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Starbucks is a global coffee powerhouse that has had a success record that nearly any company would die for. It has never undertaken much a traditional route in regards to marketing and advertising. Starbucks specialty is using word of mouth, tribal, and viral social formats to promote its products and services. It is recommended in the wake of global populist movements that Starbucks further refine its CSR initiatives internally, and then use this to leverage new consumer segments. If Starbucks takes this approach it will position itself to be more sustainable in terms of the triple bottom line in the wake of a shift in public consciousness.
The coffee retail industry is one of the most multifaceted industries possible. This industry generally relies on the reliance on marketing to drive sales. Marketing undoubtedly isn't restricted to just advertising, and one of the primary responsibilities of marketing is to keep pace with the ever evolving set of consumer preferences. Consumer preferences can either be consist of individuals existing preferences or the inherent predisposition by which preferences can be trained. For example, one opportunity for marketers is to build demand by teaching the consumer to appreciate the characteristics of any particular product they are trying to sell. In this manner marketing campaigns can train a consumer to demand a product. Thus teaching consumers to appreciate the differences provide by product differentiation can serve a major role in building a loyal consumer base.
There are many barriers that prevent other firms from competing with Starbucks on the global coffee market. One example would include the issues related to developing economies of scale. When new firms enter the market they will have to contend with the competition in regards to the product prices and production costs. Starbuck has established a well-managed global supply chain that can deliver excellent coffee to fifty million customers in fifty one countries each and every week (Cooke, 2010). Starbucks has industrialized its supply chain so systematically that it serves as an exemplary system for other firms in different industries to try to aspire to (Locke, 2011). Thus for any entrant to attempt to compete on the scale in which Starbucks does it would take either an enormous investment in capital which few other firms are even capable of.
Any new entrant would have to be at least fairly price competitive. Therefore they would either have to build comparable quantities of scales or accept a reduced margin. Starbucks comprehensive supply chain would most probably mean that any potential competitor would have higher production costs for raw materials with would result in a disadvantage. Such disadvantages would not only affect the supply chain costs but they would subsequently affect production, marketing, research and development and many other business functions. Basically, any firm wishing to try to compete with Starbucks on a global scale would have to try to develop a market from a significantly disadvantage position.
The only potential competition for Starbucks would be limited to local markets or markets that Starbucks has not entered. For example, in some markets local coffee shops may have a certain home territory advantage that Starbucks might find it difficult to break through. Having to compete with this level of localism would require high levels of customization and thus would be difficult for Starbucks compete on that level. Starbucks must operate on a more standardized model so that there is only flexibility to make only moderate changes to suite local markets. However competitors within local markets are generally highly fragmented and relatively unorganized. Therefore they do not necessarily pose any type of significant threat to Starbucks on a global level.
Starbucks target markets are positioned mostly in proximity to their retail locations. These locations are consequently chosen by areas that are likely to have significant numbers of consumers who have above average disposable incomes. There are often Starbucks that are positioned around office centers which attract repeat clientele given their proximity to the coffee chain. Malls are another popular target market for Starbucks as shoppers generally stop at a retail outlet or sometime a Starbucks kiosk to recharge while they are fatigued from walking around. In some locations there is drive through Starbucks however most have large lounges that can serve as their target markets "third place." In the big box stores where Starbucks competes directly against lower priced brands the target market is often the same as the retail location. Starbucks focuses on customers who prefer a premium grade coffee and also has sufficient disposable income to purchase such luxury items.
4 P. Analyses
Starbucks sells gourmet coffee through its retail stores as well as many related items such as pastries and coffee accessories such as mugs and thermoses. The organization also has an ecommerce product line in which can be directly mailed to any individual customers. There are customer loyalty items as well as gift cards that work to support the online aspects of the business. Furthermore, they have also introduced a line of coffee meant for residential use that is distributed through the retail stores as well as many big box chains.
Product differentiation is closely related to brand identification and brand equity which represents a focal point for Starbucks product mix. To differentiate their products they have made substantial investments and provided immense amounts of capital over the course of time to establish a level of customer loyalty that is unlikely to be replicated by any other firm. Brand identification is a result of costly advertising and customer service over time that makes consumers loyal to one brand (Conway, 2011). Starbuck product mix and branding efforts have been successful which is evident by their record of tremendous growth throughout the years.
Starbucks, since its inception, has always followed the concept of complete ownership of branding, processes, and control over all of its retail spaces. This has allowed them a significant amount of control over issues such as quality and their customer service experience. However, when the global economy fell into a recession, Starbucks was profoundly obstructed due to the fact that its products represent a luxury good to most customers. As a result Starbucks was forced to close many corporate owned retail locations (Jargon, 2010).
Location may be one of the most fundamental pieces of the equation for retail premium coffee shops. As opposed to being loyal to any one brand, it is reasonable to believe that location may be one of the most significant factors that from the consumer perspective. It is unlikely that the quality of coffee would bring anyone to venture a crossed town to purchase a single cup of coffee. Generally consumers will just go for the best option that happens to be in there immediate environment. Though there may be a small portion of the consumer base that would be willing to go the extra length to get a cup of coffee from their favorite brand, this segment is most probably fairly low.
Price is most likely one of the least significant variables that a consumer will consider when purchasing coffee. Even premium coffee most likely does not account for a large portion of a typical consumer's disposable income in their target market. As long as Starbucks is at least in the ballpark in regards to the prices that they charge for the various coffees that it offers then it is unlikely that premium coffee drinkers will use price as their primary basis for any purchase decisions. However, during the global recession it was reported that may people would forego premium coffee altogether and replace it with homebrewed coffee or lower cost alternatives such as the coffee brands that are found at fast-food franchises or at convenience stores. Therefore even though consumers might not necessarily price shop for premium coffee brands at the retail locations, under some circumstances they will find substitute products that are in different price niches. The products sold through big box stores might fall under a different model however. These products are in competition to products that are available in the same isle in the supermarket locations. Thus proximity has some effects since Starbucks charges a price premium.
Starbucks coffee has had a long history of creative promotions. However, there marketing campaigns are generally unconventional. It is very rare to ever see a Starbucks billboard advertisement, magazine or newspaper ad, or even a poster (Kembell, 2002). Instead of a more traditional path, Starbucks chooses to use predominantly social network channels to promote its products. It relies heavily on word of mouth advertising. Starbucks works to create tribal communities that can use Starbucks retail locations as a "third space" to meet at or just to hang out and relax (Moore, 2006). Therefore these strategies often work to make Starbucks go viral in the communities or locations in which it develops retail locations. From the success of the retail…[continue]
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