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Starbucks Corporation Marketing Case Study

Starbucks Corporation Marketing

Headquartered in Seattle Washington, Starbucks Corporation is a premium coffee retailer offering a wide selection of hot and cold beverages, fresh food, premium ice cream, merchandise, and entertainment. Starbucks opened its first location in 1971 at Seattle’s Pike Place Market. Although Starbucks closed approximately 600 underperforming stores this year, it still operates more than 16,000 stores worldwide with over 11,000 stores in the United States. (Herman, 2008). Each store varies its product mix depending upon the size of the store and its location. Larger stores carry a broad selection while smaller stores offer a more limited selection.

The product strategy of Starbucks can be summarized by the company’s vision statement. As stated on its website, the company’s vision is to “establish Starbucks as the most recognized and respected brand in the world and to be the premier purveyor of the finest coffee in the world” (Starbucks, n.d., p. 1). Starbucks has strong global brand recognition which is built on a solid reputation for premium products.

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The company is well known with consumers for making high quality beverages, food and associated goods. Starbucks takes pride as being recognized and respected as the top coffee store in the world (Allison, 2007, p. 2). The atmosphere of its stores is what keeps customers coming back. The stores are designed where customers can get in and out quickly or stay and enjoy the camaraderie. Starbucks does not mass advertise. Most of their marketing is done by word of mouth, and in supporting local events within the communities where their stores are located.

As Howard Schultz, the CEO of Starbucks states:

At Starbucks, we have integrated ourselves in a way that is very different than selling a cup of coffee. We have an emotional relationship with our customers. It’s not one thing, but a lot of things. It’s not good enough to have a good ad, but everything you do helps complete the circle…the packaging, the community involvement, the service all help build that emotional connection. (Lewis, 2008, p. 3)

Starbucks has created very loyal customers who continue to return to Starbucks. These customers are willing to pay four dollars for a cup of coffee. The average Starbucks customers are middle to upper class, working adults. Also, there are a lot of college students who are extremely loyal to Starbucks as well.

“These students will go to Starbucks, spend their money on drinks and hang around to do homework or meet with friends, turning Starbucks into a social meeting place” (Bell, 2006, p. 3). Starbucks also offers kid-friendly drinks such as the Frappuccino. The company does not directly market to this customer base, but their coffee appeal reaches all generations.

Before Starbucks was available nationwide, the option for gourmet coffee was limited. One option was to go to a gourmet café, which usually did not stay open for extended or early hours of the day. Another option was to pick up a cup of coffee from a local gas station or from a fast-food restaurant in which it could not be specifically blended to the customer’s preference. Starbucks saw this opportunity and fully captured the market with a quality drink and a social environment. Starbucks is the first mainstream coffee shop that allows customers to dictate how their coffee should be made. Customers can choose a product that is fine tuned to their exact specifications.

Starbucks has distinguished its product based on quality and image. The company is ranked as one of the world’s 50 most valuable brands (Adams, 2007, p. 4). Starbucks has done an amazing job establishing an emotional connection with its customers and is able to promote loyalty to its brand. When carrying a Starbucks cup, the customer feels like they belong to an elite social class. Starbucks has paralleled its branding with the actions found at any Starbucks across the world. The company differentiates its new products based on its unique features and brand image. They have an excellent company vision, which they stick to, which in turn assists their brand image. Starbucks’ image has been achieved not only through this and their massive global entrance, but through its ability to provide honest quality service.

In addition to its numerous franchises and licensed locations, customers can also find Starbucks in grocery stores, shopping centres, airports, bookstores, and hotels. Next week, Starbucks will open its first store in Portugal. “We are thrilled that we will be able to share our passion for high-quality coffee and the Starbucks experience with the people of Portugal.

Additionally, we are excited to offer traditional Portuguese favourite food items that will complement our high-quality coffees” (Starbucks, p. 2). Starbucks also has several joint corporate ventures with major suppliers and distribution channels. For instance, in 2006, Starbucks announced an expansion of the relationship with Kraft to distribute Starbucks coffee into retail channels in Canada and the U.K. In that same year, Starbucks partnered with Pepsi-Cola North America to roll out Starbucks hot vending machines where a latte is heated on demand for customers (Starbucks, p. 2). Through its numerous partnerships with grocery stores, franchises, record labels, and outside vendors, Starbucks has the opportunity to expand its brand name to places it may not usually be seen.

In 2001, Starbucks started to offer the Starbucks Card. This is a store value card for customers to use and reload. The company has created an opportunity to improve customer service, shorten lines and make a customer’s visit at Starbucks quicker and more convenient. In 2003, Starbucks launched the Starbucks Card Duetto Visa. This card blends the functionality of a regular Visa card along with a reloadable Starbucks Card. The next year, Starbuck launched a Hear Music media bar with a CD-burning service in select stores. Recently, Starbucks launched mystarbucksidea.com on their website.

This allows the customer a place to post and share ideas about Starbucks. Some of the suggestions include Italian cream soda, seasonal ice creams, pumpkin spice syrup, and chocolate chip muffins (Starbucks, p. 4). This site is open to all visitors who register.

There are many competitors in the coffee industry. Starbucks needs to be aware of what is going on in the competitive markets they serve. The company should push to be the first mover in order to compete against this potential market threat. Starbucks must invent new products to stay ahead of such competitive tactics. If Starbucks has the chance of preventing a competitive company from being the innovator, it must do so by being the innovator itself.

References

Adams, E. (2007). Trouble Brewing; Brand Management. The Economist. Retrieved September 25, 2008. Retrieved from http://www.theeconomist.com
Allison, M. (2007). Brand Royalty: How the World’s Top 100 Brands Thrive and Survive. Fortune 500. Retrieved September 23, 2008. Retrieved from http://www.money.cnn.com
Bell, M. (2006). Catching the Starbucks Fever. Businessweek. Retrieved September 23, 2008. Retrieved from http://businessweek.com
Herman, C. (2008, July 1, 2008). Coffee Crisis? Starbucks Closing 600 Stores. ABC News. Retrieved from http://abcnews.go.com/Business/Story
Lewis, J. J. (2008). The Art of Creating Passionate Consumers: Howard Schultz. Knowledge Networks. Retrieved September 23, 2008. Retrieved from http://www.knowledgenetworks.com/starbucks/Howard_Schultz
Peter, J. P., & Donnelly, J. H., Jr. (2007). Marketing Management (8th ed.). New York: McGraw-Hill/Irwin.
Starbucks (n.d.). Retrieved September 23, 2008, from http://www.starbucks.com

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