brand image.
- Japan
Low roofs, traditional and often with allusions to its national religion,
Shintoism. To recreate this feel, Starbucks has partnered with local
designers to identify the spirit of a city. E.g. Fukuoka, in Kyushu, has a
Starbucks with 2000 interlocking wood blocks, to give the impression of a
forest to fit with the spirit of Shintoism: honoring nature.
- Saudi Arabia
Starbucks controversially segregated its stores into male and ‘family’
sections for women.
- France
Perception of French over Starbucks coffee = Overprice and low quality
- Amsterdam
Starbucks built stores that supported to local culture scenes, for instance
building a stage for poetry in a converted bank vault at Rembrandtplein.
- Change in ethical behavior to support local coffee community improving
lifestyle
- Change ethical behavior to ethically source their coffee beans
Enabled entry into new foreign markets, increases sales revenue as
more customers are available.
Negative: Overseas competition
Rival coffee shops started copying Starbucks’ business practices, name,
and even its company logo. Starbucks had to utilize intellectual property
laws to dispel customer confusion between itself and competitor
Alliance of Nestle and Starbucks
- Nestlé, the world’s largest food and beverage company. Committed to
enhancing quality of life and contributing to a healthier future.
- New cultural preference (see above)
 Innovation
The introduction and implementation (commercial
pioneering) of new, radical and improved products,
processes or idea.
Strategy
Significant long-term planning decisions that
organizations make in order to meet the needs and
wants of their stakeholders.
- Mobile app
- Unicorn Frappuccino
- Menu design and optimization
- Personalized attention
- Introduction of a new loyalty program and mobile and digital
payment platform
e.g. Starbucks Privilege cards Rewards Visa Prepaid card Earn
1 Star per $10 you spend in and out of Starbucks® stores and
redeem them for Starbucks food or drink Rewards.
- Launching nitro cold brew in 500 stores, greater number of
customers to its stores by offering new and innovative food and
beverage options. (2015- 5.51%, 2016- 8.15%)
Strategies for Growth: Combination of Market penetration
and development. These strategies are equally important as
the coffee business has reached its Maturity (from product
life cycle) thus extension strategies are extensively required
to avoid saturation.
- Growing the number of stores
Changing its store mix, the coffee giant is concentrating on drive-
thrus in the outer edges of urban and suburban areas. In
addition, Starbucks is opening up express stores which
essentially function as walk-thrus in New York, Boston, and
Seattle. (Market penetration)
(-) incremental growth (moving slowly but steadily forward)
- Elevating the Coffee experience (most preferred coffee shop)
Expanded store portfolio, offering highly customized and
elevated experiences.
The company is looking at potentially 10 Roasteries, offering
different types of coffee experiences: pour-over, siphon, clover,
specifically roasted Reserve coffees on-site that you are able to
buy from a scoop bar, and interactive experience with bars and
baristas.
- Creating New Customer Occasions (improved food offering,
more fresh food items around bistro boxes
Launching nitro cold brew in 500 stores, greater number of
customers to its stores by offering new and innovative food and
beverage options. (2015- 5.51%, 2016- 8.15%)
- Driving at Home Coffee Share and Occasions
Starbucks is the leader in K-Cups
partnering with companies like Pepsi in Latin America, Tingyi in
China, and Anheuser-Busch, Starbucks is making efforts at
expanding its ready-to drink segment which is forecast to grow at
approximately 10% y-o-y in the next five years. (globalization)
- Building Teavana (one of the biggest growth drivers)
contributed one percentage point in comparable sales growth for
seven consecutive quarters most especially in China and
Europe. (extending variety of products)
 sales of premium Teavana brewed and iced teas in Starbucks’
stores, helping increase the average spend per customer on
beverages.

- Extending Digital engagement (innovation)

Mobile Go and Pay – making the exchange between customers

of coffee products easier and more convenient.

Joint venture between Starbucks and Takt Inc. (big data

company) – meeting the demands of a digital marketing
strategy. The coffee giant plans to move from the email one-to-
one marketing capability to in-app capability. This will likely help
SB drive spend-based behavior (identifying the needs and wants
of the customers) thus, boosting sales for the company.

- Establishing New Partnerships (gaining popularity of its

complementary coffee and food menu)

 It is currently testing a new weekend brunch menu in 70

locations in the western part of the U.S., which would be
available on Saturdays and Sundays from 8 a.m. until 2 p.m., or
until supplies run out.

 Partnership with the Italian bakery, Princi. The company will be

serving fresh Princi food at its new premium restaurants.

 partnership with Macy’s, wherein Starbucks currently has

presence in 49 Macy’s stores.

Additional statistic information:

Statistics
75% market share
8.15% growth in customer base
5.79% growth in number of stores
2003 entered European Markets
1999 entered Chinese Market
191 stores in China
99% ethically sources coffee
$100 million invested into local coffee community
Mobile Order & Pay introduced in 2015, accounted for 7% of U.S orders
18% revenue growth 5% transaction growth in china
Employee wages 9.48 per hour

Starbucks Marketing Strategy main points:

 Quality based differentiation – premium quality tea and coffee

 Excellent customer service.
 Consistent brand experience.
 Use of unconventional techniques for marketing and branding
 Image of an ethical brand
 Excellent brand merchandise
  Customer orientation
 High brand equity
 Unconventional social media techniques of establishing consumer connection.
 Creating real customer value
 Near no or less use of traditional methods for marketing (till some years ago; now it is using a
mixed strategy)
 Good quality products and customer service – higher word of mouth marketing.
 Investment in advertising for last 4-5 years.

Social Media Marketing

- There are more than 500 interesting and engaging videos of Starbucks brand and products
on YouTube. It has released videos of its products, supply chain and various other aspects of
its business operations.

- Twitter has also become a favorite spot for marketers. It has helped them address a very
large audience without any significant investment. Starbucks has made more than 87,000
Tweets and has more than 11.8 million followers. Informing the larger audience of the existence
of the brand.

A Unique Marketing Strategy that Starts from Premium Quality Products

Starbucks has a distinct marketing strategy that starts right from its products. Starbucks has used the
formula of quality based product differentiation which has resulted in high level popularity and
customer loyalty.

Product quality must be considered the central pillar of its marketing efforts.

Great quality has several benefits for Starbucks:

- it helps with brand image and reputation including great customer service.
- Great taste equals higher recognition and popularity. As a brand, Starbucks has built great
reputation over time for the quality of its products, their flavor and for unequalled customer
service.
- A lot of marketing takes place at their stores and through brand merchandise. Great customer
service has also added to the brand’s positive reputation. In the recent years, investment in
marketing and advertising has resulted in better sales and increased brand recognition.

Starbucks has positioned itself as a premium coffee brand based on an overall premium experience
designed to take the coffee experience to the next level. Apart from great quality coffee, the brand’s
value proposition is also based on a great customer experience supported by excellent store
environment meant to drive fatigue away and offer guests premium space to relax.

Segmentation:

Since Starbucks is a premium brand, its customers are mainly from the upper economic strata or the
upper middle class and upper class. The brand targets people who want a peaceful space to drink
coffee and shake fatigue away. These are higher wage earning professionals, business owners or other
higher end customers in the 25-60 age group mainly. People with a fast moving life style want good
quality coffee along with an environment where they can relax. Starbucks offers all these privileges at
a single place.

Excellent Brand Merchandise and Unconventional marketing Tactics

Brand merchandise are an important part of any brand’s marketing strategy. They also play an
important role in customer retention and satisfaction. Starbucks logo is printed on the brand’s
merchandise. Attractive looking merchandise are always pleasant and add value to a brand’s
products. A perfect cup of coffee cannot be perfect if the cup is imperfect (packaging) Well, this is a
strategy most customer focused brands employ.

Starbucks has also employed unconventional techniques for marketing its brand. Traditionally,
Starbucks has not relied on conventional marketing and advertising methods. It did not advertise its
brand in traditional places like billboards, posters, or advertisements in the common places like
Newspapers or television. However, it was still able to generate very high level of publicity and
popularity.

An Ethical Brand

To better market itself as a responsible brand, Starbucks focused on its long term branding as a quality
focused, customer oriented and ethical brand. Apart from great looking stores where the customers can
sit comfortably and enjoy a great cup of coffee amid excellent service, Starbucks has focused on the
other parts of its business operations to create a unique and strong brand image. Ethical sourcing is
also an important part of its business strategy. Starbucks sources 99% of its coffee ethically from
suppliers around the world. This gives rise to an ethical image which proves favorable in terms of
marketing as well as customer loyalty and retention. The image of an ethical and accountable brand
can be a major plus point in the 21st century. Customers are more loyal to brands that are environment
friendly and accountable.

Now Investing in Advertising

Starbucks was known for not investing in marketing. All the marketing was based on its brand
image and the fame it had earned by offering premium quality products. In the recent years however,
it made some changes to its marketing strategy and started investing in advertising. This is because,
to be able to adapt with the market changes and used as their extension strategy.

Now, its advertisement are visible on television, print and other digital channels too. In 2015, it invested
more than $351 million in marketing and advertising. Its TV commercials highlight the newest and
most romantic flavors available at the Starbucks stores. However, advertising and paid promotions
are not a central focus at Starbucks. Compare its marketing budget with other celebrity brands like
Coca Cola or Nike spend and it would look like Starbucks spends thriftily on marketing. From 2006 to
up to date, its focus was to spend more on having talented people and good quality raw material
than on advertising gimmicks for enormous growth. For instance, last year 6,535 Starbucks
employees received full college tuition coverage. It’s not just coffee, it’s helping college.

Its 2006 annual report states it clearly – “When we set out to become the world’s leading purveyor of
fine coffee, we didn’t put all of our focus on how large we’d become or just how much profit we intended
to make. Intuition told us that our ultimate success would depend less on clever advertising gimmicks
than it would on the special individuals we’d bring onboard, one by one, as we worked to make our
dream a reality”. That’s how they rolled till 2006 but in later years started spending on marketing and
advertising. However, the budget has never touched even half a billion.
In addition the big company has never used any celebrity to represent their brand. Other well-known
company such as Nike, hires sports celebrities such as Michael Jourdan and Tiger Woods and receive
payments of $40 million.

YEAR Advertising costs Marketing

(millions $) (millions $)

2012 182. 4 277.9

2013 205.8 306.8

2014 198.9 315.5

2015 277.9 351.5

2016 248.6 378.7

2017 282.6

2018 260.3