Starbucks Marketing Case Study

Question 1: Marketing Strategy (1)

The first corporate objective that is probably important to the current management is close of some its stores in the US. In line with this, the company should scale back some of its plans to open other new stores. The other corporate objective has to do with the company introducing new blends, such as Pike Place Roast, so as to revive its location of its initial Seattle store. The other objective is for the company trying to meet its growth promises, but ensuring that it meets good standards for selecting the new stores.

The company should set up stores in places where the traffic is flowing on both streets to ensure that drivers can easily make a right turn to their Java fix, when they are heading to their offices. The company should also increase the number of its stores in those countries that they seemed to be winning the customers faith and heart and continue to focus on expanding internationally. The other objective is to come up with new brands as well as making the drinks by hand, which will excite the customer by the top-notch coffee.

The next marketing objectives for the company to advertise it sell in media links such as Facebook and create good customer relations by getting their feedback about this website. The other marketing objective is for the company to give discounts of certain levels to its customers by winning them back in the near future. Some of the corporate strategies will make the company to realize its goals. For instance, opening new stores and closing the others as well as retaining more experienced employees will lead to production of better products and the achievement of customer value maximization. By opening a website and creating links with customers, it means that the company was able to advertise itself to other new potential customers and retain the other already existing ones (Stones, 2008). Starbucks plans to shutter all the underperforming stores that are serving the company for its growth and continuity. This will give them a good chance of opening new outlets that will serve the company.

Question 2: Research (1)

This research can be best conducted by walking into those already existing company’s locations in the US. In this case you’ll take various information concerning the sales, number of customers walking in, interviewing the customers on their satisfaction. You’ll also test and get the quality of the coffee produced in these places as well as finding the level and experiences the employees have. The research will enable the company to take advantage of the gaps in the market to increase their sales and profits.

I will make use of questionnaires, interviews, consumer preference and satisfaction scales in my research. I will compare the sale revenues in these stores and compare them to the set sales targets and goals. To deliver this data and present it successfully to the board committee, I will make use of graphs, polygons, pie charts and histograms to illustrate my findings. The research can also focus on the best ways the company can take advantage of market automation so that they can effectively utilize the opportunities available in the market. In these delivery methods, I will try as much as possible to illustrate how possible market growth can be realized without necessarily adding new locations in the US. The best methods that I will use to deliver the data needed will be through pie charts, graphs, polygons and histograms as well. This will assist me in explaining my findings. The urban coffee opportunities are well known to have been potential areas of success to the industry (Barbado, 2008). The Starbucks small stores ought to be opened in less crowded areas due to the competition that can come as a result. Researches on the best coffee production ought to be carried out to enable the industry to cater for the needs of its customers accordingly together with the growing competition.

Question 3: Segmenting, Targeting and Positioning (2)

  1. Segmentation of the Market of Coffee Drinkers

The company segments the market of coffee drinkers by considering the different demands arising in different places (Stone, 2008). Due to this the company is able to design some new strategies in meeting the different demands from these categories of consumers. In this case it is able to categorize other consumers in terms of the time they are readily available from their offices and those that are freely around. The company has used, traffic, time and location as a way of segmenting its customers. My point of segmentation is justified since the author tells us that the company is planning to open new stores in places where the demand has shot up and close on those areas where demand is low. Also the company is planning to open new stores in those areas where traffic is high, so to take advantage of the bigger demand. Finally, we are told that the company is planning to open store in some places with regard to the time people leave their offices and can walk in for some cups of coffee.

  1. The company targets and ranks

The three targets and ranks A, B and C may be in the form of traffic or population, consumer preference, and consumer economic class. For population or traffic, the company will segment the customers in terms of those places where there is a big flow of traffic, meaning that it can win part of this big population. For consumer preference, the company will categorize customers in term of what they prefer, and what quality of coffee the demand with the aim of increasing the customer life time value. Finally, the company will segment the customers in terms of their different economic status and purchasing power. Following the slow growth rate at the company and high competition Starbucks has a good strategy of segmenting the market coffee drinkers where it encourages the closing of more estates while accelerating the oversea expansion. The company is well known in roasting and whole bean coffee together with tea and coffee products that are licensed to make the business legal. They are very much determine in focusing on the customers experiences who were impressed by other versions of coffee before Starbucks introduced theirs. The company Seattle’s Best coffee operating segments in the market following the many opened stores nationwide amounting to 40,000 stores worldwide. The stores are well known to cater for food and beverages that no any other store has ever achieved before (Nocera, 2008). Closing store meant focusing on the coffee business in the United States for it to pick up well as per plan. The company handled it segmentation of the market coffee drinkers by introducing espresso that uses a robotic machine to help in the pumping of drinks through the usage of a button. Efficiencies like automated espresso machine was introduced due to the company’s expansion of its food supply to the customers. This led to Starbucks being more of a fast-food restaurant than a coffeehouse; since, it used to provide more food that coffee. The other segment of the company is known to be the Grocery Products Group (CPG) together with the licensed stores segment all working hand in hand for the company’s success. The segmentation type used by the company is to ensure that its coffee sell are well facilitated through the company’s store worldwide. There are purchases and sales done on the whole bean coffee and tea beverages all together.

Question 4: Product (1)

The company has been running a coffee chain with a relatively bigger number of stores in different countries, so as to take advantage of the increasing coffee demands (Stone, 2008). In the case of the different economic classes of the consumers, the company has strategies to make different products, in terms of quality and price, so as to fully meet their needs (Martin, 2008). For this target market, those belonging to the lower class economy, walk into the company outlets and purchase relatively low priced products. For this particular target market, the company has established some products that require some average low costs of production and made give them some quality preparation processes.

Those of the middle class economy are also targeted by the company, in such a way that some products are made available to meet their average purchasing power. In this case, the products sold to them are of a higher quality as compared to those of the lower class economy. The other one includes high income earners who from the higher economic class. The second targeted market is the biggest population and heavy traffic experienced in some areas. This heavy traffic buys a variety of products from the company outlets. To meet their needs, the company has established a variety of coffee drinks and other foodstuffs that are taken with coffee (Stone, 2008). The last targeted market is the rising consumer preference and tastes that the company is experiencing in different regions. To meet this target, the company has come up with ways in collecting the information on what consumers prefer most as well as their changing tastes.

Question 5: Place (1)

  1. ( i) The Positive Aspects of Closing More Locations

In closing down some of its location, it means the company will be able to improve on the quality of their service delivery as well as high quality products. This is because a lot of concentration and other resources, including, time will be directed to left store, thereby giving quality services to the customers. The company will be able to meet the customers demand at the right time (Martin, 2008). For the same reasons, the company will have created a lot of time to respond to the customers’ demands in their existing locations as well as serving them. Finally, the company will minimize part of its operational costs, such as employing more workers and paying rents for the closed premises.

  1. ii) The Negative Effects of Closing More Locations

Some of the negative aspects may include declining of profit margin, since the total number of service delivery will be reduced thereby having reduced revenues. By closing down other locations, it means that the employees at these places will be rendered jobless. This will further create unemployment scenarios. Closing down the outlets will make the customers to move to the other competitors, seeking for their products and services. Finally, this step will destroy the public image of the company, thereby lowering its goodwill.

  1. Making More Alliances

Making more alliances to distribute in distributing the coffee can spoil the image of the company to the public and therefore not the best way. When this method is adopted, there will be of lack of contact between the company and the customer. This means that the company will not be able to directly get the customers’ claim and also they will not get the customers’ feedback.  Also, when this method is adopted, the company will not be able to come up with an effective advertising for product promotion.

 

 

Question 6: Promotion (1)

Promotion has been part of Starbucks’s business strategy right from its inception with the aim of improving their sales. Marketing utilizes unique, innovative, and pedagogical approaches by integration of various techniques that ensures that all marketing elements are utilized (Kerin, Hartley, & Rudelus, 2015). An integrated marketing communications are a necessity so as to lure the customers back to the company, other than the use of billboards. The company has been using the attribution strategy to quantify the influence of promotion impression on their decision to purchase their products. These new methods of advertisements should be particularly targeted the big traffic and the growing population in some regions (Stone, 2008). The new advertisement mechanisms will also target the customers who form different economic classes and difference in preferences and choices of the consumers.

The company should employ the concept of double-loop marketing to ensure that they create a proper interaction with their customers with the aim of understanding their needs. The promotion should be done through the advertising screens, and should be located at places of high traffic and on top of buildings. These screens will be showing some clips of the new products and services offered by the company. They can also show the pictures of the newly designed interior of the coffee premises should be more attractive and attract the traffic and the population in different regions. This will be able to reach all the individuals in the economic classes, since those who don’t have televisions will be getting the information through radios, newspapers and magazines (Martin, 2008). In addition, the company should launch an attack marketing by incorporating a series of creative and strategic technique that ensures that all their potential customers appreciates the value of their products. The company can also engage in lead nurturing by making good use of the social sites, such as Facebook, tweets and integral, to advertise its products. Though the Facebook, the company can have some friends and likes in its products as well, making direct communication with the potential customers. In this site, the company will be able to get the new customers’ preferences and tastes as there are trends in the preferences. Due to the information on customers’ tastes, the company can adjust more effectively towards achieving them.

Question 7: Price (2pgs)

  1. Increasing Prices

When Starbucks takes an action of increasing the prices of the standard and premium drinks by 10 cents and 25 cents respectively, it is likely to face some challenges and benefits at the same time. The increase in prices will mean that the revenue base of the company will increase, since the total sales will significantly be a larger figure. When the company increases the price of its products, then it means that they will be realizing high profit margins. This is because the total sale will be significantly greater than the cost of production, thereby experiencing high levels of profits (Patton, 2012). With increasing sales, then the company will be able to produce high quality products and of high quality relative to their former products. Increasing the prices will also enable the company to survive the negative consequences of inflation and still make reasonable profits. If inflation increases and the company do not increase their prices, they are not likely to make any significant profits.

Some of the challenges the company is likely to face as a result, increasing the prices may include running away from the customers to other cafes. This will mean that the company will experience low sales volume since very few will be walk in for some cups of coffee. Due to the low sales volume that is likely to face the company, then the profit margins will drastically fall. The difference between the average costs of producing the coffee will be minimal thereby leading to very low profit margins.

  1. Reducing Prices

The company may also decide to cut the prices of its drinks for as much as 10 cents up to around 15 cents, so that it can attract as many customers as possible. In choosing this strategy, the company will realize an increase in the number of customers who walk in to get some cups of coffee. Therefore the company will have a lot of savings and make more investments in the future, perhaps by opening other locations.

The process of reducing prices so as to lure customers can also be accompanied by a number of challenges and shortcomings. In reducing the prices for different cups of coffee, it means that the average revenue received in each cup of coffee will have fallen drastically (Patton, 2012. This will further lead to the total profit margin realized by the company, since the difference between the cost incurred in production and the total sales revenue will be minimal. There will be further reduction in the volume and quality of the coffee available for sale in the business premises. This is due to a desire by the company to cut the production cost, so as to realize profits, by producing less coffee that have lower significant qualities.

In my final argument, I will say that the decision taken by the Starbucks in increasing prices of some grades of coffee was the best decision considering the economic environment in which the business operates. This is because through this, it will be able to meet its operational costs, pay the salaries of its employees and produce coffee of high quality as well. This will be due to the increased revenues and profits as a result of price increases. However, increasing the prices of their products should be done with caution since some customers may shy away from their expensive products and opt to go for cheaper alternatives elsewhere.

 

Reference

Kerin, R.A., Hartley, S.W., Rudelus, W. (2015). Marketing 12 Edition. McGraw Hill.

Martin, A. (January 8, 2008). Starbucks Replaces Chief with Chairman. NY Times

Nocera, J. (January 12, 2008). Curing What Ails Starbucks. NY Times

Barbado, M. & Martin, A. (January 30, 2008). Overhaul, Make It a Venti. NY Times

Stone, B. (4th July, 2008). Lax Real Estate Decisions Hurt Starbucks. New York Times

Michael, J. (July 2, 2008). Starbucks Announces It Will Close 600 Stores. NY Times

Patton, L. (Feb 29, 2012). Starbucks to Sell Seattle’s Best at Kmart, Chevron Locations. Bloomberg News.