Consumers provide the economic rationale for business and marketing activity. The products and services offered for sale, the manner in which they are offered, the distribution channels employed, the methods of advertising and personal selling, and every other factor of marketing are all molded by consumer preferences, opinions, habits, beliefs, wants, needs, and desires. In this way, the total business system attempts to meet the desires of consumers. It is essential, therefore, that we analyze the antecedents of consumer behavior, the behavior itself, and the consequences of consumer reactions (Bearden et al 98).
Company Background and History
Starbucks is an international company which operates on the global scale. Its organizational culture is influenced by the multinational environment and socio-economic changes. International staffing and development helps to organise HR in accordance with the needs of the company. On the other hand, there is a positive impact of this culture on organizations expressed in low diversity levels and homogeneous culture shared by all employees. In spite of great criticism, Exceptional service and high quality standards attract millions of customers around the world and help Starbucks create a core of loyal supporters. Starbucks can be regarded as the largest coffee bar chain in the U.S. Being one of the largest in the world, with some 2,600 stores worldwide the company has many stores that specializes on selling products that are all similar in their look. The major task of the business is to deliver the same services as well as the experiences to all people in the world. The aim and duties of the EEO department is to ensure equal treatment of all employees (including training, professional development, coaching, equal pay, etc.) (Starbucks Home Page 2010).
Identifying and understanding consumers
Consumer demographics and lifestyles
For Starbucks, the demographic makeup of the United States is being altered drastically. America is becoming younger. In direct opposition to the slackening birth rate is the burgeoning group of young adults. The 20 to 39 age bracket presents the fastest growing age segment and is expected to increase by 24 percent between 1967 and 1975, when it will account for 28.5 percent of the population. This has great importance for markets, since the 20 to 29 age bracket represents a large proportion of new household formations and home purchases. The 40 to 64 age group, by contrast, will only increase 3.5 percent between 1967 and 1975, and by the latter year the under-40 group is expected to outnumber the over-40 bracket by 61.6 to 54.4 million. Many factors establish the specific decision maker. The importance of the decision is one consideration; place is another (Starbucks Home Page 2010). For instance, if a decision is made in the home, as contrasted with a retail department store, the identity of the decision maker may easily vary. Groups witnessing a decision being made can influence what happens. Also, decision roles outside the home need not be the same as the roles within. Exceptional service is the main priority of Starbucks supported by friendly atmosphere and positive organizational climate. Starbucks gives some thought to how intercultural differences impede or enhance business success. Diversity has a great impact on decisions of managers and is based on removal of prejudice from the organization and the individuals it employs (Boone and Kurtz 21). It has also been acknowledged that the managers of Starbucks have important obligations to a variety of stakeholders and not just the shareholders, and this should be reflected in the organization’s statements of purpose, such as mission statements. “The keystone value in the effort “to build a company with soul” was that the company would never stop pursuing the perfect cup of coffee” (Starbucks Home Page 2010). Starbucks follows conservative Strategy characterized by a slow growth and stable environment. Innovations as a part of organization culture requires participative processes and results in the sharing of information across departments, functions, and organizational levels; team decision making; conflict resolution; and deference to the person with the best idea rather than the most senior title. Many people are struggling to determine the shape of the innovative organization (Crawford 72).
Consumer needs and desires
Not content just to recognize customer wants and needs, manufacturers and retailers attempt to cultivate markets through promotion and information. Through innovation and market communication, they stimulate buyers to redefine needs, shift wants, and increase expenditures and consumption. By so doing, Starbucks has a great effect on economic well-being, since the combined impact of consumer decisions reverberates throughout society. Buyers do not always know why they decide to make a purchase — and even when they do, they may prefer to keep the reason to themselves (Dobson and Starkey 76). Often, more than one reason or psychological motive may underlie a purchase, some of which may be known to the purchaser and others not. Separating the conscious from the subconscious is at best taxing, if not impossible. These policies lead to a unique ideology and philosophy followed by Starbucks for many years. At Starbucks, coffee pricing strategies are perceived in terms of the whole product line rather than in terms of each individual product. For example, some coffee products (including beverages) are priced to engender prestige for the rest of the line rather than to gain their own sales. Other prices (for coffee beans) are set to permit “trading up,” to establish images, or to meet coffee price lines and price points. At Starbucks, price differentials are subject to administration scrutiny and regulation. They are set on the basis of quantity, distribution level, geo- graphic area, and cash payment. Starbucks proposes distribution discounts instituted on a net or list basis according to distribution levels. Quantity discounts are cumulative or noncumulative, and apply to part of a line or a whole line (Dobson and Starkey 22). Basing points, f.o.b. factory, and uniform delivered pricing are issues of geographic differentials. For Starbucks, legal issues, price discrimination can be defended on the bases of meeting competition in good faith, of cost savings in dealing with dissimilar customers, and of promoting and not injuring competition. It is the effect of price discrimination, and not the act itself, that determines legality. Though these legal constraints are significant in establishing price differentials, the realistic guidelines are confusing and the economic consequences are mixed, since price favoritism can actually benefit society. In the USA, both the Federal Trade Commission and the Justice Department are interested in pricing practices, particularly in the administration of prices. In the administration of price differentials, marketing managers must be concerned with legal problems of collusion and price discrimination as well as the impact on sales, profits, and competition. As a result, pricing strategies are adopted that tend to depress or invite competitors, that relate to the payout in research and development, or that generate images of qualities or bargains (Hollensen 66). Companies can decide to have high, low, or competitive prices. Starbucks’ followers or leaders use several bases for price variations: geographical coffee price discrimination (single and multiple points, f.o.b. factory, freight payment and equalization, and zone pricing), discounts and allowances (quantity, seasonal, cash, trade, and advertising discounts), channel and service discounts, guarantees against price, and Starbucks prices over time (Fill, 41). According to organizational analysis, the remarkable feature of Starbucks is ‘monoculture’ which affects all spheres of organizational performance and human relations. Starbucks is often criticized for this strategy that threatens individual differences. Exceptional service and high quality standards attract millions of buyers and create a positive image of the company on the global scale. Starbucks’s pricing strategies are reviewed and overhauled, for they tend to become “baked in” and to mirror traditional approaches, especially in retailing.
Shopping attitudes and behavior
Starbucks Services are becoming a more important part of consumption. A large proportion of products and services are purchased and consumed at a considerable distance from home. Therefore, transport to and from services is significant, and people become increasingly dependent on efficiently organized transportation systems. Many services involve direct contact between the person who furnishes and the person who receives them. Research findings do not clearly establish why consumers react as they do to products and services. Yet findings of behavioral scientists help us to acquire a better understanding of buyer behavior. To date, no iron-clad rules have been formulated. However, the insights, perspectives, and tendencies discussed in the following material should be useful in establishing basic marketing programs that are coordinated with consumer wants and needs. High quality standards create a positive image of the company and allow Starbucks to set premium price for its products. Coffee pricing strategies consider both cost and demand conditions, and the dynamics of markets, thereby accounting for both internal and external variables (Kotler and Armstrong 71). Though the determination of an optimal coffee price is usually impossible, a satisfactory one can be developed by market research. The major pricing decisions at Starbucks include determining prices for each product or service, discount structures, price relationships among coffee lines, and price maintenance levels. Problems encountered in establishing prices relate to the inability to determine costs exactly, the difficulties of dealing with expectations, and the variations in impact of coffee policies on different products in a company’s product line. Marketing aptitude is a critical component of effective price determination (Drejer 98).
At Starbucks, psychological research on buyer behavior has taken many tacks. Some of the approaches have been aggregative, including analysis of total expenditures by consumer as members of groups and total expenditures for different classes of items. Other studies have focused on individual customer decisions, dealing with both static and dynamic models of consumption. Whereas some studies concentrate on behavior at a point in time, others focus on behavior over a period of time. Several investigations have dealt with elementary descriptions of behavior, which are most unrealistic and superficial, but still useful for purposes of analysis. The consumption process is a learning experience that affects and is affected by perception. Perception influences the selection and interpretation of marketing information, symbols, and products (Hollensen 82). Because it affects the expectations of potential results from various customer choices, it is a significant factor in individual and group reaction. In essence, perception determines how marketing reality is interpreted and thereby influences the consumer. Buying runs the gamut from habitual, routine purchases, which involve little planning, to such purchases as houses and automobiles, which require deliberation and evaluation over a considerable period of time; from purchases initiated by the buyer to those initiated by the seller; from purchases where powerful, logical, and rational motives exist as in some industrial situations, to purchases where more emotional motives are the dominant force, as in such consumer goods as perfumes. The reasons for making purchases vary among buyers. Such features as status symbols, prestige, utility, economy, price, service, and warranties may appeal to different segments of the market (Drejer 98).
In a free-enterprise economy, consumers are relatively free to purchase what they please, limited, of course, by income, socio-economic status, legal business forces, and geographic setting. Manufacturers, wholesalers, and retailers thus find that ultimately they are governed by consumer reactions in the marketplace. In a sense, consumers “dictate” to the marketing system the goods and services they want, the prices they are willing to pay and how, where, and when they desire to purchase. Over time, profits are tied inextricably to the satisfaction of consumer wants. Environmental forces and the existing business system together are critical factors shaping marketing organization. A balanced state of adjustment must be reached between them. Even though company environments establish conditions that marketing organizations and behavior must fit, internal and external organizational balances can be achieved. Internal adjustments occur through changing authority-responsibility relationships and departmental structures. External adjustments occur through the marketing mix and through the distribution network (Dobson and Starkey 31).
Information Gathering and processing in retailing
Translating marketing information into research requires three related general functions: surveillance, assessment, and prediction. Surveillance refers to the ways in which marketing activities are placed under closer scrutiny. This activity consists of observing the reports of marketing occurrences, discerning patterns and deviations from standards, and trying to make sense out of them. Surveillance serves two ends: it indicates likely trends and changes in the marketplace and then suggests what must be known and done to meet the changes. Starbucks assessment attempts to evaluate more specific knowledge of particular opportunities, or competitors’ capabilities and vulnerabilities. Knowledge of strengths and weaknesses of specific competitors supplies the basis for developing one’s own marketing strategies and programs. Predictions provide a dimension of futurity that makes research relevant for planned decisions (Drejer 11).
Information flows in a retail distribution channel
Marketing research results from a systems approach to collecting, interpreting, and utilizing all information bearing on marketing problems. As a staff function, it serves executives by gathering significant facts and providing the proper information to facilitate their decisions. It influences and shapes policies and decisions by surveying and scrutinizing situations for which appropriate actions are required and objectively exploring alternative approaches to them. Top management’s concern is future markets, future survival, future growth, and future profitability. Today’s decisions have sharp impact on tomorrow. Yesterday’s action is valuable only for its illumination of the morrow. As companies become larger, then business systems grow more complex, management teams expand, companies tend to become further removed from market developments, and thus, the management of information, particularly marketing information, requires greater emphasis. This results in the development of centralized information centers. Fast, pertinent, and complete information links management on a global basis, exposes more areas to decision makers, and facilitates rapid adjustment and successful innovation. It does not, however, imply centralized decision authority (Hollensen 31). Maximization of profit is directly related to marketing research. Profit maximization depends on accurate prediction of potential markets, and the translation of research into effective marketing programs. Research is based on experience, experimentation, trial and error, and hypothetical information; and facts are not enough. The hypothetical feature is vitally necessary — it depends on the preparation and development of alternative strategies derived from “what if” reasoning. Marketing research helps to indicate what changes in present situations may mean for the future and how a company can influence its market destiny. It induces innovative and risk-taking possibilities. By anticipating future situations, it guides present actions, which in turn shape the future. But marketing research must not only concern itself with problems of the immediate future, such as the advertising campaign for next year’s sales; it must deal with long-range problems as well. Intermediate and long-range marketing research is a basic requisite for planning and decision making (Kotler and Armstrong 332).
Avoiding retail strategies based on inadequate information
Through its insights into risks and opportunity, marketing research can be used to redirect corporate effort to more profitable objectives. By anticipating changes and treating them as opportunities, it often leads to a redesign of marketing strategy, to development of longer-range perspectives, and to cultivation of a viewpoint of what can be done to adjust the Starbucks corporate effort. Descriptive research deals with knowledge of people and the market at a given point in time. Basic to reportorial and speculative research, it forms the background that gives meaning to other research. Reportorial research furnishes knowledge of the scope and directions of modalities of change. Speculative and evaluative research refers to the marketing information a company requires to be forward looking and prepared for the future. It is concerned with such things as future competition, market forces and present competition, courses of action, and the countercourses likely to be initiated by others. Speculative and probabilistic, this sort of information demands good evaluative and reasoning skills. Marketing research may also be aggressive or defensive. Aggressive or offensive research is basic to the development of a thrust or change in strategy to enhance company position, such as the research gained from market experiments concerning a proposed new product. Defensive research, by contrast, is designed to protect, secure, and maintain company positions-to ward off competitive threats. Internal research is easier to gather than either position or environmental research. It is research about internal company operations (Dunne and Lusch 43). Given good data-reporting systems, executives should have adequate knowledge of finances, personnel, inventories, production capacity, and company position. The company can control these factors through time. An appraisal of the impact of the interaction of internal forces on the external environment furnishes guidelines for profit assessment. Environmental research assesses trends, developments, and opportunities. Concerned with the firm’s external environment, it evaluates the impact of such forces as competition, international developments, technological changes, and political and socioeconomic factors. These forces establish some of the constraints on corporate opportunity. Position research derives from analysis of relative data concerning market and industry position. Through such analysis, management is able to gain a good view of the company’s relative costs, profits, and rates of return — its position in the industry and marketplace. This research relates to all aspects of the marketing mix as compared to competitor’s situations. It results in statements about the relative effectiveness of advertising, the relative efficiency of salesmen, the relative profitability of product lines, and the best channels of distribution (Dobson and Starkey 76).
The retail information system
Internal, environmental position research gives Starbucks managers a good basis for evaluation and developing projected research, which is concerned with future constraints, variables, and possible marketing strategies that may apply to a company. These factors are interrelated, and a consideration of their combined future impact is a basis for forecasts. Decision research builds on projected research and relates to the future. Linked to internal position and environmental research, it results from a consideration of future plans, programs, organization, and control. It invokes the “what if” speculation and sets the pattern for future marketing commitments (Dobson and Starkey 52). Four dimensions for evaluating specific information systems that yield research have been identified: information; information aggregation; analytical sophistication; and computer authority. Information refers to the time lapse between the occurrence of an activity and its description in the information system. Aggregation refers to the detail of the information in the records. Analytical sophistication refers to the kinds of models or structures used in handling the information, and forms a spectrum from retrieval, aggregation, arithmetic, logic, and statistical learning to simulation. Computer authority is related to the degree of analytical sophistication. Marketing research involves more than machine systems and accounting and statistical information. Decision makers themselves are important components of marketing research systems. The rapid feedback of information on market conditions must be tempered by the analytical skills and judgment of management. Dealing, as it does, with future customer demand, this research depends on the value judgments of executives as well as the data processing capacities of the company, but unless it suits a company’s decision climate, it is utterly useless. The marketing research system consists of five major activities (Drejer 66). Three of these cover the acquisition and analysis of information; the other two relate to the use of information thus obtained. The marketing data system furnishes the grist for the research mills. This raw material consists of facts, attitudes, opinions, observations, and experiences. Through a process of sorting, classifying, indexing, excerpting, and verifying the data, we go from the mere gathering of data to the acquisition of information(Dobson and Starkey 44).
The marketing research process
Starbucks is purified with marketing data but has relatively little marketing research. Their task is to convert the data into marketing information, which then furnishes the basis for the marketing research required for keener decisions. A marketing data system generates unrelated and unorganized data. These include facts, opinions, motives, observations, and experiences that may throw light on markets and marketing activity. Not all these data are necessarily factual or useful, however. Upon their receipt, data must be subjected to preliminary evaluation (Drejer 122). Those who collect data, marketing researchers, statisticians, motivation researchers, and operation researchers, must assess their findings as to the reliability of techniques and the source of the information. Researchers are in the midst of a data-and-information revolution, and with the increasing use of computers and quantitative techniques, more adequate and timely information will be furnished that will intensify the pressures on executives to analyze and interpret data. New cash registers called “data-capturing devices” have been developed that punch rolls of coded tape that can be fed to computers to produce reports on fast- and slow-selling items, sales, and inventories. Executives are able to obtain information on their wine and liquor sales across the country by pushing buttons. Brokerage houses and airlines use similar systems. Two kinds of information are necessary: past and future. Past information is factual, whereas future information is assumptive or conjectural. Future information is derived from past information by applying sales-forecasting techniques and other predictive tools. Future information and the possible implications of past information are the bases for marketing research.
The analysis of and its marketing activities show that through this primary analysis, data becomes marketing information. Marketing research may be gained from marketing information by interpreting, evaluating, and collating the data collected. Not all information becomes research, however. Only through the recognition of information patterns and deviations may research be gleaned. To apply marketing research to problem solving requires that it be put into usable form in the development of strategies and tactics. Then, through reports, policies, plans, programs, and decisions, marketing research is disseminated for use. Often this dissemination occurs through reports on market potential or profit.
Bearden, Wird. O., Ingram, Thomas. N., LaForge, Curtis L.W. Marketing, Prentice Hall, 2004.
Boone, Louis.E., Kurtz, David.L. Management, McGraw-Hill, New York, 2002.
Crawford. Merle. New Products Management. Irwin-McGraw Hill. 7th edition, 2006.
Dobson, Paul, Starkey, Ken. The Strategic Management: Issues and Cases. Blackwell Publishing, 2004.
Dunne, Patrick. M., Lusch, Robert. F. Retailing. South-Western College Pub; 6 edition, 2007.
Drejer, Anders. Strategic Management and Core Competencies: Theory and Application. Quorum Books, 2002.
Fill, Chris. Marketing Communication: Contexts, Contents, and Strategies 2 edn. Upper Saddle River, NJ: Prentice Hall, 1999.
Hollensen, Svend. Global Marketing: A Decision-Oriented Approach. Financial Times/ Prentice Hall; 4 edition, 2007.
Kotler, Phillip.,Armstrong, Gary. Principles of Marketing. Prentice Hall; 11th edition, 2007.
Starbucks Coffee Company. 2010. Web.