Starbucks' promotion and pricing strategy across media channels

Business Marketing

Promotion and Price Analysis Paper

For purposes of this analysis, Starbuck's Coffee messaging is analyzed from a promotion and pricing analysis perspective, with specific attention to television, Internet and point-of-purchase media strategies. Starbucks' promotional messaging is analyzed in the context of each media strategy the company has chosen to use, including how the company positions its products for its target markets. There is also analysis of how Starbucks handles products at each stage of their product lifecycles, which by definition are rapid and marked with high levels of innovation, as this competitive strategy has worked well for the company. The rapid rate of innovation in product lifecycles is critical in the coffee business, as there is no shortage of competitors.

The total number of coffee shops in the U.S. increased by 70% between 2000 and 2005, bringing the total to 21,400 or one coffee house for every 14,000 Americans. Mintel Research, 2005 believes that the number of shops could well continue to rise until there is a coffee shop for every 10,000 Americans.

Analysis by Media Strategy

In terms of analyzing these two core message strategies of having a cool, exotic reward of a drink (Frappacino) or getting a caffeine boost for a job (Double Shot), Starbucks chooses their media strategies wisely. Presented here are their strategies by television, Internet, and point-of-purchase.

Television - Over-the-top graphics and humorous approaches to telling the benefits of both exotic and reward-driven exotic drinks and the high powered caffeine of Double Shot and its role in making a person ready to face their jobs are dual messages the company continues to stress. Notice in the link for the television spot the humorous role of the rock singer and his enthusiastic and over-the-top approach to encouraging the young professional. What is implicit in this messaging is that you're not only getting a healthy dose of caffeine with Double Shot you're also getting ambition and drive, determination and focus. Those emotional intangibles are invaluable in starting a challenging task at the beginning of any morning. Starbucks continues to use the music-to-emotion connection in the television spots to underscore their core messaging and differentiation.

Internet - Starbuck's Internet strategy stresses their environmentally friendly corporate policies, humanitarian efforts, and accentuates its health coverage for part-time employees. In short, the Internet strategy primarily focuses on showing global corporate responsibility, which is a critical messaging platform as the company moves into new Pacific Rim nations including Australia, Japan, and Korea. The global reach of the company is also exemplified in the use of maps to show where the various coffees are grown and sourced from.

Starbucks also supports their two core messages of delivering "reward" drinks on the one hand (Frappacinos) and getting a caffeine boost for a job (Double Shot) through the heavy use of graphics and downloadable computer art. For the summer promotion of "reward" drinks there is also the attempt to link music with the positioning of the drinks through entire mini-sites running on Macromedia Flash that presents albums and music selections interactively as online shoppers look through the latest Frappacino flavors. The link of high performance, ambition, and acute intensity at work is also communicated through the websites' messaging around its core coffees and Double Shot as well.

Point-of-Purchase - With 75% of the company's sales being through retail stores, according to DataMonitor in Starbuck's Profile (2005) the need to excel at point-of-purchase marketing is clear. Exacerbating this is the fact that the market for coffee shops in the U.S. is becoming saturated, and lifetime customer loyalty is critical for the continued revenue growth of Starbucks. The critical nature of in-store sales through point-of-purchase messaging and fulfillment of promises to customers is central to the growth of the company worldwide.

Starbucks chooses to focus on just-in-time messaging in their stores, including the seasonal promotions around Banana Creme Frappacinos and the hot, spiced ciders and peppermint coffees during the winter holiday months. The high seasonality components of their product strategy, and the season the company decides to launch the majority of their products, is winter. This is due to the fact that they have an entire year to create a concerted launch and product strategy, and also create a series of point-of-purchase displays.

Another key point regarding the interconnection of point-of-purchase and product lifecycle strategies within Starbucks from a global perspective is this: it is always a season away from winter in any part of the world at any point in time. This translates into a significant competitive advantage for Starbucks in terms of learning their product strategies in the winter of Australia for example which is in fact the Spring of the Western Hemisphere. The knowledge transfer and focus on sharing lessons learned through geographies is what is more than anything else besides the store build-out in the U.S., key to the company's growth. Underscoring these growth strategies is the core messages of rewarding yourself with Starbuck's latest drink creation, whether you are in any hemisphere, there is something new in their product strategy that drives both new customers and lifetime customer value being increased. The integral part of messaging in lifetime customer value and a product strategy that never stops due to the multi-hemisphere focus of the company is why Starbucks dominates global coffee service today.