Current Promotional Strategy Starbucks has implemented numerous promotions to reach its targeted market. One of the promotions that Starbucks has used is the Starbucks Card. When a customer purchases a gift card, it not only shows brand loyalty, but it also provides the company with free advertising, and brings in new customers. Starbucks also provides a card for corporate sales, which are used for extrinsic rewards to show employee appreciation for a job well done, or a gift to a client.
Another promotional implementation is that they deliver coffees to offices or work places without any coffee size restrictions. There are very few or rare coffee outlets that are willing to deliver without placing any conditions or restrictions. Thirdly, they appeal to a diverse customer base by offering international teas and coffees to accommodate those customers that want a taste from home or for locals that enjoy tea.
The other political imperative that Starbucks faces is the need to adhere to the laws and regulations in the countries from where it sources its raw materials.
The third political imperative, which Starbucks faces, is the regulatory pressures within its home market in the United States because of greater scrutiny of the business processes that multinationals based in the US are now subject to.
Economic The foremost external economic driver for Starbucks is the ongoing global economic recession, which as explained in the introduction has dented the profitability of many companies. However, studies have shown that consumers instead of cutting down on their coffee consumption are shifting to lower priced alternatives which is an opportunity for Starbucks.
Of course, the company still has to contend with rising operational and labor costs as the inflationary macroeconomic environment coupled with the falling profitability is squeezing the company from both ends of the spectrum. Socio-Cultural Though Starbucks can offer cheaper alternatives as mentioned previously, it has to do so without sacrificing the quality and this is the key socio cultural challenge that the company faces as it expands its consumer base to include the consumers from the lower and the middle tiers of the income pyramid.
Third, the retiring baby boomer generation means that spending by the older consumers is likely to taper off and hence, Starbucks would have to lookout for tapping the Gen X and the Millennials as part of its strategy. Technological Starbucks is well poised to reap the benefits of the emerging mobile wave and as it has tied up with Apple to introduce app based discount coupons, it can expect to ride the mobile wave with ease.
The company has already introduced Wi-Fi capabilities in its outlets so that consumers can surf the web and do their work while sipping coffee. This is indeed an added value to the Starbucks brand and something, which enhances the consumer experience. It can also introduce mobile payments and this is something that it is already testing out in pilot locations in the United States. Legal Starbucks has to ensure that it does not run afoul of the laws and regulations in the countries from which it sources its raw materials as well as the home markets in the United States.
Environmental There have been several concerns about the business practices of Starbucks from the activists, international advocacy groups, and from the consumers themselves. Therefore, Starbucks has to take into account these concerns if it has to continue holding on to the trust it enjoys with its consumers.
Marketing Strategy Starbucks has a distinct marketing strategy that starts right from its products. It has differentiated itself from the others based on the premium quality of its coffee. From its humble origins in Seattle, the brand has spread throughout the world to become the number one coffee retail brand. Starbucks has used the formula of quality based product differentiation which has resulted in very high level of popularity and loyalty.
However, its entire marketing strategy is not limited to products only but Starbucks is equally unique in other aspects of its marketing and promotion strategy. Still, product quality must be considered the central pillar of its marketing efforts. Great quality has several benefits. First of all it helps with reputation management.
Starbucks will venture into the untapped Italian market where ironically this is where the original concept of the Italian espresso bar experience was founded and where coffee consumption is one of the highest in the world at over , tons or 6kg per capita per year annually Table 2. The New Product Starbucks will launch the new product, Starbucks branded frozen yoghurt in Italy that will appeal to the segment of new generation Italians and tourists alike.
The product is a healthier option to ice cream and gelato but with less fat and sugar and more overall health benefits. The new product line would complement their current brand promise of providing premium quality products with superior customer service.
Frozen Yoghurt is a perfect complement to the Starbucks brand main product, coffee, because it a cold dessert with sales mainly higher during warmer temperatures versus coffee sales that normally rise during cold temperatures so the risk of sales cannibalization is low.
Table 2. Market Research Approach The market research approaches for determining the demand for the new product will be to use quantitative data collection in the form of surveys as well as qualitative research through field testing and market panels. The areas of market demand to be examined through these research methods are current brand strength, buyer behaviour and the buying process as well as customer segment characteristics.
In order to test the potential brand strength for the new Italian market expansion, primary source research surveys will be conducted at Starbucks branded kiosk locations setup in Italy asking respondents to describe their perceptions, awareness and willingness to purchase both a generic frozen dessert product and the new proposed Starbucks branded Frozen Yoghurt measured by using the five-point Likert scale of brand equity from strongly agree to strongly disagree as described by Yoo et al, Buyer Behaviour and the Buying Process The decision for buyers to purchase a particular product over another, especially in the case of Frozen Yoghurt, where the product is simple and easily replicated needs to be researched as to what motivates buyer behaviors.
This illustrates how the traditional consumer decision journey is changing to include various touch points mainly influenced by brand equity Court et al, Customer Segment Characteristics In order to determine the customer segment characteristics for the demand of the new Starbucks branded Frozen Yoghurt in Italy, existing secondary source market analysis data and primary source panel studies will be employed that is relevant identifying the existing demographics i.
The frozen desserts market in Italy is well established so gathering existing customer data should be easily accessible through secondary sources. Field testing will also be required to determine how target buyers will specifically react to the new product to be conducted through opening test kiosks providing samples of the product and gathering feedback from respondents separated into the applicable customer segments to be used for analysis compared to existing generic frozen dessert customer data.
The market for Starbucks Frozen Yoghurt has been segmented using three main groups including behavioural, psychographic and profile variables that will help to identify marketing decisions, benefits sought, purchasing behaviour, as well as consumer lifestyle and socio-economic factors that affective price sensitivity Figure 3. The needs of this segment are mainly enjoyment of a fun, great tasting and trendy product with the ability to customize for self- expression.
This segment prefers social and modern environment. This segment has a tendency to impulse buy so is not very sensitive to price although due to the young age grouping of this segment despite the low income or parental support. Adults Segment The adults segment is aged , middle to high income, employed, impulse buyers, modern, social and health conscious. The needs of this segment is to experience new, innovative products that are perceived to be healthy and can be customized for self-expression.
This segment prefers a relaxed, modern and social environment. This segment also prefers premium quality products, have middle to high income and tend to impulse resulting in low price sensitivity. The sizing of the product will be smaller than the adult size and therefore more affordable.
The product will also be made to order with select toppings geared towards children and teens. Advertising to this segment will be mainly through commercials and internet web based as this would be most effective because they spend the majority of their free time watching TV and on the internet thus promoting maximum brand awareness. The target marketing strategy to the adult segment will involve the use of trendy, upbeat packaging with famous sayings or inspirational quotes written on it geared towards adults.
The product will be customizable, new flavours of the month, be made to order with fresh fruit toppings with calorie and nutritional information clearly visible. Advertising to this segment will be mainly through social media channels like Facebook, twitter and Linkedin, internet content marketing and digital loyalty rewards. This target marketing approach would be most effective as this segment is more socially engaged and spend the majority of their free time online and engaged in various digital forums.
The strategy addressing the demographic profiling and lifestyle indicators to fulfill the needs of the segments will use the essential criteria of measurability, substantiality, accessibility, differentiability and action ability to further increase brand equity Kotler et al, Furthermore, targeting through television and online content marketing via digital newsletters, web promotions and social media will effectively promote brand awareness and therefore increase brand equity.
Positioning Strategy The new Starbucks Frozen Yoghurt positioning strategy to the children and teens segment will be to emphasize the product features including being a great tasting, fun and customizable product.
The main benefits of the product will be positioned around being a healthy alternative as parents will be the main income providers for children and teens. The value offering for this segment will be lower price due to smaller sizing for a higher quality product. The product differentiation from competitors with similar offerings of frozen novelties like ice cream will focus on the quality, freshness and being an alternative healthy choice. This strategy will be effective as it addresses both the perceptions of the child and the adult that is providing the income source by being a fun yet healthy product.
The main benefits of the product will be positioned around being a high quality, fresh, innovative great tasting product that is better for your health than the alternatives. Price The pricing strategy of Starbucks is to maintain its brand image and quality offering through premium pricing of their products. Starbucks also defends their premium pricing through their fair trade initiatives of paying coffee bean farmers fairly and reinvesting in farmer sustainability practices worldwide Starbucks, Their customer proposition of offering excellent customer service and a unique experience allows price differentiation between their competitors which is used to target their core segment of high income earners.
Place The company distributes its product through four traditional channels: retail stores, licensed stores, consumer packaged goods stores and foodservice operations as well as online internet and mobile applications Starbucks Corporation SWOT Analysis, The retail store channel is the most important as they represent the highest percentage of sales than the other channels Mourdoukoutas, Nonetheless, there is opportunity to expand further internationally, especially in Europe where they hold Promotion Starbucks brand promotion revolves around their unique yet simple brand positioning focused on quality, experience and social responsibility rather than price.
This strong customer focus builds brand credibility through initiatives like educating customers about products, providing free Wi-Fi and engaging in constant customer feedback mainly via online forums. Their low cost advertising strategy focusses on more local markets and the use of social media rather than mass marketing campaigns.
Brand experience occurs through daily interactions tweets, status updates, content shares and conversations between customers , for example, there are over 19 million tagged photos on Instagram with Starbucks Brown, The product will be served in Starbucks branded logo environmentally friendly cardboard bowls similar to the coffee cups offered to promote brand association.
The product will serve to target their existing market segments and the new niche customer segment being the children of the core Starbucks customers. The product will aid in their expansion into the Italian Market as table 4. Price The pricing strategy for the new Starbucks Frozen yoghurt will be to offer a high quality product at a premium price point with smaller sized offerings at a reduced price point for the children and teens customer segment.
The pricing strategy will be supported by the focus on quality and unique product differentiation through customization while maintaining high margins. Starbucks Frozen Yoghurt will be positioned as offering more health benefits and unique customizable flavour options warranting the premium price. The company's major competitors are Dean Food Company, Nestle, etc. Through various departmental stores and grocery stores, the products are distributed by a similar company to its customers. However, Starbucks' management has taken a different approach, where the products are distributed through its franchises and other specified outlets.
Strengths - All the outlets and stores are installed with the latest technologies that have attracted a large customer community Dominus The company has been able to make appropriate decisions at a crucial time. Weakness - The rising cost of raw materials has coerced the companies to hike the overall price of coffee products.
The indiscriminate increase in the cost of rent and dairy products has impacted the company to its extreme Chernev, Opportunities - The company should target the markets where the population is evenly distributed with wealth. Threats - The business should only be expanded after verifying the political stability of the particular company.
The emergence of new competitors has challenged the position of Starbucks in the global market. Thus the decreased purchasing power of the targeted customers has created a lasting impact on the business of the company. The major reason for the stability of the company is the fact that the company's product comes under the category of Food and Beverage. The company should devise a strategy to somehow reduce the cost of the product without compromising its quality.
Market Demographics It is majorly the four different sections of the population targeted as viable customers by Starbucks' authority. Loyal of Starbucks The majority of the coffee drinkers, i. The company has the potential to acquire an estimate of 7. Psychographic The element helps the company focus on the attributes of attitudes, lifestyles, and values while focusing on the customer base.
The belief system and the thought process of the people would vary continuously through various nations. It is majorly the employed population which prefers the coffee products of Starbucks. This particular demography is fond of premium quality products, no matter how high is its price.
Geographical The company is focussing on international sales by expanding its geographical market. The approach has helped the company in understanding the potential of various local markets. Youth between the age of 18 and 24 Coffee consumption is observed to be increasing among the youth population and is developing as a campus culture.
The group is considered to be very potential by the company since they could turn out to be the company's loyal and persistent customers. Conclusion The Starbucks corporation is still observed to be dominant in its operative market. We fulfill this mission by a commitment to: o Understanding of environmental issues and sharing information with our partners. Did the partners make eye contact with the customer? Say thank you? The counters? The tables? The restrooms? Was the temperature of the drink within range?
Was the beverage properly presented? We removed the non- value-added tasks, simplified the production process, and manipulated the store layout to take better advantage of store space. We want to continually implement the use of these machines in more of our stores. In doing so, we can still serve our customers who want a taste of Starbucks on-the- go.
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