Starbucks' competitive advantages in global coffee retail marketing

Starbucks Coffee

Marketing Plan

Industry Overview

Competitive Landscape

Target Markets

Product

Price

Promotion

Marketing Strategy

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.

Industry Overview

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.

Target Markets

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

Product

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).

Place

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

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.

Promotion

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 spaces, the other products also benefit from this approach as the brand loyalty has already been built.

Marketing Strategy

One trend that was identified that has worked to define a new point in history is the rise of populist movements worldwide. First it was the Arab Spring, then Occupy Wall Street, and the massive protest throughout the U.K (BBC News, 2011). These populist uprisings have reached record heights and numbers that haven't been seen in over a half a decade or in some countries much longer. As a result of these populist movements, it seems that a significant portion of the public consciousness has shifted towards are more collectivist position which will have significant consequences on business into the future. Many of these populists' movements had an underlying theme by the protested organized and stated their contempt for corporations and corporate greed.

As a result of a shifting social conscious, it is reasonable to believe that corporations should work swiftly to fine tune their corporate social responsibility (CSR) capabilities and messages. It is reasonable to believe that since the public consciousness has shifted that an increasing number of consumers will be investigating the corporate business processes and activities to try to find out information about how the organization operates behind the scenes.

Coffee also represents a sensitive industry in many consumer segments because much of the production of the coffee beans is done in developing countries. In these agricultural-based countries labor is incredibly cheap and the coffee farmers live at sub-substance levels in many cases. Starbucks has already has acquired some bad publicity in regards to the lack of social responsibility that it has shown towards many of its partners in the downstream supply chain (Reynolds, 2010). Despite various failures in social responsibility, Starbucks has developed an incredibly well established stance on social responsibility that was enacted after previous transgressions were made public (Starbucks Coffee, 2011).

Therefore, given the new trends and public consciousness and the increasing salience of CSR demands from consumers and other corporations and coupled with the fact that the competition has a well-developed program already in place; Starbucks should work quickly to promote its dedication to social and environmental sustainability. CSR practices have been based on a framework of creating sustainable production methods as well as supply chains that treat people ethically as well as place ecology as one of the most imperative considerations in the process. Negative publicity associated with lack of corporate responsibility has brought major corporations to the verge of bankruptcy in recent years. Scandals such as Nike and Martha Stewart are two examples among a number of examples.

Additionally, Starbucks can actually add value to your products and further differentiate them through CSR marketing campaigns. However, the catch to this is that your CSR messages have to be deemed credible by the consumer. Generally it is the case that consumers are skeptical of CSR promoting marketing messages unless it is a "good fit" (Jahdi & Acikdilli, 2009). A good fit is defined as a marketing strategy that is identified as reliable and credible by the customers. Furthermore organizations that are don't fit the criteria in terms of credibility could actually result in a counterproductive impact on the target market in regards to a CSR message. Instead of adding value, it might be regarded as more of a public relations trick than to be deemed as an authentic dedication to social or environmental causes.

Therefore it is recommended in light of the changing political landscape that have emerged recently, that Starbucks take another look at their CSR stance. If they find that their organization stands room for improvement then they should rectify there questionable practices as soon as possible. Starbucks should also consider implementing more social and environmentally oriented projects in the areas in which its supply chain operates. Thus they should go beyond a reactive approach to CSR and try to be proactive in their dedication to these issues. Not only will this improve the supply chain, but it will also stand to add value amongst consumers.

Conclusion

Starbucks has had a long history of using creative marketing techniques to further its business objectives. It is rare to see Starbucks engaged in any form of marketing that could be considered traditional. However, it seems that much of the social fabric has changed and may be reaching new levels of ethical scrutiny of corporate activities. Starbucks has had a mixed history in regards to CSR. It should examine its operations to ensure that there are no ethical transgressions whatsoever. Then it should be more proactive in the areas in which the supply chain operates by creating projects that tackle certain environmental or social causes. Finally, once the organization has ensured its CSR position internally, it should leverage this in new marketing campaigns to add value to consumers.