Starbucks Marketing Strategy

Abstract

This paper is based on the Marketing strategy of one of the most renowned coffee houses around the world; Starbucks. It began operating in terms of being a public limited company in 1992 and by the year 1997, it had opened up around 1500 coffee sites around the world-hinting at the success that this corporation had become. The following paper dealt with different aspects of the marketing strategy in different ways and highlighted the strengths of Starbucks.

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Who are the competitors and/or what are the product substitutes for the product?

Starbucks has its competitors just like any other company and has garnered so much success for its coffee products, it soon became the envy of many other companies and effectively other competitors began imitating the Starbucks model. By the year 1999, over 10, 000 coffee houses had opened up.

The closest competitor that Starbucks had was Second Cup, a Canadian franchisor who had specialty coffees as its products, and was merely one-third of the size that Starbucks was operating on. This company opened Gloria Jeans, a franchisor of specialty coffees, which were primarily located in malls around the United States. Behar, Howard & Goldstein. (2007).

All other competitors were not as significant since no one had 250 stores operating, but at the same time there were at least 20 small-sized local and regional chains that were operating and all aspired to reach the pinnacle of success that Starbucks had achieved. The mentionable chains included new world Coffee, Coffee People, Coffee Station, Java Centrale, and Caribou Coffee. It was expected that these small competitors would join hands in order to gain a greater stronghold in terms of their market share size in order to prove stronger competition for Starbucks.

At the same time, numerous restaurants and cafes had opened up which were also offering coffee varieties as part of their product line. Schultz, Howard and Yang. (1997).

Nationwide manufacturers such as Kraft General Foods, Proctor and Gamble and Nestle; all who were responsible for the coffees available at the supermarkets were also competition for Starbucks. A number of specialty coffee companies were also selling whole-bean coffees in supermarkets which attracted a significant amount of consumer force due to the customer’s act of purchasing coffee from these supermarkets.

Hence, the above competitors and products were all a source of competition in different forms for Starbucks.

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Does the organization have an obvious competitive advantage? If yes, what is it?

(Consider brand names, service, price, distribution, technology, personnel.)

Starbucks distinguished itself from the numerous coffee houses due to its different, catching and easy-to-pronounce brand name which intrigued any potential customer. The reasons that it achieved the success could be attributed to the notable success that Starbucks had in identifying some of the top retail outlets. The company had the best real estate team in the industry and the sophisticated system that allowed it the perfect store location. With the aid of its specialized team of architects and designers, each store was able to project the right image and character.

It had four basic templates and two mini-store formats, which allowed Starbucks to achieve a different image for itself. Schultz, Howard and Yang. (1997).

The product line constituted of a number of regular, decaffeinated coffee beverages, along with a special coffee of the day and a broad selection of Italian –style espresso drinks. The product mix in each retail outlet was based on the size and location which allowed it to cater to the customers appropriately.

The recent addition of selling special CD compilations allowed Starbucks stores a special background music setting. The company was always engaged in producing new ideas, new products, and new experiences for customers that belonged exclusively to Starbucks. The management laid special emphasis on projecting the right image of the brand through the setting of the store and its ambiance.

Starbucks was recognized for its awareness regarding conservation and was even awarded for this purpose. Employee training was done on a major scale; 8-10 weeks before opening and the management were inducted into specialized courses.

Another part of its distribution line involved mail order catalog services which soon gained prominence; almost 50, 000 customers were signed up to receive monthly deliveries of Starbucks coffee by 1997. Joseph (2006).

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Starbuck’s joint ventures included a partnership with PepsiCo, Dreyer’s grand ice cream and Red hook Ale brewery; allowing it to differentiate itself even further.

Does the product/service have a competitive advantage? If yes, explain your competitive strategy?

The competitive advantage that Starbucks had was not merely in its national coverage strength which constituted of over 250 stores nationwide but in its store ambiance, product line, appropriate location, distribution pattern etc.

The special sales group that worked for Starbucks enabled the reach of this product to increase even more than at present. Its supply chain included airlines such as Horizon Airlines, United Airlines and even signed a deal with Nordstrom’s which allowed it a competitive edge in terms of its reach.

Going by its international access, it had a number of stores in Tokyo, Hawaii, Singapore, Korea, Taiwan, etc which allowed Starbucks to further add to its portfolio a number of regions to which its competitors still had no access.

Its store ambiance all was done along the lines of promoting and developing the brand image which had not been done so by its competitors and thus, this initial competitive edge allowed Starbucks to soon become a giant chain. Its product line was constantly developed and the training methods for its employees allowed them to be always prepared for any changes and developments. Joseph (2006).

The provision of Starbucks in supermarkets with distinctive, elegant packaging allowed it a further edge as the coffee houses were as yet only operating from their own stores, and the supermarkets allowed Starbucks huge access to potential customers.

How will the product or service be positioned?

The positioning strategy is done by keeping in mind a number of things; positioning against competitors, emphasizing a particular benefit, and affiliating with something valuable to the customer.

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The strategy of Starbucks was to increase the access to its consumers on a level which the competition could not even think of. Hence, the mass number of stores across America, International expansion and even supplying supermarkets as well were all a device to achieve that. Behar, Howard & Goldstein. (2007).

The particular edge and benefit that Starbucks had was its constant innovativeness in terms of its product line and its store setting and planning which were at the same time innovative and yet conservative.

The customer was able to affiliate with Starbucks due to a policy that kept the consumer’s needs always in mind e.g. the mystery shoppers’ idea which allowed Starbucks to become like the consumer and think like the consumer.

References

Michelli, Joseph A. (2006). The Starbucks experience: 5 principles for turning ordinary into extraordinary, 208 pages.

Schultz, Howard, and Yang. (1997). Pour Your Heart Into It: How Starbucks Built A Company One Cup At A Time, 350 pages.

Behar, Howard & Goldstein. (2007). It’s Not About The Coffee: Leadership Principles from a Life at Starbucks, 208 pages.

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