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The term marketing is extracted from the word market which refers to a group of sellers and buyers who cooperate to trade goods and services. Marketing includes planning, executing, monitoring, promoting and distributing of products and services (Kotler and et.al., 2013). To deliver the product to its customers, company has to go through a marketing process. The report explains the various principles of marketing. It also helps the reader in understanding the fundamental concepts and principles of marketing process. This reports aims to understand the various marketing strategies of an organisation. Starbucks is an American global coffee company; it is the largest coffeehouse company in the world. The company was founded by Sir Jerry Baldwin in 1971. The report also explains the marketing mix, segmentation, targeting, positioning, pricing strategies and distribution & promotion mix of Starbucks Corporation (Burks, 2009).
Marketing research is the process of systematic gathering, recording, and analyzing of information related to market in which business operates. Every organization wants to make profits and capture market share and these objectives can be achieved through satisfying its customers. Marketing process stats with identifying the needs and desires of market consumes and runs till providing them the product will offer them value satisfaction. In a marketing process there are different levels such as marketing audit, environmental analysis, setting the marketing objectives, developing the strategies and implementing and evaluating such strategies. These all are known as elements of marketing process. The main task of marketing research is to identify the needs and wants of customer. Company conducts a research so that it can become aware about the needs of target market, then company offers the product and services as per the requirement of market consumers. It is very important to put efforts in identifying needs of each and every customer so the business unit divides market in different segment then decide target market. In this way company can reach the expectation of its patrons. It is very important for business units to develop the product and communicate the target that it has the product that they desire. The task can be achieved through designing an effective marketing mix.
By offering them suitable products, value and satisfaction can be created for existing and potential consumers. Organization also does SOWT analysis to become aware about its current strengths and weaknesses as well as the potential opportunities and threats. Company adopts the strategic marketing process in order to set marketing objectives. The goals should be specific, measurable, attainable, realistic, and in particular time fame. At last, in the marketing research process, the firm develop its strategies to attain the corporate goals. It is important to implement this in effective ways to influence the customer. The marketing mix tools such as product, promotion, price and distribution should be effectively managed. The tactics should be evaluated and monitored over a particular time frame (Ferrell and et.al. 2012).
In the marketing orientation concept, company primarily focuses on discovering the needs and wants of target market consumers so that it can provide the products and services according to market demand. Starbucks firstly conducts market research so that they can know about the brand’s position in the market and need of development in such products. The company offers products according to consumer demand and as a result customers willingly pay the charged amount for the product. The organization will also gain customer loyalty while capturing market share. It reduces the burden of predicting and forecasting product trends and buyers’ demand. The concept also helps the firm in eliminating those products which are not satisfying consumer needs (Holt, 2002.).
The company introduces the product as per consumer’s wants and desires. By marketing orientation concept Starbucks creates value and satisfaction for individual customer, which helps the organization to retain its customers. On the other hand, firm has to bear a lot of monetary costs to effectively implement a market orientation concept. To implement marketing orientation, a successful market research is needed. Conducting a marketing research takes time and an expert team of marketing executives. Company also has to bear cost of hiring such marketing experts. In order to create value for its customer, company has to invest in product development activities. The company focuses on marketing orientation in order to create long term customer relation.
The company is a famous coffeehouse in the world. Now it is operating in macro environment. The PESTEL analysis of Starbucks includes political, economical, social, technical, environmental and legal factors which are affecting company’s operations.
Political environment: The political factor of different countries in which Starbucks operates business such as taxation & social welfare policies, Government stability and trade regulation have a high influence on its operations. The company has to consider all political influences in different countries and has to maintain good relations with countries that produce coffee beans.
Economic environment: The organization has to monitor all the factors such as inflation & interest rate, unemployment and the supply of money in the country. All these may affect customer consumption capacity. Buying power of consumers also affects the business of Starbucks.
Socio-cultural environment: The various factors like demographic profiles, lifestyles, cultural values, income distribution influence the Starbucks coffee business. Nowadays, customers are going towards healthy food; this is an opportunity for company to get success in different markets.
Technological environment: In coffee house industry, technology refers to development of new and healthy products. Technological factor which affects business of Starbucks are such as emergence of innovative technology in the industry, biotechnological developments and developments in agriculture industry.
Environmental environment: The customers are becoming more environmental friendly. The company is considering environmental factors such as waste disposal systems and energy consumption. At all stores and out of the stores Starbucks keeps dustbin to reduce the wastage in company.
Legal environment: As Starbucks is operating in many countries so it has to take care of laws regarding production capacity, minimum wages, product design & safety, pricing and promotion. The company is also facing the problem of duplication of products as in the industry many rival companies are offering duplicate products.
Competitors: The competitive rivalry of Starbucks is very high in the marketplace as it has to compete with major brands such as McDonalds, Dunkin Donuts, Second Cup, New World and Coffee Caribou. It is very difficult for new competition to affect Starbucks. This is as coffee industry of UK requires huge capital investment and the UK coffee chain market is saturated (Kotler and et.al., 2013).
Suppliers: The suppliers of Starbucks are provides of coffee bean and it uses quality of beans to make its products. The major suppliers of the company are Africa, Latin America, and Asia and all have significant influence on its operation. There is risk for company if suppliers fail to deliver goods at time. In this way it can be said that the bargaining powers for the company is very high.
Consumers: The consumers have developed an increased expectation from Starbucks coffee. This is as company provides quality of products. But still various other competitors provides product at lower rates (O'Farrel, 2013).
Segmentation refers to dividing the market into similar groups. For dividing the market into similar segments company has to conduct market research so that they get to know about the needs of individual customer. As the company is a leading brand of coffeehouse and offers different energy drinks, therefore it has selected upper-scale of the coffee market as per its comfort rather than its convenience. The company can segment its market as per demographic, geographic, psychographic and behavioural factors. In its demographical segmentation it can divide market as per age, gender, income group, occupation and family life cycle. It can offer energy drinks for different age groups such as kids, teenagers, adults and senior citizens. Most children prefer sweet drinks and teenagers like spicy snacks and drinks. Adults and senior persons prefer tea and customers from other age group like coffee. The market can be segmented as per gender where males prefer hard drinks and women want to have soft drinks. If company goes for geographical segmentation then it can divide market as per population size, region climate and city size. In countries where weather condition remains cold it can offer hot coffee and in hot climate areas cold energy drinks and cold coffee can be offered. In this way firm can segment its market as per various demographic and geographical variables.
After segmenting the market into various similar groups, company needs to target its consumer so they can better satisfy needs of potential consumers. Till now organization has targeted its market of wealthy, well educated and white collar customers. Starbucks has created a mature and high prestige image in the market. It also provides beverages and food in order to attract ideal segment market. The company can use different types of targeting strategies such as undifferentiated or mass market, differentiated, niche market and micro market. In undifferentiated market, company does not segment its market whereas in differentiated targeting strategies it augments its market as per individual customer needs and wants. In niche market Strategies Company needs to focus on a single product and in micro market segment group can be a small group which is chosen by a company according to convenience. Starbucks can launch a new energy drink in its menu for this purpose but firstly it has to target is market. It can use niche market and micro market strategies in which the target market can be selected as per the personal needs of consumers. It will be the best strategy to introduce the new product in market. If company will able to make its consumer satisfied, it will gain profits by increasing the sale s of new product (Fellner, 2008).
Every individual has his/her own needs and they want the product as per their desire. Consumer behaviours refer to the process which a consumer adopts while taking purchasing decision. The study of consumer buying behaviour helps the business to develop marketing strategies. Starbucks is an international coffeehouse and offers coffee, tea, juices, soft drinks, water and energy drinks. The company needs to understand consumer decision process and the factor affecting it. While purchasing the products an individual goes through a process in which firstly he/ she they feel the need of that product. After knowing the needs for product they go in the market in the search of goods that can satisfy their needs. Then the person evaluates the alternatives available in the market. Finally he makes it decision and purchase the particular products. The satisfaction and dissatisfaction level of the customer decides its relation with the company (Gök and Hacioglu , 2010).
There are different factors affecting the buying behaviour of consumers in fast food industry such as demographical, cultural, social, and psychological. Cultural factors include culture, subculture and social class and these factors are often inherent in our values and decision processes. In demographical factor variables as age, income level, gender, family lifecycle stage, occupation, economic circumstances, lifestyle influence the decision making process. Motivation, perception, learning, beliefs and attitudes are the psychological factors affect the consumer. For Starbucks in is important to understand behaviour of individual in order to develop marketing mix strategies (Bruce and Daly, 2006).
Positioning refers to the process of creating an image in customers’ mind so they can relate the uniqueness of product with individual needs. It helps consumer in comparing a company’s product with competitor’s product. Starbucks can introduce a new energy drink in its menu which contains low cholesterol. The product can be manufactured as it can satisfy the demand of target market consumer. The product will give a sustainable advantage over its competitors which contains low cholesterol content in it. The segmentation criteria and targeting strategies will help company to become aware with market needs. After segmenting and targeting the market into similar groups having similar needs, it is important to make aware potential and existing consumer with product which has qualities to satisfy their needs. This task can be achieved through positioning of product. Through positioning, perception of consumers towards products can be changed. The company can follow the current advertising with healthy messages. The organization can create its restaurant’s image as a family restaurant to attract large customer groups. As they are introducing a new energy drink, they can position the product according to the kids while introducing new advertising. They should also follow the concept of undifferentiated marketing in which they will become prepare for using same marketing mix to mass audiences (Simkin, 2012).
Starbucks has been successfully creating its image as the world’s most powerful and recognizable brand of high quality coffee and non coffee products. The major competitors of Starbucks in the market are Dunkin’s Donuts, MacDonald’s and Caribou coffee. Starbucks has 12500 coffee shops in the US whereas Dunkin and Caribou has 6700 and 415 coffee shops in united state. McDonald’s is a biggest restaurant chain and has 31000 stores all over the world. Recently, company has introduced a slogan “You, kin do it” which has a significant role in creating its competitive advantage.
Starbucks has many products in line of its drinks such as smoothies and frappes. The company has crested their frappuccino for summer season whereas MacDonald’s has introduced its frozen strawberry lemonade in its McCaf’e, which is a non coffee beverage. For that company has created a website to promote its products in Washington. In this website the customers can express their views about prices and quality of Starbucks product. This unique idea has been made in order to create a competitive advantage. The company is able to adjust its prices for a cup of coffee from state to state. In big cities prices are high, but in small cities the prices are somewhat reasonable. Although the prices are different in every state but Starbucks provides the same qualities and service in all cities. It is the major element of its competitive edge. Starbuck’s brand equity is built on selling supreme quality coffee and related products. The company has created a large group of customers by providing each customer a unique “Starbucks Experience” (Michelli,2006).
It makes use of relative pricing where premium items are sold along with the presence of lower-cost items. It is clear that making use of this strategy has presented a significant risk as co summers choose the lower-priced items,. But Starbucks has been able to justify higher price through comparison (Farrell, 2015)
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Distribution refers to delivering the product to the end consumer. After producing the product as per demand of consumers company needs to deliver product according to convenience of customer. The channels of distribution are the ways to make available products in consumers reach. The industry, in which Starbucks operates, is very fragmented. The distribution strategy of the company is to reach customer at its working, travelling, shopping and dining area. For this company has good relationships with third parties that share Starbucks' values and is commitment to product quality (Hannah and David ,2012). The company has to go through a consolidation process where it collects the coffee beans from the framer, then it has to convert it in the original coffee form, then company can deliver it to end consumer. Starbucks always tries to maintain the quality of its coffee by working on supply chain management. The company has many stores in different locations from where it delivers the product directly to its consumers. The most of company’s products are seasonal or specific to the locality of the store. The stores are also located at prime locations like shopping centres and airports. It also has tie ups with many grocery stores as the ice cream and coffee of brand are also offered at various big grocery stores. The company also operates as retail stores, from where it provides the product to customers. In company oriented retail stores, customer can have rich-brewed coffees, Italian-style espresso beverages, cold blended beverages, coffee-related accessories and equipment, pastries and confections, premium teas and a line of compact disc. Starbucks has number of joint ventures and licensing arrangements with prominent retailers in its operating counties like in North America, United Kingdom, Thailand and Australia. It has joint venture with Dreyer's Grand Ice Cream Inc. to distribute Starbucks premium coffee ice creams to its customers (Gilbert,2008).
The aim of any firm is to capture the market share while having more profits. Both these objectives help the company to decide its pricing strategies. Business has to set its pricing as per the condition of the market and the organizational objectives. Starbucks has captured huge market share as compared to its competitors. The company offers combination of quality, and value for its customers. It sets its prices at a level high but the objectives of pricing strategies are somewhat related to quality of product. High value at moderate cost is the objective of company pricing strategies. If customer is getting the value and satisfaction, it will be ready to pay a price for that product. Starbucks has to maintain strict quality controls in its coffee & related products and customer service (Michelli, 2006).
The organization has spent huge amount to differentiate its product from its competitor’s products. The new product introduced by the company is high priced because company is confident about its brand image and knows that customer will be ready to pay extra as the brand is recognized for quality. In its new segmented market, company has set its prices very low with the objective of capturing new market share (O'Farrel, 2013). The competitor’s pricings strategies and the price of substitute products also affect the pricing of Starbucks products. The company uses relative pricing strategies for its premium products such as espresso drinks and drip coffees. On the product, offers at grocery stores have relatively low prices as per the market condition of particular countries. Before setting the high prices, company justifies the higher price through comparison with competitive product prices (Strutzmann, 2012).
Starbucks is operating its business internationally; the firm has designed a global marketing mix strategy for effective global growth. The company is following similar retailing formula in all countries. The promotional strategies used by Starbucks are as follows:
Word of mouth publicity - Starbucks success depends on word-of mouth advertising. The management of the company focuses on increasing in store experience of customers so they can be a source of brand promotion. If the company provides better services to its customer they will help in increasing customer groups from their mouth publicity (Kotler and et.al., 2013). In order to make sure that consumers give positive feedbacks about company’s offerings, Starbucks has tried to give emphasis on local taste. Most of its products are designed while considering the taste and preference of customers. In food market consumers wants the product with good quality and hygiene. Starbucks uses goods quality of products and it tries to provide products with convenience. These arenas are enough to spread positive publicity about its products.
Stores as brand ambassadors - advertising strategy of Starbucks focuses on using stores as their brand ambassadors. For example, the stores in India represent the Indian ethnicity as well as its cultures. It has added the concept of creativity in store designs.
Using advertising agencies - Starbucks includes Omnicom‘s, Goodby Silverstein and Partners and BBDO worldwide as its advertising agencies (Pham-Gia, 2009). These agencies help in designing an effective brand image in the marketplace over other competitors.
Sales promotional tools - The Company’s sales promotional tools are free samples to unaware customers. IT offers coffee pouches and snakes free to the consumers so they can experience the product and convert in loyal customers. It also provides special offers to its existing customers such as discount and coupons (Retseptor, 2005). Through such practices it attracts a huge customers groups to attracted families it offer various family discounts coupes and also provides discounts and allowances through various online sites.
Promotion on social networking - Social networking sites such and Facebook is a source through which Starbucks does its promotional activities. The organization has also created online website to promote its sales (Fellner, 2008).
Loyalty programs - The Company have more loyalty programs and offers special breakfast schemes and holiday promotions. It provides the cards to repeated customers (Geereddy, 2013).
Start bucks is known for its quality products and services. The major marketing mix elements are product price, place and promotion. As the company is operating in service industry, it has to consider extended marketing mix elements such as people, process and physical distribution.
People: People refer to the staff members and employees working in Starbucks. The employees are the persons who deliver products and services to its customers. The franchise partners, owners of stores and the grocery store owners are also the people of company. The company focuses on its employees and gives them extensive training so they can gain customer loyalty while providing them quality services. Starbucks also has a proper system of recruiting, hiring and training baristas and store managers (Brady, 2010).
Process: Process refers to the way of providing services to customers. The service timing has to be quick and effective that can deliver customer delight. The company’s operations include licensed retail stores, food service and other stores. Starbucks has introduced home delivery services for customers. It has started a community website to collect suggestions and feedback from customers.
Physical distribution: It is an important marketing mix element of service industry. Customers prefer a clean and friendly environment. Starbucks’ international strategy is focusing on adding new stores in different locations. It has to give more emphasis on store design and construction in order to attract customers. The stores are located in high traffic and high visibility areas (Haberer, 2010).
Starbucks has various products for every consumer as it serves different type of regulars. The company follows marketing principle in which its produces the products as per the market consumers. It has divided its whole market in different segments in which it conducts diverse marketing strategies. There are 4 P’s of marketing which play essential role in promotion brand image and attracting market consumer. Starbucks pricing strategies varies in all market somewhere its uses premium prices and in many areas the prices of its products are very low. Business sets its pricing as per the condition of the market and the organizational objectives. It can be said that it designs the prices as per its customer group but does not compromise with product quality. Starbucks offers products through its various stores, grocery store, departmental stores as well as from its online websites. It tries to offers convenience in services and products offerings. The way in which company promotes its product is also unique in all its target markets. The market can be segmented as per gender where males prefer hard drinks and women want to have soft drinks. If company goes for geographical segmentation then it can divide market as per population size, region climate and city size.
Starbucks does both, business to customer and business to business marketing. The main product of company is coffee and coffee related commodities. In B2C marketing company delivers its products directly to its consumer. For this the company has its own store in different locations. In its own stores company provides direct services to its customers. For conducting B2C business, company has introduced its website and online store where customers can chose the product and can home delivery of products. To increase its business directly to consumer, Starbucks is planning to open its stores at different locations (Michelli, 2006).
B2B is marketing is where company offers its product through third party. For Business to business trade, the firm has a tie up with reputed companies such as Pepsi Cola and Dreyer’s ice-cream. Through these stores organization provides its products to consumers. The company is distributing whole beans and ground coffee through supermarkets. The other products of company are provided by retail and grocery stores. The company has tie up with United Airlines companies and provides its product in flights to its customer. To commence the business successfully, company has to maintain good relationship with trade partners and customer (Sweet,2008).
Domestic marketing refers to offering products and services within home country. This can be a cost effective method. Through domestic marketing company has to operate in a single culture market. On the other hand, international marketing refers to conducting business outside the local market. While conducting business in international market, company has to face lots of environmental issues such as political and economical changes, currency fluctuations and all. The local market of Starbucks is US market. Company aims to increase business in international markets. The company has hired a team of multi lingual and multinational managers to plan global expansion strategies. In its international strategies, Starbuck focuses on developing new businesses opportunities in overseas markets. Global strategies include financing and planning new stores across the world, managing operation and logistics, merchandising activities and providing trainings to international mangers of Starbucks. For achieving success in international and local market company has to focus on standardization of product and services. Starbucks is giving training to its employees in order to manage cultural diversity. At the international level company is emphases on brand marketing (Geereddy, 2013).
The report explains the concept and process of marketing mix .Starbucks is a leading coffeehouse in the world. The company is operating more that 12000 branches around the world. The report analyses the case based on marketing principles of Starbucks. The company is giving focus towards expanding its stores in global markets. Through the benefits and cost associated with marketing orientation analysis, it has been identified that if the company fails to cater to the needs of its customers then it is bound to lose on important market share. Porter’s five force analysis and micro environment reveal that the organization has good opportunities of expanding in international markets.
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