The Marketing Strategy Of Starbucks And Its Effectiveness Marketing Essay

The Marketing Strategy Of Starbucks And Its Effectiveness Marketing Essay Brand recognition is crucial factor in business growth where customers readily pay premium prices for robust brands. Consumers feel satisfaction while consuming a brand that attracts strong loyalty to them. Brand yields not only expression for external stakeholders but for internal environment as well. Employees feel pleasant to work hard for the success of company and consider companys achievements as their own success that enhances organizational efficiency (Ljiljana StankoviĆ¡, 2006). Marketing connects company with customers and influence on consumer consumption habits. Latest marketing trends and technologies make value addition and steady revenue stream towards company. Marketing communication means create demand of organizational goods and services. Chief marketing officers and brand manager designations are common in marketing departments of organization. Organizations deploy adequate marketing budgets for brand management and creation of sound customer base (Kotler Keller, 2009). Consistent change management is the essence of marketing management where stagnant position of company is its failure. Importance of marketing communications in globalized environment is potential cause of choice of this topic for the sake of research and analysis report. The Starbucks has positioned its brand in the market as a high quality customer experience brand. Starbucks sells its high quality products and services at premium prices. The high quality of products and good customer experiences are the main differentiators of its brand from other coffee brands in the market. The Starbucks has designed its stores on theme of Italian bars. The Starbucks provides a home like experience to its customers. The customers of Starbucks are very loyal to the Starbucks brand. The Starbucks gives very first priority to customer satisfaction in order to form a loyal customer base of its brand. The Starbucks focuses on customer relationship management by integrating communication with customers. Research report would analyze coffee retailing industrys marketing trends by making comparative analysis of Starbucks with McDonald. The marketing of brand is very important in order to promote products of brand among the target market. The Starbucks uses word of mouth marketing for promoting its products among customers. The customers appreciate the coffee taste and environment of coffee shops of Starbucks. Starbucks has used comfortable and elegant furniture design, soft music playing on background, messages on coffee cups and visual art in a coffee shop. The Starbucks is the name of comfortableness, fascination, satisfaction, smartness, and enjoyment of life (Hanft, 2005). Starbuck is recognized as a cultural brand because it connects itself with cultures of regions and countries. Cultural nature of Starbuckss brand is the reason of choice of company for the sake of review of marketing strategies of an organization and its effectiveness. McDonald is considered for comparative analysis. The report would conduct critical analysis of Starbuckss marketing strategies by making comparison with McDonald Company. Research Objectives The research report aims to discuss attributes of marketing strategies of Starbucks and its impact on the achievement of organizational goals. Starbuckss marketing is aligned with the cultural attributes of local market where company undertakes local marketing trends by accounting customers needs analysis. Starbucks brand adopt differentiation as market competitive strategies in spite of slow down economy. Company does not bother about price competitive tactics of competitors so the report would focus on brand elements that secure its leadership of quality. Research objectives are given below: To analyze cultural attributes of Starbucks brand and uniqueness from other brands. To examine corporate social responsibility campaign of Starbucks and its impact on brand building. To consider brand differentiation strategies of company and rapid expansion strategy analysis of organization. To assess long term objectives of Starbucks to aid its marketing strategies and achievement of company objectives. Research Approach and Research Questions What are brand attributes of Starbucks that make it differentiated from other brands? What is role of strong experience that company deliver along with taste of products? What are growth opportunities for Starbucks in emerging markets by virtue of its international marketing strategies? What is the role marketing in organizational growth and strengthening sound customer base? The exploratory and explanatory research approaches can be helpful to analyze market strategies of Starbucks while answering above described research questions. The explanatory research describes the process of marketing strategies of Starbucks (Johnson Christensen, 2011). The explanatory research describes variables in the context of a research study. The explanatory research describes the nature of research variables in the research study. In explanatory research first of all target population is defined, then the sample is selected from a target population, data analysis is conducted and then the conclusion is drawn. The explanatory research is very helpful in order to study behaviour, culture, demographics, attitudes and belief of Starbucks customers. On the other hand, exploratory research is used to study new dimensions of a research area. The exploratory research is more vibrant and comprehensive than explanatory research. In exploratory research qualitative research tools are used in order to conduct a research study. The primary data are used in order to conduct an exploratory research. A problem statement may be designed in order to conduct an exploratory research. However, inductive research design is feasible in answering the research questions and addressing research objectives. My area of research is coffee retailing industry so individual cases of Starbucks would be studied to generalize the marketing trends and tactics of company on overall industry. The philosophy of inductive research approach is to study particular cases and scenarios in order to generalize the conclusions on targeted population. Part B-Business Techniques used for data collection Research Methodology The secondary data collection techniques are used in order to conduct research study. The information collected by using primary data is picked from the source of information generation. The primary data collection methods are surveys, pilot studies, focus group studies, interviews and observations. The primary data is concrete and free from any bias. The research can get more relevant information by using the primary data collection technique. The primary data collection is more objective oriented than secondary data collection technique. The quantitative and qualitative techniques are used in order to interpret the primary data and conclude the findings of a research study. The disadvantages of primary data are that, it takes a lot of time to collect primary data. Sometimes, it is very costly to collect primary data. Substantial amount of resources are required in order to collect primary data so researcher avoids using primary data due to scarcity of resources. On the other side, secondary data collection resources pick up second hand information conveniently where information is already available in this case. It includes corporate reports, corporate websites, books, journals, articles, case studies, documented information. Above prescribed information sources would be used to analyze and review marketing strategies of Starbucks and its effectiveness in organizational goals accomplishments. In order to answer the research problems and questions, secondary information sources can be conveniently used. Although, secondary information sources are easily approachable and retrievable but challenging things include credibility of source, quantity of biased information, conflict of objective between author and researcher. Case Study Approach Case study is regarded as most convenient research methodology to review the marketing effectiveness of Starbucks. Case study would consider the best in class marketing communication tools including social media marketing to aid the organizational growth by Starbucks. It is evident that international marketing strategy of Starbucks is primary cause of success of organization being the essential tool of strategic management. Case study method defines and explores the research dimensions and research areas (Kotzab et al., 2005). Case studies of company and its competitors would be studied including annual reports and corporate website information to analyze and conclude best industry practices while recommending future directions to company. Starbucks heavily relies on unconventional marketing strategies like word of mount and social media strategies. Starbuckss brand strongly emphasizes on providing high quality to customers while delivering delicious taste at premium prices. In-store atmosphere is most important at Starbucks brand to deliver world class coffee experience. It means that area of research for case study approach is wider in analyzing different dimensions of Starbuckss marketing. Problem Statement Following problem statement is defined to consider different research dimensions for current research by case study approach. Objectives of company are related to provision of high quality and fresh coffee experience. Company always tries to satisfy customers, contribute in the community development programs, environmental campaigns, provision of pleasant and friendly work environment, business diversification, setting highest standards for purchasing raw materials (coffee beans). In addition, it improves the roasting quality to increase profitability, which enhances the shareholders confidence that is essential for the success of future development strategies (Khattab et al., 2008). All of the above stated objectives appear to have potentials of long term objectives. The company objectives seem to be acceptable, suitable, understandable and flexible in nature. However, there is a problem in its measurability and achievability because most of them are without any benchmark for assessment and are ongoing. Motivation of objectives is reduced by difficulty of progress measurement (Steiner, 2001). Application of Models SWOT SWOT analysis is used for assessment of the strategic position of the company in the current environment. The SWOT framework consists of four elements called strengths, weaknesses, opportunities and threats. The strengths and weaknesses are the internal factors while opportunities and threats are considered as external factors (David, 2011). It is widely used strategic framework due to its simplicity and convenient application in almost every situation. SWOT framework would confirm how Starbucks utilizes cross selling (selling different product to existing customer) and up selling (selling upgraded or expensive version of same product to customer) marketing tactics to customers. It also analyzes the way Starbucks offers high class coffee drinking experience to its customers. Likewise, SWOT model reviews the company competitive advantages including offering best in class coffee experience by offering coffee drinking with inside store experience that act as unique selling proposition. Formulation of unique selling proposition is main point of our concern to apply SWOT. Starbucks is getting fame in Europe, US, Canada, and Japan that is being marketed and distributed by e-commerce retailing, foodservice accounts, merchandise stores, food and drug stores, which are opportunities at Starbucks. Opportunity analysis is the area of scope in SWOT where coffee appeals to youth having age range of 18-24 years that has strong proportion in Asian fast growing economies. Limitations of SWOT SWOT is too short and simple which unable to cover all aspects of the environment in which Starbucks operates that leads to strategic errors in the analysis. The decision based on SWOT analysis sometimes might be wrong but this limitation overcome by using other detailed framework with a SWOT (Pickton Wright, 1998). The SWOT framework used on the basis of assumption which sometimes might be untrue in the future. SWOT has an inherent limitation because there are rare chances that two people come up with the same results due to its subjective nature (Pehlchen, 2005). SWOT produces lots of information but all are not useful because sometimes one factor is a threat but at the same time it becomes an opportunity (Henry, 2008). SWOT is ineffective in the current dynamic environment where the pace of technology development change everything. Particularly, SWOT analysis may be conducted separately for emerging economies and developed countries in the regions of Starbucks. Dynamic nature of limitation might be reduced by conducting the SWOT on regular basis. Marketing Mix Marketing mix is widely used by organizations to understand the needs of customers which enable organizations to provide level of products and services as per expectations. In order to achieve success in the marketing campaigns, organizations need to understand their target market and their expected levels of products or services (Kotler et al., 2006). Starbucks has used aggressive strategies to sustain its position as a market leader due to intense competitive rivalry in the service industry. Starbucks has adopted branding strategy due to which it changed the logo that is more focused and highlights the sustainability of company policies. Seven attributes of marketing mix are demonstrated as product, price, place, promotion, people, process, and physical environment. (e-Marketing Mixology, 2012) The main objective of marketing mix program is to create communication and deliver value to customers. The Starbucks is using different marketing strategies like customer relationship management, integrated marketing communication, creating a good customer experience and social media marketing. The objective of Starbucks is to share its customer experience with consumers from low income groups and develops a long term relationships with them. The weak point of marketing mix strategy is that it focuses on short term goals and ignores the long term interests of a company. Research Ethics There are ethical issues involved in research like plagiarism and privacy of respondents. My project mentor has advised me to make your work original in order to avoid the plagiarism issue. I will use my own content in order avoid any plagiarism issue. The disciplinary committee of OBU will take action in case of plagiarism. I have given proper references of my research work in order to avoid any issues of copyright violation. I have used Harvard referring style in order to meet the guidelines of my university. Limitations of Research Primary data collection sources could not be used due to scarcity of time and required resources. Adequate methods of data collection, arrangement, processing and interpretation, analysis and conclusion could not be used. Researcher bias cannot be eliminated during research process (Creswell, 2009). Limited access to the confidential nature of information necessary for the sake of organizational analysis (Lancaster, 2005). Qualitative research design requires more information technology tools than quantitative one (Johnson Christensen, 2011). Conflict between the goals of researcher and author limit the credibility of research findings and analysis. Part C-Analysis, Conclusion, and Recommendations Brand Differentiation Strategy The Starbucks has adopted a brand differentiation strategy through product uniqueness and product differentiation in order to promote its products. Starbucks has used innovation in its products and services in order to gain competitive advantage in the market. The Starbucks has positioned itself best coffee brand in the market by providing attractive store design, unique environment, elegant taste and high quality coffee beans (Kotler Keller, 2009). The main target market of Starbucks is customers from professionals, businessmen, students, tourists and students of colleges and universities. The Starbucks customizes its products and services according to the tastes and culture of different regions and countries. Starbucks has opened its coffee shops in other countries in order to introduce its products and services to customers of international market. Recently, Starbucks has announced to open its first coffee shop in India. Marketing SWOT Strengths It delivers value added entertainment services as add-ons at its premises. Starbucks renders free Wi-Fi internet access in US and Canada the company owned chain of stores. Starbucks sticks customers at its stores to spend adequate time inside the store by offering web based internet portal and digital network. Its digital network allows subscribed editions of New York Times, Economist, ESPN insider, Wall Street Journal, and USA Today (Corporation, 2010). Starbucks services for in-store customers include particular download options of iTunes and e-Books. Up selling merchandise of company includes accessories, books, apparel, movies, and music. Company markets and sells its products through four channels as food service operations, consumer packaged goods, licensed stores, and companys owned chain of retail stores (Starbucks Inc, 2011). Companys competitive advantage regarding distribution strategy includes approaching customers while they are at shop, dining, travelling, and at work through formulating strong distribution network (Kotler et al., 2005). Manufacturing process of fruit juices and beverages is best in class than competitors. In order to retain natural ingredients, company prepares beverages by high pressure pasteurization (HHP) process to preserve nutrients of juices (Starbucks Corporation, 2012). In addition to stores experience and robust process of HHP, healthy beverages portfolio is also source of unique selling proposition. Starbucks has offered convenient purchase options through smart phone mobile apps. Mobile application payment option generates barcode to be usable in targeted stores. Purchasing is made by Starbucks card mobile app with the use of scanner. Customers can reload balance through PayPal. This payment option is considered as most flexible and convenient for customers because its processing is fast. Company has launched two iPhone applications for customers namely Starbucks card mobile and my Starbucks. Card mobile application allows enjoying the useful features of Starbucks card and mobile commerce features (Kharif, 2012). Company also launched mobile commerce features for Android smart phones. Company is gaining competitive edge in rendering mobile commerce transactions while leveraging technology to cater customers. On the other side, companys strong operating performance is aiding its global expansion strategy despite the poor consumer response due to weak economy. Weaknesses Company has been forced to close down 475 coffee locations of Seattles best due to impairment of assets (Thomson Reuters , 2012). Closing down of companys stores in significant amount would result in reduction in profitability. Starbucks has caused product recalls in 2011 where US food safety and agriculture department has reported bacteria issues in ready to eat chicken meals of Starbucks. Similarly, company has recalled its different products like glass water bottles causing laceration hazard whereas safety commission of consumer products ordered to close down 530,000 units of Starbucks (Scheunemann, 2010). Opportunities Starbucks is in strong need to establish robust distribution strategy to beat the competition. Most of Americans like natural ingredients in soft drinks including nectars, carbonated beverages and juices. Americans are getting more health conscious than ever. US organic food market is fast growing business segment where competitors of Starbucks are growing in wellness and health program (sustainable.org, 2012). Starbucks has decided to execute brand distribution strategy by retail stores of company and adoption of additional channels. New juice bars of company would sell fresh vegetables and fruit juices to deliver true captivating experience. Company is of the opinion that to reflect beverage natural ingredients and adopt new look of store (Starbucks Corporation, 2012). Inside walls of Starbucks contain entertaining and knowledgeable contents on juices and smoothies (sweetened beverage including peanut butter and chocolate). Starbucks is targeting the China and Indian markets that have largest population in world. China is getting fast paced economic development where disposable income of middle income people is increasing (White, 2011). There is great opportunity for Starbucks to meet growing demand of consumer products. Starbucks has formulated aggressive expansion plan in India and China (Starbucks Inc, 2011). Starbucks is targeting the demographic factors in its marketing strategy. Company is registering its strong operational performance in China that is quite positive symptom for brand marketing opportunities (Starbucks Inc, 2011). Situational analysis of India reveals that Indians are tea addicted. However, living standard and income level of middle income group of Indians is growing that is strong inclination toward coffee consumption. In India, there is 75,000 tonnes of coffee consumption as compared to 700,000 consumption of tea (AOL Inc., 2011). These statistics reveal that there is untapped market in India for coffee. Starbucks has made joint venture agreement with Tata group named as Tata Starbucks Limited and Tata Coffee Limited where Tata Coffee is supplier of Tata Starbucks (Starbucks Inc, 2012). Starbucks is creating local alliances in Asian markets to tap fast growing economies. Starbucks has entered into agreement with Courtesy Products to deliver on demand and in-room coffee service in more than 500,000 US luxury hotels (Starbucks Inc , 2011). Likewise, Starbucks made another agreement with Green Mountain for licensing, distribution, marketing, and manufacturing, and sale of coffee brands. Threats Starbucks operates in highly competitive environment that demands continuous improvement in quality from speciality stores and restaurants including strong competitor of McDonald (Starbucks Inc, 2011). Raw material prices of Starbucks may increase causing in enhanced prices of manufacturing costs (Starbucks Inc, 2011). Brazil and Columbia are largest producers of Arabica beans that have served limited production causing decreased supply (Walsh, 2011). Due to low supply, Starbucks may have to face challenges in meeting desired standards of quality (Starbucks Inc, 2011). Starbucks has offered espresso beverages at home where customers are becoming habitual to enjoy same quality products of company at home as quality of verismo is same like that of brewed coffee that is served for in-store customers (Starbucks Inc, 2011). It means they would visit stores in lesser numbers. In India and China, McDonald has already catered brand loyalty and customer coverage (Kotler Keller, 2009). Howard Schultz strategies are strongly criticized due to its announcement of closure of 600 US stores. It is argued that premium brand image of Starbucks is difficult to maintain where CEO may have to cut the prices and inside stores experience is no longer attractive to customers (Quelch, 2008). Rapid expansion strategy of company and new products offerings are blamed. Critics argue that McDonald has improved its coffee quality at substantial lower prices but it is challenging for Starbucks to maintain its offerings at higher prices. Marketing Mix of Starbucks Product The Starbucks product portfolio includes premium coffee, high quality tea, cold and Italian beverages. Iced tea, lattes, hot or cold tea and lemonades are the top flavours of Toza team. Starbucks uses cultural phenomenon in the development of product portfolio which is key to its brand success. Starbucks makes double shots; Starbucks discovers innovative product attributes whereas it has launched milk drinks in the UK market (Starbucks Inc, 2010). The company is always trying to enhance its product portfolio and diversified in complement products with its coffee, company also owned a number of bookstores in Canada and USA. The company has enough strategies but it should need diversification and innovation in its product portfolio to achieve further advancement in its objectives and goals. Price Starbucks charges premium prices for its products from customers as compared to its competitors (Lee, 2007). Starbucks believes in the brand differentiation strategy with quality and natural taste at premium prices and does not involve itself in price war strategies. Starbucks provides the pleasant environment and wonderful service attributes along with the taste of its product which enable the company to charge for that attributes also not just a cup of coffee at cafà ©s. All these attributes in one place and in one premium price add value to the customer experience and create loyalty. Overall the prices of coffee fall in the USA but not in the Starbucks stores and cafà ©s which shows how much company focused on premium prices (Fottrell, 2012). In comparison, McDonalds charged low prices as compared to Starbucks that creates a new rivalry and serious threat for the Starbucks (Krasny, 2012). Place The company has more than 17,000 stores in more than 55 countries (Starbucks Inc, 2011). Tokyo in Japan was the first international place for the Starbucks coffee house in 1996 (Starbucks Corporation, 2012). The company also has a virtual existence through its website. Starbucks acquired its rival the Diedrich Coffee chain of cafà ©s in 2006 to enhance its geographical presence and market penetration (Hirsch, 2006). In order to enhance its presence in North America, Starbucks struck a deal with Green Mountain Coffee Roasters in 2011 (Ropes Gray , 2011). Starbucks coffee and other products are located at schools, movie theatres, business organizations, grocery stores, department stores, airports and railway stations etc. Promotion The company has used various means of communication with customers like print media, TV ads, social media and the companys website. The company also operates a website for its customers where they interact with each other and give new ideas and suggestions related to service improvements, which is the best medium for retention of customers. Company use print media ads like The Time ads to promote its products and coffee houses. The main focus of advertising channels is on the promotion of high quality of its products and services. Overall the company is successful in its growth strategies but in 2008 its sales has declined due to its excessive focus on expansion and growth strategies (BBC News Inc, 2011). Social media like Facebook, Twitter, blogs and companys own website is used for creating virtual communities and forums which helps in the management of the customer relationship. Especially, the company website (www.community.starbucks.com) is used for customer feedbacks and suggestions regarding the products and service add-ons that help to keep in touch with its customers. The company also works with communities and sponsor the sports events for the sake of customer relationship management. In order to attract the sports lovers it struck an innovative deal with ESPN for developing sports learning centre. ESPN is famous worldwide among the sports lovers. This collaboration with ESPN further enhances the customer base of Starbucks (Kotler Armstrong, 2008). In order to sustain the huge campaign to attract new loyal customer bases, its needs integrated marketing communication methods. By using this approach, company is able to use various marketing channels at once that also provide most suitable use of advertising budget and resources. The company spent 1.6% of the revenue in the form of advertising and promotion expenses (Starbucks Inc, 2011). Processes The company has used various technologies in its processes and keep trying to improve them. Improvement in the product and service delivery is the main part in the process strategy of the Starbucks. Blue printing techniques like flowcharts and diagrammatic presentations are used for planning and improvement in processes for the customer services, which is based on forecasting, artificial intelligence and simulation concepts (Young Burgess, 2010). The company uses the proactive approach in the change management process of mapping the customer service process. Blue printing techniques are most widely used as feasible service tools in hospitality sector in which Starbucks operates to enhance the customer service experience (Woo Brotherton, 2008). People Starbucks has very good scope in the Europe because European people are coffee lovers. Starbucks is providing them a quality products and services at premium prices that are satisfying their expectations. Management has focused on expansion strategies to reach far in the whole Europe by opening a chain of coffee houses. Young age customers are the prime target of Starbucks. The company also tries to attract old age customers by providing them combination of different products and pleasant environment. Cultural values and attitude of people regarding the coffee provides an opportunity for Starbucks to deepen its footprint in the European market. The demand of coffee houses has increased from $8.9 billion to $10 billion in the Europe (Hilowitz, 2009). The company also focuses on its employees by providing them career development opportunities and training programs. Employees are also the part of its mission statement and considered essential part of the organizational strategy. Physical Environment The pleasant and friendly environment in all coffee houses provides a wonderful experience which helps to attract more customers. Free Wi-Fi access, entertaining music, unique combination of lighting, well mannered and trained employees, unique pieces of art collection and comfortable chairs are the add-ons with one cup of coffee or tea which attracts customers (Khattab et al., 2008). The Starbucks sitting environment is very much supportive to students, readers and researchers that provide a delightful experience. On the contrary, McDonald staff delivers best in class hospitality experience by time management, responsibility, customer service skills, teamwork, and leadership calibre (McDonald Inc, 2012). Social Media and other Marketing Tools at Starbucks Female class is more loyal customer of Starbucks than male where customer profile of company includes professional, educated, and wealthier than average Americans (Kotler Keller, 2009). As customers of Starbucks grow Starbucks experience also matures. Starbucks experience is more exciting to new customer than previous one. Although, McDonald and Dunkins donuts sell premium quality coffee but still Starbucks is preferable option for customer. Schultz never believes in competing with cost competitive coffee houses rather it aims to offer intimate and warm services at its stores. Starbucks lets the consumers believe that Starbucks is the only coffee destination sought by them. In order to meet the challenges of slow down economy, Starbucks had laid down its workforce to serve its cash strapped custome