Professional Documents
Culture Documents
Title
Page Number
1. INTRODUCTION
2. TARGETING
3.1.PRODUCT
3.2.PRICE
3.4. PROMOTION
4. CONCLUSION
1. INTRODUCTION
The Starbucks Coffee, Tea, and Spice Company was founded in Seattle in 1971 by
Jerry Baldwin, Gordon Bowker and Zev Siegl, with a vision to educate the consumers about
fine coffees. Starbucks began to expand when Howard Schultz took it over in 1987. His plan
was to re-create the Italian espresso bar experience in America by making a personal
relationship between consumers and coffee. Within years, they grew from a small, regional
business into the undisputed leader in the speciality coffee industry by buying only the best
quality coffee and providing an unmatched store experience (Stanley, 2002).
To inspire and nurture the human spirit one person, one cup, and one
neighbourhood at a time.
---Starbucks Mission Statement from their website
Ever since its establishment there has been a sharp growth in the company
performance. According to their 2008 annual report (from Starbucks website), they have
nearly 17,000 stores in 49 countries. This report deals with the targeting and positioning of
Starbucks when it was launched and how decisions on marketing mix supported that
positioning.
2. TARGETING
Coffee consumption in the U.S. has been trending down since 1960s (refer case
study). So Starbucks was extremely cautious in selecting its target markets. A target market,
according to Kotler and Armstrong (2004), consists of a set of buyers who share common
needs or characteristics that the company decides to serve. The decision of selecting target
segments can be assessed by looking at market factors, competitive factors, and political,
social, and environmental factors (Jobber, 1995). Price, bargaining power of customers and
suppliers and barriers to entry all comes under the market factors, and in the case of
Starbucks, their coffee was expensive and they were trying to re-create a new coffee culture
in America. Hence, they have low barriers for entry. Since they were extremely careful in
each step of coffee making, they tried to maintain a long-standing relationship with their
suppliers (Stanley, 2002) and similarly they did not have any real competition threats.
Starbucks targeted office workers, with middle to high incomes, who had a desire to
purchase premium products. Schultz wanted Starbucks to become the Third Place, the place
between home and work where people could gather, relax and interact with one another
(refer case study). So they were vigilant about their quality control to meet the high
expectations. Also they paid a great deal of attention to the details of the store everything
from the layout, to the furniture, to the music (ibid.). Moreover, they were in the
introduction stage in the product lifecycle.
Target marketing can be done in three different ways; undifferentiated, differentiated
and concentrated. Concentrated (or niche) marketing directs its efforts towards a single
market segment and creating and maintaining an exclusive strategy for each segments (Dibb
et al., 1994). Another approach to the market, known as differentiated (or segmented)
marketing, approach the mass market by designing separate products and marketing
programs for the different segments (Boyd & Walker, 1990). In undifferentiated (or mass)
marketing, the firm ignore market segment differences and target the whole market with one
strategy (Kotler & Armstrong, 2004). When Starbucks launched, they used this
undifferentiated marketing strategy and they created and maintained the marketing mix
considering the market as a single segment. A major difficulty in using this targeting strategy
is developing the brand to satisfy all consumers (ibid.). Starbucks used their services without
compromise in quality for attaining this. Moreover, they were aggressive in the market by
opening 15 new stores in 1988; 20 in 1989; 30 in 1990; 31 in 1991; and 53 in 1992 (refer
case study).
High
Starbuc
Low
High
Price
Quality
Low
3.1. Product
3.4. Promotion
All marketing activities that attempt to stimulate buyer action or sales of a product
can be considered as promotion (Shimp, 1997). Starbucks used to organise a big community
event prior to the opening of its stores (refer case study). Artworks were designed to boast
each citys personality, and it was used on commuter mugs and T-shirts. They also recruited
local ambassadors from new partners and from customers to promote their brand (ibid.).
They didnt use advertising but they used those funds for acquiring key locations. Starbucks
tried to establish a national dominance before other speciality coffee bars comes into the
picture.
4. CONCLUSION
We arent in the coffee business, serving people. We are in the people business,
serving coffee
--- Howard Schultz (Serwer, 2004)
Starbucks claimed their leadership by focusing on a strategy of new products, a
stronger connection with customers as the Third Place and expanding store locations in the
United States and abroad (refer case study). They never compromised on their quality and
service standards and maintained their customer relationships with utmost care. This report
analysed the target markets and positioning strategy of Starbucks while it was launched.
Also, it shows how the marketing mix variables (product, price, distribution and promotion)
along with services supported their positioning. Today, Starbucks is in cities all over
America and in 48 other countries. The level of success achieved by Starbucks holds some
important lessons and some much needed inspiration to the business world.
REFERENCE
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11.Serwer, A. (2004, January 26). Fortune Magazine. Retrieved October 23,
2009, from CNNMoney:
http://money.cnn.com/magazines/fortune/fortune_archive/2004/01/26/358
850/index.htm
12.Shimp, T. (1997). Advertising, Promotion, and Supplemental Aspects of
Integrated Marketing Communications (4th ed.). Fort Worth: The Dryden
Press.
13.Stanley, A. (2002). Starbucks Coffee Company. 1-28.
14.Starbucks Case Study
http://www.starbucks.com