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Marketing Portfolio for Starbucks

1.0       Executive Summary

The report examines and analyses a portfolio of advertisements from Starbucks. The main segmentation criteria used by Starbucks is psychographic segmentation, targeting customers based on their lifestyle and attitudes. Starbucks aims to create loyal customers and reduce brand switching by offering a wide variety of products and special coffees regularly. Using a combined push-pull strategy, the company mostly relies on advertising, promotions, personal selling, Internal marketing, and public relations, all making good use of AIDCA formula. An important part of this strategy is the (basically) exclusive distribution channel used in the UK and the premium pricing strategy supported by augmented products such as after-sales service. Overall, think these adverts serve the company well by communicating why Starbucks is unique.

2.0       Company Description

Starbucks was chosen because it is one of the most admired and successful coffee companies in the world with more than 6,000 self-operated and licensed stores in 38 countries outside USA (Starbucks Coffee Company, 2008). It serves more than 30 different brands of blend coffee as a roaster and major retailer, as well as iced beverages and other related products. In the UK, Starbucks is the leading operator of branded coffee shops based on turnover (Key Note, 2009). Starbucks primarily competes with other coffee shops, which include outlets that are principally involved in selling coffee and other hot and cold drinks, usually along with some snack foods, such as muffins and cakes, such as Costa Coffee and Caffè Nero. Of the approximately 10,000 coffee shops in total in the UK and the Republic of Ireland, the major branded chains account for around 30% of all coffee-shop outlets (Key Note, 2009). In terms of turnover, Key Note (2009) estimates that the total turnover of all coffee shops in the UK and the Republic of Ireland was £4bn in 2008, with branded coffee shops gaining about 35% of total coffee-shop revenues (about £1.4bn in 2008). Starbucks also indirectly competes with retailers that offer coffee-shop facilities but are engaged mainly in selling other items, such as department and bookshops, as well as retailers that derive their sales mainly from the sale of food, such as Subway and McDonalds.

3.0       Overview of the Adverts in the Portfolio

Seventeen adverts are included in the portfolio in the Appendix. Ten of these are print adverts, while two are from the company’s US website, two are pictures taken of promotional material at Starbucks shops, one is a screen grab of a television ad available on Youtube, and two screen grabs from Starbucks UK’s Facebook page. Various creative approaches are taken, but mostly you will notice a minimalist approach taken to how the adverts are created, especially in the print adverts and there is generally one clear message in each ad. However, the adverts in the Appendix have been categorised based on the market segment that they predominantly target: serious coffee drinkers, socially conscious coffee drinkers, and non-coffee drinkers, with a fourth category added to reflect the fact that food items are also an important revenue stream for the company.

4.0       Segmentation, Targeting, and Positioning

The main segmentation criteria used by Starbucks is psychographic segmentation, targeting customers based on their lifestyle and attitudes about ‘fairtrade’ food (Solomon et al., 2002). The core consumer for Starbucks is the ‘serious coffee drinker’ (upscale market), which it tries to reach with adverts and other promotional material that reflect the quality of the coffee that it serves, as well as displaying its dedication to providing its customers with the best coffee (Pictures 1, 2, 4). The third ad in the first series is a screen grab from the US website, showing a range of special coffee blends that the customer can try at the store each week for eight weeks. The final picture in this series shows in-store promotion for the company’s new ‘Via’ brand of coffee that customers can buy and brew at home, again targeted at those who want a good coffee experience.

With the increasing emphasis on corporate social responsibility, Starbucks’ is also seeking to develop a market of consumer that are interested in their products being socially conscious. The adverts in this series (Pictures 6-10) talk directly to those consumers who are interested in changing the world, one cup of coffee at a time. So these adverts are still aimed at coffee drinkers, but these adverts help the company to project an socially responsible image – flavourful, lively, multifaceted can define the company as much as the (Starbucks) RED coffee (Picture 9).

Above everything, Starbucks is a lifestyle brand and the company aims to attract a wider demographic of customers and so offers several products for the non-coffee drinker (or the less hardcore coffee drinker) who still wants to be a part of Starbucks’ social environment. The third set of adverts (Pictures 11-15) is aimed at these people, with the first three adverts being for the Frappachino blended beverages, also known as the Summer Drinks flavours, which serve to help the company to reposition itself in developing the non-coffee iced-beverage market. The third ad in the series is especially powerful in getting across the idea that Starbucks is not only about coffee. The final series of adverts (Pictures 16-17) also fits into this category somewhat, because (while the food is accompanied by coffee in both promotions), these adverts also show that there are other reasons to indulge in Starbucks other than coffee.
This STP strategy seems effective, since the serious coffee drinkers, socially conscious coffee drinkers, and non-coffee drinkers segments are distinct segments, have common needs, respond to market stimulus, and can be reached by marketing (Jobber and Fahy, 2006). The segmentation and targeting used by Starbucks allow the company to position itself as a (socially conscious) high price-high value brand.

5.0       Consumer Buyer Behaviour

Consumer decide on which brand they want to choose based on either the functional benefits, the emotional benefits, or both (Jobber and Fahy, 2006). The function or performance benefits of the brand are important to consumers, but they also choose particular brands because it can be used to express their personality, social status, or affiliation (symbolic purposes) or to fulfil their internal psychological needs, such as the need for change or newness (emotional purposes) (Solomon et al., 2002). Some researchers present purchasing as a problem and is often presented as the buyer decision-making model: problem recognition, information search, evaluation of alternatives, purchase, post-purchase evaluation (Jobber and Fahy, 2006).  For high involvement products, such as high priced products/services (economic risk) and products/services visible to others (psychological and social risk), the consumer often goes through an extended decision-making process that includes all these steps. However, with the prices ranging from £2 for a basic espresso to over £4 for hot lattes, Starbucks’ prices are among the highest in the UK, but in the general scheme of things coffee is a low-involvement product. This means that consumer are often engaged in a limited decision making process, or they may see coffee buying as an impulse purchase or a routine purchase. Additionally, if consumers are loyal to a specific brand, they would tend to buy coffee without much information search or evaluation of alternatives (Jobber and Fahy, 2006).

Starbucks is trying to get consumers to get more involved in the product in several ways. First, Starbucks is marketed as a status item (Pictures 11-15) and so it is more high involvement (has more economic, psychological, and social risk) than unbranded coffee or cheaper coffee from Subway or McDonalds. Second, the company is using various campaigns, such as ‘Bold Coffee’ campaign (Pictures 3 and 7) and the ‘Via’ taste challenge recently conducted in the UK (Picture 5) to get consumers to come into the store continually and try its products. This is a good use of buyer behaviour theory, which predicts that customers may switch brands just to try something new (Jobber and Fahy, 2006). By providing customers with a new flavour to try each week, Starbucks actively manages customers’ natural inclination to try new things. And by emphasising its socially responsible behaviour, Starbucks is also providing consumers with more benefits on which to evaluate its products (Solomon et al., 2002). Starbucks is also making good use of consumer buyer behaviour theory by building a strong brand to which customers are loyal, meaning that these customers do not even consider other brands when they are going for coffee, they will immediately choose Starbucks because it is the coffee for anyone who really loves coffee (Pictures 1-5).

These adverts are generally aimed at all the stages of the buyer decision-making process. For example, Pictures 14 and 15 are adverts that are aimed at the problem recognition stage as these adverts lets the consumer know that these products are available and seek to arouse their motivation to visit Starbucks. Most of the adverts help with information search because they provide information on the functional and emotional benefits that the product can provide. This is the same with evaluation of alternatives, because the aim of all these adverts is to keep Starbucks within the consumer’s evoked set. This is helped by reinforcing the prestigious brand name and providing consumers with a range of tastes and aromas. Pictures 14 and 17 are two of the adverts that are asking consumer for action, to purchase something. Finally, Pictures 6-10 and 12 help with post-purchase evaluation, as it reinforces to the consumer the benefits of paying £4-5 for a cup of Starbucks coffee and thus reduces post-purchase dissonance (Jobber and Fahy, 2006).

6.0       Promotion

The most common promotional mix elements used by Starbucks are advertising, Internet marketing (Picture 7), personal selling, public relations, and sales promotion.  In terms of advertising, Starbucks spend a small percentage of its revenue on advertising (Subhadra, 2003), relying to a greater extent on its image advertising, such as movie and television placement, in order to promote the success of the business (Kembell et al., 2002). When it does advertise, Starbucks uses print media a lot (as evidenced by the majority of adverts in the sample), as the company’s target market tends to be educated people who do more reading than average (Kembell et al., 2002).

In terms of Internet marketing, Pictures 7, 10, and 17 show that Starbucks spends a lot of its promotion time and money on interacting with customers. Its Internet promotions are often done in a manner that lets customers interact with the product or leave comments, even if they are not directly able to interact with Starbucks staff. The company engages in personal selling through their passionate baristas in the store. As indicated in Picture 4, the focus is on customer service by providing the perfect cup of coffee to customers every time. In terms of public relations, Pictures 7 shows one aspect of this, as the company is often engaged in charitable causes and highlights this through its promotional material. Finally, there is also sales promotion, as highlighted in Picture 5, which takes the form of samples.

In terms of promotional strategy, the company uses a push strategy, which involves the active engagement of customers using direct selling channels and emphasising promotion and advertising (Jobber and Fahy, 2006). At the same time, there are elements of a pull strategy being used, as the company has developed a highly visible brand to encourage customers to seek out its products.

7.0       Communication strategy

The message that Starbucks is sending in each advert is very clear. For example, the adverts represented in Pictures 1, 2, and 4 are very clearly expressing the quality of the coffee that consumers should expect to get when they visit Starbucks. The same can be said about the adverts in Pictures 12-16, which clearly show that Starbucks is not only for coffee and also that the high quality that is offered to coffee drinkers are also offered non-coffee drinkers. Similarly, the adverts in Pictures 6-10 clearly express the company’s social conscience.

The adverts effectively communicate the company’s brand values by making good use of the AIDCA formula: attention, interest, desire, conviction, and action (Jobber and FAhy, 2006). The clean palate and the bold fonts used easily catch people’s attention and can generally be read from afar. Similarly, the way the products or brand is presented tend to draw interest. Other adverts present testimonials (Pictures 10 and 17), while several ask for action (such as Pictures 3, 5, and 14).

8.0       Pricing

There are different pricing strategies available to firms and each will be optimal in different situations (Jobber and Fahy, 2006). One strategy is premium pricing, which is also called a high price-high quality strategy, and this allows the firm to charge higher prices because there is something unique about the product. Exclusivity is partially derived from price because more expensive products exclude some consumers who might like to buy them (Solomon et al., 2002). It is therefore expected that the high status products will to cost more than the mundane brand. In line with this, Starbucks’ adverts do not contain pricing information because product pricing is premium, which is due to the company’s commitment to quality products and a high level of customer service. Indeed, the only time price is mentioned in the sample of adverts is when the company is depicting low prices as suspicious (Picture 6) and how higher prices can change the lives of others (Picture 7). In this way, the pricing strategy is again used to reinforce the brand as being socially responsible and helping to justify the price (and reduce dissonance). The premium pricing strategy has to be carried out throughout the life of the product (Solomon et al., 2002). For example, using deep discounts and other price promotions are generally not  the best tactics when selling status goods. Therefore, while Starbucks will use promotions where it gives customers things for free for trial (Picture 5), it does not engage in price promotions to any extent (Kembell et al., 2002).

9.0       Product

The marketer has a lot of control over the product offered. The core benefit that Starbucks offers is providing customers with an opportunity to take a break from their busy lives in a relaxing atmosphere. The tangible products that are offered include coffee and tea beverages, whole bean and ground coffee, food items, and coffee-related equipment. In terms of the augmented product, Starbucks offers after-sales service in the form of wireless connections and atmosphere in store, as well as providing customers with some education about coffee and coffee making and an interactive website.

As noted, Starbucks is as much about the experience of drinking coffee (or some other drink)  as it is about the coffee or the tea itself. This indicates that Starbucks’ brand is about its product, its people, as well as the in-store experience (Strehle and Cruickshank, 2004). The brand is communicated very effectively by the adverts, especially the repeated brand logo which uses complex graphics to help in product identification. The elements of the brand communicated through the adverts in the portfolio include: high quality coffee, rich taste, variety of choices of complementary food and beverage, warm, friendly, and homelike store atmosphere, and socially responsible/caring.

10.0     Place

Exclusivity is partially derived from whether a good is available. By limiting the number and type of distribution outlets in which consumers are able to purchase the product, marketers restricts access and thus protect the perceived exclusivity of the product (Solomon et al., 2002). To main this exclusivity, the main distribution strategy for Starbucks’ is sales through stores, which is explicitly stated in Pictures 10 and 14 although most of the adverts bring across the message that Starbucks is a coffeehouse. The company is now embarking on the sale of ‘Via’ ready brew coffee, to complement its sales of coffee beans, all of which are available directly from the store only. The adverts are definitely trying to pull customers into the store to try new coffee flavours and new products (Thomson and Strickland, 1999). Having products available only through Starbucks is congruent with the image the company wants to portray.

11.0     Critique and Recommendations

The brief exposition presented shows that Starbucks uses a variety of elements within its adverts, but most importantly, these adverts reinforce the company’s position as a (socially conscious) premium quality coffeehouse. These simple adverts that focus on quality and experience seem to serve Starbucks well by telling the story of what makes the company special; highlighting what customers can expect to get from Starbucks that they cannot get elsewhere. The main areas in which others compete with Starbucks is on price, and so the adverts are reiterating that price is not always the most important thing by communicating the company’s unique position and value to its to customers.

Starbucks’ marketing strategy continues to be one of its main strengths as it uses traditional advertising less than many others, instead relying to a greater extent on its image advertising (Kembell et al., 2002). This has made the company image on its key areas of success and as consumers have become more socially responsible, Starbucks has followed that trend in incorporated that aspect into their image as well. Going into the future, it is important that Starbucks positions its brand as an experience so as to entice new customers.

Bibliography

Isdiro, I. (2004). Learning from Starbucks: 10 lessons for small businesses, 04 October. Available online at www.powerhomebiz.com/vol144/starbucks.htm [accessed 24 March 2010].

Kembell, B., Hawks, M., Kembell, S., Perry, L., and Olsen, L. (2002). Catching the Starbucks fever: Starbucks marketing strategy. Unpublished paper. Missouri State University.

Jobber, D. and Fahy, J. (2006). Foundations of Marketing. Berkshire: McGraw-Hill.

Key Note (2009). Coffee & Sandwich Shops 2009. Key Note Market Reports.

Solomon, M., Bamossy, G., and Askegaard, S. (2002). Consumer Behaviour: A European Perspective. Harlow, Essex: Pearson Education Ltd.

Starbucks Coffee Company (2008). Company Fact Sheet 2008. Available online at http://www.starbucks.com/assets/company-factsheet.pdf [accessed 24 March 2010].

Starbucks to promote ‘FairTrade’ coffee. (2002). PeopleandPlanet.net, 19 September. Available online at http://www.peopleandplanet.net/doc.php?id=1750 [accessed 24 March 2010].

Strehle, P. and Cruickshank, M. (2004). Starbucks: International Business Concept and Starbucks in Germany. University of Lappeeranta: GRIN Publishing Scholarly Papers.

Subhadra, K. (2003). Starbucks international operations. ICFAI Centre for Management Research. Available online at: http://www.icmr.icfai.org/casestudies/catalogue/ Business%20Strategy1/Starbucks%20International%20Operations.htm [accessed 24 March 2010].

Thomson, A. and Strickland, A. (1999). Strategic Management: Concepts and Cases. McGraw-Hill.

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