Marketing Management of Starbucks Coffee Sellers - Free Sample

Question: Discuss about the Marketing Management of Starbucks. Answer: Introduction Starbucks is one of the leading coffee sellers in the world. The company believes in serving the best quality coffee that is available out there. It aims to use coffee that is grown under the best climatic conditions and to obtain it using ethical sourcing practices. The company has its own coffee roasters that help to ensure that the coffee is of the highest standard. The coffee outlets opened by Starbucks are characterized with a very welcoming staff, comfortable seating and excellent beverages. The company has its outlets all over the world that gives the brand an international recognition. It offers a range of products that include more than thirty blends and single-origin premium coffee, handcrafted beverages, merchandise like brewing equipment and mugs and consumer products like coffee, tea and ready to drink beverages like iced coffee. Starbucks is also known for its amazing work culture, ethical sourcing, environmental stewardship and community involvement. Starbucks believes in treating its employees as their partners and not their subordinates. The company aims to ethically source the best quality coffee. This process involves responsible buying practices, forest conservation plans and supporting farmer loans. Starbucks is well aware about the importance of environment and is constantly working towards environment preservation using techniques like recycling, energy conservation and reforestation. Additionally, the company is encouraging community involvement by employing a large number of people from the local community (Starbucks Corporation, 2017). The report contains detailed analysis on the marketing strategy of Starbucks that includes information about the 8 Ps of marketing, competitor analysis and the evaluation of its marketing strategy. The major challenges faced by the company are also stated along with some relevant recommendations. The main aim of the report is to get an insight in the marketing strategy of Starbucks and find loopholes. The recommendation section helps to fill the gaps in the current strategy in order to increase the overall profitability of the company. Marketing Mix The marketing strategy of any organization revolves around the famous 8 Ps of marketing which include Product, Price, Place, Promotion, Physical Evidence, Process, People and the recently added Productivity and Quality. Starbucks is one of the leading coffee brands in the whole world. While developing its marketing plan, Starbucks gives a lot of importance to its product mix. The company positions itself in the market by bringing creativity in its products and by using the best quality coffee available out there. Since, coffee is a perishable product with limited shelf value, Starbucks monitors every step of the coffee production process. The company roasted the coffee obtained from Kenya, Costa Rica, Ethiopia and Sumatra, in its own plant and eventually sold the same in their coffee shops. Additionally, Staarbucks is constantly innovating its existing products and adding new products to its menu (Bhasin, 2016). The additions include tea, a variety of small snacks and a number of hea lthy products for the diet conscious segment of customers. The company pays a lot of attention to the seasonal demand and social trend while making changes to its product mix. For instance, the gingerbread latte became everybodys favorite drink in the Christmas season. Starbucks offers more than 1000 variants to its customers across the globe. The stores also sell coffee makers (Boychenko, 2012). Price plays a key role to decide how popular and unpopular a product will become among the customers. It is very difficult to price the products perfectly, but there are several factors that could help determine the optimum price. Starbucks is often perceived to be an expensive brand since the company spends a lot of money to obtain best coffee beans and train its staff. These expenses clearly reflect in the companys products price. However, in order to maintain competitive edge, Starbucks introduced a $1 bottomless cup of coffee, which has two benefits; it was cheaper than its competitors price and the customers could refill it as many times as they wanted. The company also launched some breakfast and coffee combos at cheap prices to attract customers. The menu of Starbucks has a combination of medium and high price products, but the company justifies the higher prices through comparison. The company believes that the customers would not mind paying higher prices if they are offered premium products. The pricing mix of Starbucks is mainly based on this belief (Greenspan, 2017). Starbucks focuses on developing a personal relationship with its customers and hence has a direct supply chain from the producers to customers. The company has a major global presence. In the USA, Starbucks is a very common name and the company has its stores in all neighborhoods. It has opened several coffee bars all over the region. The company is trying to localize itself by opening outlets with the relevant streets name rather than the companys own name. This provides a local touch to the international coffee brand and increases the brand loyalty. The company also wants to give their customers the best coffee shop experience ever and invests a huge sum of money in training its staff to do so. Starbucks also uses more than one channel of distribution which maximizes the companys presence. It not only sell its products in self-owned stores, but also through a direct retail system. Additionally, Starbucks has tie-ups with several hotels and airports with the aim of serving a wider c ustomer base (Laos, 2013). When it comes to the promotion, Starbucks was not investing a lot of money in this segment of its marketing plan initially. Due to rise in competition, the company started indulging in various promotional activities. The company invested a lot of money in conducting promotional campaigns in places where it was opening a new outlet. These campaigns involved using methods like printing information on tee-shirts and mugs. The company also joined hands with local representatives to become the brand ambassador for the company and promote the brand. This attracted a lot of new customers. This technique was also known as smart partnerships. Additionally, Starbucks introduced gift cards as a promotional scheme for their customers. This increased brand loyalty among its customers. The company partnered with several corporate offices to provide coffee without any size restrictions. It has also been using the technological advancement as a great opportunity in its promotional activities. The St arbucks app allows the customers to earn points every time they spend money at the outlet and these points can be redeemed after one point. Also, the company is using social media platforms like Facebook to keep their customers updated with its new products and offers (Thayyil, 2014). Starbucks believes in the concept of treating its employees as its partners. If the people working in the company are happy, they will give their best and Starbucks is well aware of this fact. The company spends a lot of money and effort to provide its staff with the best possible training which involves coffee making, serving and tasting. The company also supports diversity in its workforce. As it is an international brand, it welcomes people from different regions, color, caste and creed to work for the company without any personal discrimination. The company also employs a lot of young people as it offers flexible work shift to students who can only work part time. Overall Starbucks provides a very motivating, friendly and open minded work environment to the people working for the company (Hammers, 2003). Starbucks gives a lot of importance to the whole process of getting the coffee beans, roasting the beans and finally serving it in their outlets. Quality of service and quality of coffee are the two key points of focus of the company. The company realizes that the customers do not really pay attention to how Starbucks is obtaining coffee, but what they care about is the process that makes the coffee reach them For instance, the customers hate to stand in long queues in the process of buying their coffee. Hence, Starbucks pays extra attention to this issue and focuses on minimizing the wait process as much as possible. To attain this, the company is making use of technology that allows touch payment rather than having each customer enter their pin. This saves a lot of time overall. Another step towards quick payment on the counter involves paying directly though iPhone, which is also known as Apple pay. Physical evidence implies to that part of the marketing plan in which the customers can physically experience something which makes them like or dislike the products and services. Hence, everything that the customer can see and touch forms the perception about the company and everything it does. Starbucks aims to provide its customers with the best coffee experience and plans to do so not only by providing good quality of coffee, but also good ambience where the customers like to drink their coffee and have a great experience. In order to provide this experience, the coffee outlets have comfortable seating arrangements, smiling staff, book shelves and good food shelf presentation (Dias, 2016). The productivity and quality, has recently been added to the list of the 7 Ps of marketing as an 8th factor of the marketing plan. This point focuses on improving the overall product quality and company productivity. The productivity is considered in terms of both manpower and machinery. Starbucks aims to make the most of its employees by providing them extensive training and good work environment. The company also aims to improve the quality of its products and services by constantly innovating its offerings and analyzing customer feedback. Evaluate Marketing Strategy and Competitors Starbucks main competitors in the coffee beverage industry include 7-Eleven, Dunkin Donuts, Caribou Coffee and McDonald's. These competitors dont only have a wider choice menu than Starbucks, but also has the financial resources to strengthen their position in the industry. These players can easily eat into the market share of Starcbucks. Dunkin Donuts is a globally renowned donut and coffee retailer. It was founded by William Rosenberg in Quincy in the year 1950. Even though the company initially focused on baked good and donuts, more than half of the companys current sale constitutes of coffee making it a major threat to Starbucks. In addition to Dunkin Donuts, McDonalds is another strong competitor of Starbucks. McDonalds successfully upgraded its drip coffee and set its foot into the world of lattes. The restaurants owned by the company then started serving mochas, lattes espressos and cappuccinos each with different flavors and milk. These coffees also cost as much as 50 cents l ess than similar options at Starbucks, which can threaten the pricing strategy of the organization (Sekara, 2016). The success of marketing strategy highly depends on identifying and targeting the right customer and positioning the product correctly in the market. Starbucks is a very well known coffee brand across the globe, but certain flaws in its marketing strategy adopted by the company in Australia led to its failure in the country. First, the company assumed that its brand power would be enough for it to attract Australian customers. Even though Australia witnessed a strong coffee culture throughout is geographical region, but the company failed to understand the countrys coffee culture (Stier, 2017). The company wanted to be the Premium Coffee Supplier in Australia like it was being in the rest of the world, but they did not optimize their products according to the taste and preferences of the Australian customers and tried to tell the people of the country how to drink coffee which was a major drawback in its marketing strategy. Also, the company highly underestimated the power of its riv als in the region. Australia was a country of mature coffee culture which was evident from the cafe culture of the country (Lehnert Gore, 2010). Starbucks overestimated its brand power and completely overlooked the coffee trend of the country which led to the wrong positioning of the product. It wasnt a big enough brand to gain popularity via word of mouth and its inability to realize the importance of positioning and promotion in Australian market became the reason for its not very successful business in the country (Team, 2014). Contemporary Issues Major contemporary issues faced by Starbucks are Increasing Prices of its Products, Higher Wage Payment and Rising Price of Coffee Beans. During the years between 2014-2016, there were four major price hikes in the products offered by the company out which two happened in 2016 itself. This rise in price is owed to hike in the price of coffee beans and wages. In order to protect the companys operating margins, the company has been increasing the price of its products This is a major issue for the company. No matter for how long the customers decide to stay loyal to the brand, but if the company keeps increasing the price of its products like this the customers will switch to the competitors in no time (Trefis Team, 2016). The increase in the federal minimum wage has had a negative impact on Starbucks and its profit margins. The rise in the amount of wage has consequently contributed to the increase in the companys end product. Also, the coffee industry is witnessing a constant increas e in the price of coffee beans. Starbucks aims to use the best available coffee beans available in the industry, which ultimately makes the company pay the highest price for the coffee beans. Due to the increase in the demand of coffee beans, the suppliers are charging higher prices to the companies. These factors have become a major issue for the company and are negatively affecting companys profit margins (Cameron, 2008). Recommendations Some of the recommendations are mentioned below in the form of points: - Starbucks should develop a focus-based strategy that includes cost leadership and differentiation. The company should try to attain cost leadership in the industry by lowering the price of its products. This will attract more customers to the brand and help it to gain competitive advantage. Also, since the competition has increased in the coffee business, Starbucks should aim at innovating and specializing its products to have an edge over its rivals. The company should also promote its products by offering special discounts and seasonal offers to its customers. Since the company is perceived to be charging very high price, such discounts and offers will grab the attention of the customers readily and encourage the people who usually stick to cheaper coffee shops, get the taste of the Starbucks coffee. There are good chances that these new customers will switch to Starbucks even when the promotional offers are over. This will increase the overall customer base of the company (Shahi, Aufschlger, Schmerling, Gassner, 2007). Starbucks should also invest more money and time in advertisement campaigns. The advertisement platforms can vary from technological areas to road shows and handouts. This will help the brand to gain more popularity among the consumers. The company should particularly incorporate social media in its advertisement campaign due to the increase in the popularity of these sites lately. Some famous sites that Starbucks can use include Facebook, Instagram and Twitter. The number of internet users is increasing every day so this will allow the company to cover wider customer base than any other traditional advertisement techniques (Brook, 2016). Starbucks must adopt twin policies of Product Development and Product-Market Diversification to counter the stiff competition in international markets. It is important to understand this in the product development phase as they would need to focus solely on making their existing products better. The company can demonstrate product and market diversification through research and development coupled with creativity and innovation. Product differentiation has proven an excellent defense against threats such as bargaining power of buyers. Developing new products will offset such potential risks. A strategy should be formulated to tackle the competition by entering into agreements, long-term contracts, with the food service companies that they are competing against. This way their coffee would be sold at these outlets and they would gain access to new markets and increase sales while decreasing competition. Conclusion Even though Starbucks is a big brand all over the world, yet the company has not been able to exploit all the opportunities available in the industry. Since the competition in the coffee industry is rising at a fast rate, the company should not only focus on retaining its existing customers, but should also aim to attract the customers of its rivals in order to increase its market share. The set of recommendations provided will help Starbucks to improve its marketing strategy and increase its customer base. The company should pay extra attention to Australia since the business was not very successful in the country despite the company's strong brand image. Starbucks is already a key player in the coffee industry and can continue to hold this position by making some changes in its marketing strategy based on the recommendations mentioned in the report. References Bhasin, H. (2016, December 01). Marketing mix of Starbucks. Retrieved from https://www.marketing91.com/marketing-mix-of-starbucks/ Boychenko, M. (2012). It's Not Just Coffee, It's Starbucks . Retrieved from https://thecoffeeteam.blogspot.in/2012/02/3-more-ps.html Brook, B. (2016, September 30). Starbucks coffee is quietly expanding in Australia after humiliating retreat eight years ago. Retrieved from https://www.news.com.au/finance/business/retail/starbucks-coffee-is-quietly-expanding-in-australia-after-humiliating-retreat-eight-years-ago/news-story/b7f136c4d78f24aaa600a3822b1e31b4 Cameron, L. (2008, December 01). Top Challenges Facing Starbucks. Retrieved from https://lindsayecameron.wordpress.com/2008/12/01/top-challenges-facing-starbucks/ Dias, N. (2016). 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