The COVID-19 pandemic has presented businesses with far-reaching consequences. Only with effective operational strategies that businesses can remain afloat. Starbucks is a company that requires consumers to visit their premises for services and products offered. With lockdowns and quarantines, however, this business model lacks continuity during a crisis. Delivering to customers, however, can allow the company to continue doing business and the consumers to enjoy their coffee.
The emergence of COVID-19 has presented businesses with a new challenge of business continuity. Governments across the world have implemented response measures, including lockdowns, quarantine, and business closures. In such situations, firms have a choice to make, which involved innovating to gain continuity or remain the same and suffer hefty financial losses. Smaller businesses have been quick to adapt and to take advantage of the gaps created. Larger corporations are also finding new ways of doing business to help avert the adverse effects of COVID-19. Starbucks is a large entity, which may find it hard to offer new services.
However, coffee subscription services are discussed in this report as the best solution to address the outcomes of COVID-19. As a new service, the coffee subscription will entail customers ordering online and the company delivering the orders to the customers. A few companies are offering the same service, but it is considered an innovation for Starbucks. The current online services include online orders and payments, but customers have to travel to the company’s facilities for pickups.
Market research and analysis can help understand external factors that can support or hinder new service development. PEST analysis is one of the tools used for this assessment, which is an acronym for political, economic, social, and technological factors (Leyva-Vázquez and Hernandez, 2018, p. 1; Alwaleed et al., 2019, p. 4; Bsak et al., 2020, p. 91). The introduction of a new service that involves the delivery of products to consumers will be subject to these four elements. The PEST analysis for Starbucks is summarized in 1 below, showing how each of the PEST elements affect the company.
|PEST Elements||Effect on Starbucks|
The pandemic has shaped the political climate of the United States, especially with the elections just concluded where divisions persist about lockdowns and similar government measures. The current political climate remains uncertain until the new president gives Americans a new direction regarding the handling of COVID-19, including new guidelines for doing businesses (Gostin and Wiley, 2020, p. 2137; Sheth, 2020, p. 280). However, companies such as Amazon are still operational, including their delivery services. Therefore, the current political environment can allow Starbucks to sell its coffee and other products through online orders and payments and delivery to consumers.
Economic factors are concerned with those aspects of the external environment that affect corporate operations in a country. First, the coronavirus pandemic has slowed down business, meaning many firms cannot operate at full capacity. Issues such as reduced labor force, layoffs, and social distancing affect both the workers and customers. Second, there is competition from entities that have already established coffee delivery services in a new business idea known as coffee subscriptions. Such competition majorly comes from Trade Coffee, Bean Box, MisoBox, Atlas, and Angels Cup (Rabideau, 2020, Para. 1-3; Gilbertson, 2020, Para. 13). With high competition, the profitability of a new service cannot be ascertained. Lastly, many people have become jobless and demand for several products and services may have declined drastically.
In terms of the social environment, it can be argued that Americans are ardent consumers of coffee. Therefore, a business offering delivery services will most likely be welcome among all Americans. Technology is the most important factor in this PEST analysis framework. The argument is that the new service will require the implementation and utilization of new digital technologies. The United States is one of the most developed countries where online businesses thrive. Starbucks already has such a platform, and the proposed new service is only an extension of the online orders and payments to include delivery.
Many businesses use certain services to add value to either their products or other services. Value addition in the service industry can be described as a systematic integration of selected supply chain processes to deliver maximum value to the consumers (Kashav, Singh, and Shabani, 2017, p. 117). In the food supply chains, value addition has been defined as the ability of the firms to change the current time, place, and form to more preferable features in the market (Cucagna and Goldsmith, 2017, p. 295).
Therefore, coffee subscription plans or coffee delivery would add value to Starbucks’ products by changing the place of pickup to doorstep delivery. The consumers’ movements are restricted due to the COVID-19 pandemic (De Biase et al., 2020, p. 1; Keane and Neal, 2021, p. 86; Studdert and Hall, 2020, p. 102). However, the movement of drivers observing strict safety measures offers the best alternative. Additionally, delivery is a better option than closing stores because of the lack of customers. Therefore, the value addition to Starbucks is in the form of business continuity during a crisis.
New Service Development
Services can be described as processes that tend to take the consumer through a journey. According to Häyhtiö, Harjanne, and Rajakangas-Tolsa (2017, p. 79), services are also defined as processes that are made by the producer and simultaneously and consumed by the buyer. Therefore, developing a new process will require the management to understand the contact points to help establish the critical areas of service delivery. The preparation of coffee in Starbucks can be seen as the broader service that comes with coffee products.
Currently, the contact point between the company and the consumer happens at the pick-up point after the buyers have placed and paid for their order. The new service, however, requires a new point of contact, which will be on the consumers’ premises. New experiences will need to be created, which includes packaging, cleanliness, safety, and other services that can also add value to the new service.
The enablers of the new service development process are people, technology, and systems. The people are the employees in contact with the consumer and who package the services in a manner that creates value. The delivery service at Starbucks will heavily depend on both those preparing and packaging coffee and other products for delivery. Most importantly, however, the delivery personnel will determine how much value the clients can get from the services. Aspects such as delay can ruin the new service in the same way that poor packaging and quality can. The current technology in use at Starbucks can still be used for online orders and payments.
However, newer technologies, including tracking and location identifiers, could help the drivers with navigation during delivery and shipping. Lastly, the systems can incorporate those activities performed as a series of steps to accomplish a goal. New systems for the novel service may need to be developed and implemented at Starbucks. The current systems allow for services to be offered in the company’s stores and other premises, which would not be suitable for the different contact points.
In a highly competitive business environment, firms can compete on many fronts. Value based marketing is based on the notion that a firm’s competitive advantage is derived from offering superior value (Classen and Friedli, 2019, p. 1). Therefore, it can also be argued that the growth of a company depends on its volume or breadth of opportunities that can be used in value addition for its buyers (Mawdsley and Somaya, 2021, p. 2).
Value based strategies can be implemented in marketing efforts such as pricing, which can be defined as the degree to which the pricing decisions account for how the consumers perceive a product or service (Kienzler, 2018, p. 86). The most important aspect of value based strategy is that the buyers positively perceive the value of their purchases, in which case they will be willing to purchase at the set costs.
Value based strategy for Starbuck’s new coffee delivery service can help sustain sales during and after the pandemic. The value of the service can be derived from timely deliveries and packaging the coffee to suit consumer needs. Currently, the customers are used to getting ready products served at the company stores. While this type of service may not be possible, especially delivering hot coffee, new approaches can be used to allow the consumer to make their drinks at home. Simplified procedures can be offered to make sure the consumers are not troubled and that they can derive as much value as the previous services and superior to those of the available coffee subscriptions.
Service Marketing Mix
Promoting services can be different from promoting physical products because of their different nature. The characteristics of services, which include intangibility, perishability, heterogeneity, and inseparability, mean that additional promotional considerations will be needed (Grădinaru, Toma, and Marinescu, 2016, p. 312). The marketing mix for services comprises seven elements or the seven Ps (7Ps), which are product, place, price, promotion, people, physical evidence, and process (Othman et al., 2019, p. 866; Rathod, 2016, p. 206; Loo and Leung, 2016, p. 85). The product is the service being offered to the consumers.
At Starbucks, the new service is the delivery of the coffee products to allow customers to access coffee daily. Price is concerned with how much is charged for the service and the element which offers revenue generation to the business. Delivery charges can reflect on the overall prices of the coffee products, especially because new packaging requirements and transportation equipment may be needed to achieve this service.
Place is often used to refer to where the products are offered. However, this notion cannot apply in service marketing as service features differ from those of tangible products (Rathod, 2016, p. 207). However, the point of service can be used to imply where the service is offered, in this case, at the consumers’ premises where the coffee is delivered. Promotion pertains to the communication used by marketers to inform buyers regarding the service.
The information is conveyed through public relations, advertising, and sales promotion. With the emergence of the internet and social media, promotion becomes simpler and more efficient as the messages can spread quickly to cover huge populations. A simple tweet by Starbucks will reach millions within a few days meaning its customers will get informed regarding the new service.
Another element of the 7Ps is people, which entails the employee offering the services to the consumers. Effective marketing requires that the workers are effectively trained to handle clients. At Starbucks, the people directly handling the consumers are the delivery personnel. However, those undertaking activities such as packaging will also influence consumer experiences, and they should also be well-versed with the needs and expectations of the customers. The fifth component is the physical evidence, which implies the physical environment.
In this case, the physical environment does not comprise the enterprise facilities as they are no longer used by customers. However, the delivery vehicles and related facilities can be regarded as the physical evidence for Starbucks’ coffee delivery services. Lastly, the element of the process entails the sequential method through which value is created. The new delivery service is not a stand-alone service because it needs supporting services such as coffee preparation and packaging. The new process will include steps such as orders, payments, preparation, packaging, and delivery.
Managing services will require a wide range of skills. For Starbucks, the most important ones include people skills, processes, and planning. Dealing with customers means that a service manager will need to understand the buyers and effectively respond to their concerns. Such skills will be needed for all those directly contacting the consumers. Process skills are necessary because the new services result in a major change in the company’s operations. New steps are added, and the manager needs to make sure they are completed efficiently. Lastly, planning is the key to accomplishing the delivery of new services. Several aspects will go into the new service, including logistics, roosters, and resources. Skillful planning will have the effect of delivering high quality services.
New service development can be a sensitive issue because of the financial and other implications. Consumers need to feel that they have gained value for spending on a new service. Additionally, innovations in services may not take long before they form new consumer expectations, meaning that continuous innovations are necessary. The new service recommended for Starbucks is coffee delivery, which is similar to the coffee subscriptions currently available in the market. The COVID-19 pandemic has kept people away from the stores, and the delivery services offer value for both consumers and the company by enhancing business continuity.
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