Starbucks has engaged in some promotion strategies in its coffee and beverage business to emerge as a global market leader which in turn has strengthened its brand name recognition internationally. In a bid to stamp its authority in the global beverage market, Starbucks has embarked on a varied range of aggressive and innovative strategies. Some of these strategies have included:
Strategic positioning of stores
One of the most creative of these has been positioning her beverage stores in high traffic areas such as hotels, up-market grocery stores, and food courts (A competitive strategy for Starbucks, 2009). This has helped enhance the ability to capture the attention of the customers who frequent these stores, an idea that has been quite successful.
The globalization strategy
The company is now giving much attention particularly to the Japanese market whose income has been increasing steadily. This is expected to increase its clout in the Asian –pacific market thereby increasing its sales volumes and revenues. In addition, the company has undertaken to take advantage of the growing interest of the European market in the coffee products from America.
To cut out a sizeable market share in the grocery market using its whole bean and coffee segment, the company has entered into alliances with various market players who include New York Times, Tazo, Pepsi co., Apple and MSNBC. These are expected to aid in distribution of the company products across the globe. The process is expected to achieve reasonable gains given that these affiliates are renowned global players with international reputations.
Television and online advertisements have been integrated to facilitate the promotion of the company’s product proposition in the market. To achieve this, the company came up with a variety of catchphrases and slogans that were integrated into television advertisements. For example, the grab-and-go lunch promotion was one of those ideas that spurred the growth of the chain helping it gain a sizeable market share. Another quite successful idea is the “let’s do lunch at Starbucks promotion” that has been incorporated with television advertisement thereby helping the chain to expand its market share considerably. The lunch promotions have been expanded from large stores into the smaller stores in the suburbs with high human traffic. This has been integrated with local tastes and flavors along with the sale of coffee in the early morning hours.
Integration of the Marketing Mix
Incorporation of market research
Starbucks has employed market research in its operations to help improve the product offering and service delivery within its chain. This was implemented by using pamphlets that were placed at chain stores where customers could share their views on their shopping experience (Tewell, Odom & snider, 2006). They have also embarked on mystery shopping strategy often referred to as customer snapshots to evaluate the performance of their partners in service delivery in the stores. This has especially been employed to assess customer care, the quality of products, and the speed of service delivery.
The store offers a variety of products ranging from beverages, bakery items and light lunches which include salads and sandwiches. By offering a wide variety of products which include light lunches and a variety of items, they put themselves way ahead of the rivals in terms of promotional advantage.
Good customer care service plays a pivotal role in the promotions of any company’s product range. In order to build a huge base of repeat consumers, loyal customers and increase customer retention rate, the chain has embarked on revamping its customer service using its long in-house experience. All-Star bucks stores have information desks that act as resource centers about coffee to their customers (Kembell, Hawks, Kembell, Perry, & Olsen 2002). There is also a wide area network that enables rapid transfer of information and prompt response to customer inquiries. The firm’s management strongly believes that the robust customer service is largely accountable for the dramatic increase in sales volumes from $284 million in 1994 to $1.3 billion in 1998. In 2002, the management proposed an annual investment of $40 million towards customer care in its stores. This was geared towards increasing the speed of service delivery. A survey that had been carried indicated that 65% of those polled derived their satisfaction from fast service.
Competitive Advantage in Promotion
Caribou Coffee is considered the greatest competitor to star bucks owing to its position as the second-largest in the US market. With 9000 stores compared to Caribou’s 500, the star bucks have a greater competitive advantage over it because of its larger market share in US and also globally. It has also posted 75% higher revenue than caribou (Harper, 2009). In addition, star bucks operating expenses are offset by a larger revenue base leading to its profitability as opposed to Caribou who has made consistent losses.
An independent research carried out by Tangible Branding indicated that seven out of ten coffee lovers preferred Costa coffee to other brands. This has inspired their latest advertisement campaign directed at star bucks. This shows an increasing promotional competitiveness of Costa against star bucks. Their current spate of advertisement involves print media, broadcast and outdoor advertisement and seems to be making impressive inroads into the star buck’s market share. In addition, the store emerged out of recession faster than star bucks recording a 22% increase in sales while the latter announced closure of its 300 stores owing to a dip 9% dip in sales in 2008 (Fitzgerald, 2009).
When it comes to the instant coffee segment, Nestle has a market clout over Starbucks which has been trying to cut into the instant coffee segment with the latest launch via brand. Buoyed by its larger distribution and marketing network as compared to the star bucks, it offers a higher competitive promotional advantage over Starbucks in the instant coffee segment (Starbucks vs Nestlé, 2009). However, star bucks still command leadership within her traditional segment against Nestle.
The entry of Mc Donald into the coffee market is expected to bring heavy competition to Starbucks. With its formidable network of fast-food chains, it is expected to ride heavily on its network thereby delivering considerable blow to Star bucks. However, owing to their long experience in the industry, Starbucks still maintains a higher advantage over McDonald’s who is still experimenting with a new product offering.
Starbucks boasts a higher competitive advantage when it comes to quality of coffee as compared to Dunkin. A recent survey revealed that it has almost twice as much the caffeine content in Dunkin. It is pitied 259mg against Dunkin’s 143mg.
The promotional strategies of Starbucks are designed to meet the needs of both the customers and the company. Those stores generally located in the upmarket offer above the competitive price. This is a form of psychological pricing which has an effect of endearing the product as superior compared to the competition. It has employed various modes of advertisement which include print media, broadcast, and outdoor advertisement to achieve its objectives.
Integration of the Marketing Mix
Starbucks has a varied range of pricing regimes to suit the various needs of customers. For example in its North American stores in 2002, it priced its products at an average of $3.85. Their drinks were served in three sizes composing of tall, grande and venti. The least price for a tall drink was $1.40 for a serving of brewed coffee while in the category of a venti; the most expensive was $4.15. The stores pack whole beans in pounded bags selling from $5.20 to $15.95.
Starbucks has been practicing skim pricing of its high-end market in drinks like frappuccinos and caramel macchiatos where there is least competition. This was prompted by loss of sales in some stores by up to 6%. They also noted that its regular customers were spending the same on each visit. Furthermore, it is reasonable to make more from its devoted customers already addicted to their products. This means reducing investments in new strategies while optimizing revenues from the existing demand. The company has also in line with this tried to establish quality leadership by using price as indicator of product quality in the market. Since most of their prices are above their competition, to appeal to their lower-end market the company came up with lower priced brewed coffee and promotions on iced drinks. This was mean to ward off the loss of price-sensitive customers to its competition including McDonald’s and Nestles.
Competitive Advantage in Promotion
The pricing of most of the products of the Starbucks is above the competition. However, this is meant to attain their marketing strategy because despite the higher prices, the company continues to be preferred by the high-end market for its superior quality. Besides the company has a stronger brand compared to its rivals who ensures it maintains its higher market clout which continues to drive up its sales. For example, Costa with its lower prices still has lower quality coffee as compared to the Starbuck Company. It also has a better product proposition as compared to its competitors which makes its prices competitive. Nestle on the other side boasting of lower pricing has a limited proposition as it specializes in instant coffee as opposed to star bucks.
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Fitzgerald, M. (2009). Costa Coffee campaign targets rival Starbucks. Web.
Harper, B. (2009). Is It Time for Starbucks to Buy Caribou Coffee?. Web.
Kembell, B., Hawks, M., Kembell, S., Perry, L., Olsen, L. (2002). Catching the Starbucks Fever. Web.
Tewell, K., Odom, B. & Snider, K. (2006). Starbucks Marketing Plan. Web.