Starbucks Campaign Market Analysis

Starbucks Company Market Analysis

0105.363.01 Marketing 20062

RIT Professor Marty Lawlor

Team 5: Stacy Di Mora, Karyn Lewis, Sarah Lind

0105.363.01 Marketing Analysis—Starbucks Co. 2

Executive Summary

Starbucks Company Our team of external consultants has been queried to assess the gourmet coffee market for

Starbucks Co. in order to develop a marketing strategy with recommendations for the

company.

We’ve crafted a strategy to improve the sales of existing products and justify the launch

of a new product offering, detailed in this document. We did this through completing a

market analysis, determining the current strengths, weaknesses, opportunities, and threats

facing the company, defining the market segmentation, target market, and product

positioning for the company, and outlining the company’s current and opportune

marketing mix.

As standing, Starbucks is the world’s number one specialty coffee retailer, currently with

more 12,000 coffee shops in more than 35 countries. The outlets offer hot and cold coffee

drinks and few food items, as well as beans, some coffee accessories, and teas. The

company owns about 7,100 of its shops, which are located in about 10 countries—though

mostly in the U.S.—while licenses and franchises operate more than 5,300 units

worldwide. In addition, Starbucks markets it coffee through grocery stores and licenses

its brand for other food and beverage products.

We’ve found the popular coffee company underscores a simple truism: a good idea is not

enough; its execution is critical (Forbes). The company adds hundreds of outlets each

year, yet quality and service rarely suffer. Furthermore, the success of the company

underscores the fact that America can successfully compete even in non-high-tech

products and services as long as there is an environment that encourages innovation in

product and marketing creativity.

If coffee behaves like pizza, hamburgers, any many other retail segments, it will mature

from a fragmented collection of players into a segment dominated by a few large chains.

In addition, customers will be expecting more from their coffee providers. Many local

and regional operators are doomed. The bigger picture for Starbucks is building a brand

that transcends java to include an array of other items, like custom-made food items, that

can compete with the fast-food market. It’s on its way to becoming the “Nike or Coca-

Cola” of the market segment.

However, the tables can turn. Starbucks has occasionally suffered the big chain’s

burden—the same kind of anti-corporate backlash that big businesses like McDonald’s

and Wal-Mart have faced.

In the face of this competition, we recommend Starbucks enhance and expand the drive-

thru experience for the majority of their stores, open up and experiment with new venues

of advertising, and make exclusive their development of made-to-order food products

such as gourmet sandwiches to their product line, as tested in few outlets.


Market Analysis

Market Snapshot

Right now the gourmet coffee business is hot. It is the ultimate commodity—anyone can

now grind coffee beans in their kitchen, and virtually every food outlet sells the stuff

(Forbes). From multi-national fast food chains and service stations to street-corner coffee

carts, a lot of new players want in on the boom. Big companies are moving in on the

supply of specialty branded coffees and the battle is heating up.

The current market is certainly sustainable for the number there is now, but it is yet

unknown how it will hold up to more. Growth in the coffee industry is expected to peak

around year 2010, and between now and then a slow but steady increase in the number of

mergers is predicted (The Gale Group). The biggest competition the market faces is from

overseas companies that are coming in and buying business—using special discounts and

perks despite the questionable quality of the coffee itself to increase its market share

(Forbes).

Specialty coffee is one of the fastest growing food service markets globally, with a net

income of approximately $9.6 billion in 2004 in the U.S. alone, due to the explosion of

cafes and gourmet retailers in the 1990s (The Gale Group). The industry trade group

Specialty Coffee Association of America (SCAA), in its Retail in the USA 2005 report,

stated that at the end of 2005, coffee sales had reached $11.05 billion. In 2005,

Americans drank more than 300 million cups of coffee, with 75% of those being home

brewed. 15% of all Americans drank a cup or more of specialty coffee daily, an increase

of 6% from 2000.

An early 1990s study by the SCAA noted above-average consumption in the Pacific,

Middle Atlantic, and New England states and found gourmet coffee drinkers tended to be

slightly more affluent than average and that they lived or worked in big cities (The Gale

Group). Gourmet coffee consumption also rose with the drinker’s educational level.

Those who finished college bought 49% more gourmet coffee on average and those with

some postgraduate education bought 71% more. Furthermore, households with children

and two working parents bought 28% more gourmet coffee.

Trends

Within the gourmet coffee market, there have been more and more similarities to the

sophistication of the wine industry. Once people drank simple wines, but now they are

extremely brand conscious and have strong preferences. The same is being seen with

coffee. With this, there is often a significant increase in sales every time a café starts

using branded consumables. The consensus is that these coffee drinks are a long-term

trend, not just a flash in the pan, with the goal of elevating people’s taste for something

they’re already quite familiar with and leading them to coffee houses to get it (Scarpa).

Many companies are tinkering with expanded food menus as well. An in-store display of

fresh baked goods and sandwiches and Ceaser salads has been shown to increase sales


about 30% or more (Scarpa). Some feel that as the segment matures, customers will want

more than just coffee. One of the newest trends in the domestic market is drive-thru

coffee stores (The Gale Group). Starbucks had 540 drive-thru stores in early 2004, all of

which were seeing continual growth and long lines.

Another trend includes consumer requests for organic coffees, which provokes more

emphasis by retailers on the beans’ growing environment (The Gale Group). The array of

products was never wider as retailers added more flavors to whole beans and variations to

the basics of espresso and steamed milk. The more clever retailers have added coffee

shakes and iced tea concoctions such as chai to their menus to outdo competitors who

offer mere iced lattes. Since most specialty retailers also retail whole beans, many stores

have added home espresso machines, coffee grinders, and other brewing supplies for add-

on sales. To further increase market shares, many gourmet coffee companies have also

ran catalog sales departments and competed for new wholesale clients such as restaurant

chains and supermarkets.

Many industry firms today, as well as Starbucks, sell whole beans in addition to their

individual drinks at their stores. They serve coffee drinks to consumers in two forms: the

filtered drip coffee familiar to most Americans, and European-style espresso—a more

concentrated form of the brew—which is harder for consumers to make at home (The

Gale Group). Despite efforts to expand coffee’s daypart, we’ve found that most coffee is

consumed in the mornings (Scarpa). The following chart shows coffee consumption

throughout the day.

Share of Coffee

Consumption

Evening 7%

Lunch 8%

Afternoon 8%

Dinner 8%

Morning 16%

Breakfast 54%

Primary Strategies

The key to economic growth is not just the low cost of production, it’s the value-added—

the innovation, design or architecture, or the sheer intangible or exciting fashion of a

brand (Forbes). It’s more than just the product itself. Success in the gourmet coffee

market requires a strong name, a good training program, and excellent customer service.

Success is listening to the customers’ needs, devoting business and research means to

come up with solutions, then creating products that serve each the customers, the

environment, and corporate business objectives (Pigott). Businesses that have committed

themselves to standing for something beyond their product in an authentic, meaningful

way aren’t just connecting with their customers—but changing the way their employees

feel about their place of work.


With the evolution of the coffee shop from mere fueling stations to away-from-home

gathering places, entertainment spots, and an alternative to bars serving alcohol, success

is also making an effort to make branches all the more café-like for a more friendly,

casual atmosphere (Scarpa). The welcoming atmosphere has enabled Starbucks to sell an

array of tempting and expensive extras such as pastries and CDs. Starbucks’ principle

marketing strategy is inventing a new way to do something that people have been doing

for years, and focusing their business around their customers. They employ themes such

as using chalkboards to display menu items and prices, extras like CDs, and holiday-

related food and beverage items. The company has also achieved market dominance by

imbuing in its brand social issues such as fair trade, sustainable development, literacy,

and clean water (Pigott).

The company also strategically pays attention to how it labels its products. Instead of

small, medium, and large, for example, Starbucks uses “tall,” “grande,” and “venti.” In

this way, the company underscores a simplistic truism—the execution of a good idea is

critical to its success. The company’s ultimate goal is to build on the brand that

transcends java to include an array of other items—such as branded ice cream, bottled

beverages, beer, and perhaps even cyberspace (Scarpa).

Competition

Starbucks top competitors include primarily Dunkin Donuts, Nestle, and Tim Hortons

(Bramhall). It is predicted that specialty coffee will follow the pattern of other fast-food

segments, in which a few dominant chains gobble up weaker business, but a full-scale

shakeout is still far off (Scarpa). Other signs of the maturing of the segment were the

initial public offerings by small players determined for success in the market. Mall-based

coffee inlets have a widespread franchise system and a big trade in whole beans, brewing

wares, and coffee drinks. However, building lots of stores isn’t the only definition of

growth. Wholesale business is a large chunk of the market.

Other than specific businesses, there are several other risks to the gourmet coffee market

(Freidman, Billings, Ramsey).

- High gas prices, minimum credit card payments, and a slower housing market could

cause the consumer to cut back on spending on food away from home.

- Spikes in dairy or coffee prices could hurt margins.

- Starbucks’ international business produces approximately 10% of earnings, primarily

from Canada, the U.K., and Japan. Economic weakness or exchange rate fluctuations

in these markets could have a negative effect on Starbucks.

- Expectations for Starbucks are very high, reflected in its P/E ratio. If same-store sales

should slow below the market’s expectations, the stock’s reaction could be

significant.


- The restaurant sector is a very competitive space, with few barriers to entry. Increases

competition in specialty coffee, including new café opening and entry into specialty

coffee by larger fast-food or packaged food competitors, could hurt Starbucks.

- Terrorist incidents in the U.S. or abroad could hurt consumer spending.

- Weather can have a short-term effect on sales.

Positioning and Relative Market Shares

Starbucks is a high-margin brand that serves about 4 million customers per week

(Forbes). Furthermore, the company also currently owns Seattle’s Best Coffee and

Torrefazione Italia coffee brands (Bramhall). The company is sitting comfortably in the

stock indexes, currently included in the S&P 500, ranking in at #338 in FORTUNE 500,

and #240 in FT Global 500. At the end of September, Starbucks’ 2006 sales were

upwards of $7,786.9 million, with sales growth of 22.3% over a year’s span (Bramhall).

Given the rate at which branches of Starbucks are springing up, it could be mistaken that

consumers are so hooked on coffee that the two biggest makers of grocery store coffee—

Nestle and Kraft—must be enjoying unparalleled success (Claire). However, there is

evidence that a more plentiful supply of specialty coffee drinks is making consumers—in

urban areas at least—turn their noses up at standard grocery brand coffees. The maturity

of the coffee market means that the major manufacturers are searching for ways to

squeeze out some value growth. The below highlights the market share of the top

competition for gourmet coffee, compared to that of the market and industry median.

Starbucks takes the lead in profitability.

Profitability Starbucks Dunkin Nestle Tim

Hortons

Industry

Median

Market

Median

Gross Profit

Margin

59.20% -- -- 27.90% 24.50% 51.30%

Pre-Tax

Profit Margin

11.60% -- -- 18.60% 4.80% 6.40%

Net Profit

Margin

7.20% -- -- 12.90% 3.80% 4.90%

Return on

Equity

26.1% -- -- 36.0% 11.6% 9.4%

Return on

Assets

14.2% -- -- 11.4% 6.2% 1.6%

Return on

Invested

Capital

19.6% -- -- 13.6% 7.3% 4.3%


Intended Customer Segment

Starbucks is an international company that is recognized and respected. It’s is well known

for its coffee as well as the relationships formed with its customers. The typical gourmet

coffee fan is that sought-after individual with high levels of education and disposable

income (Scarpa). This targets college students and business people in general, as well as

individuals from the baby boomer generation to generation Y. Starbucks aims to promote

their brand and the coffee experience to foster human connections—which is what

Starbucks advertising is all about (starbucks.com).

SWOT Analysis

Strengths

- Customer Loyalty—Starbucks has very strong brand recognition and faithfulness

among those who frequent the coffee shop. The Starbucks “high flyers” are known to

frequent stores at least three times a week, if not more.

- Employee Loyalty—Starbucks’ partners are their greatest assets. They empower

their employees, allowing them to make their customers’ experiences memorable and

satisfactory.

- Themes—Each Starbucks store is allowed its own individuality, though the business

as a whole is unified in the look and feel of the restaurant envionment. For example,

chalkboards are used for creativity in expressing the menu. CD’s, books and movies

are also sold, which the company helps to produce and/or promote. The book

readings and signings have been very successful for both Starbucks as well as the

individual authors.

- Social Issues—Starbucks supports many social issues including, but not limited to:

Fair Trade Organization, literacy, clean water and health issues.

- Coffee is still an up and coming industry, and Starbucks is growing right along with

this business.

Weaknesses

- Some of the stores may be overpowering to the cultures they merge into. For

example, in their Dublin store in Ireland, local coffee shops open mid to late morning,

while Starbucks opens much earlier. Some people feel that this takes away from the

laid back atmosphere of the Irish culture (Hammonds).

- Starbucks has a somewhat narrow product line for their overseas countries. For

example, it is hard for Starbucks Coffee to promote tea in China.


- Many people and industries view the company’s lack of advertising as a negative

business strategy.

- Over-expansion: too many stores. Starbucks may eventually become too big for

itself.

- Over-expansion: too many products. Right now Starbucks is venturing out of the

coffee industry and into music, books, entertainment, and other foods as well. Too

many brand extensions may become harmful to the company.

Opportunities

- Starbucks could add to their product line multiple brand extensions: desserts,

sandwiches, coffee makers, espresso makers, IPOD stands, breakfast items, more

coffee/hot chocolate variations, etc.

- There is a great deal of overseas expansion available to the Starbucks Coffee

Corporation.

Threats

- Immediate competition from fast-food restaurants catching on the specialty coffee

wave and developing products that competes with Starbucks.

- Tim Hortons

- Dunkin Donuts

- McDonalds

- Nestle

Market Segmentation

Target Market

Starbucks is mainly adult-focused and aims to connect with their customers,

communities, and children through various advertising tactics. The vast majority of these

customers come from urban areas, where individuals are willing to go the extra mile to

purchase costly gourmet coffee.

Another new and large growing target market within the coffee industry is college-age

students and post-graduate individuals residing in urban areas. These two segments

account for the largest portion of gourmet coffee drinkers (Isidro). There have been

studies showing that coffee consumption has increased with the drinker’s educational

level. Those who have finished college have bought a lot of coffee but those who are in


the post-graduate level have bought 71% more (The Gale Group). Urban areas have the

most coffee drinkers because it is where most of the educated professionals are located as

well as the large universities. More and more individuals are becoming educated which

shows that there will be a growth in the market of coffee drinkers.

Since the largest number of consumers are those being educated or beyond that stage,

sales should be increasing steadily. Starbucks, compared to other competitors such as

Tim Hortons, experiences a larger degree of profitability in urban areas due to its creative

ability to cater to the needs of the large market of young professional adults.

Market Attraction

Targeting adults and young adults is a good mechanism for Starbucks because this age

level has the same interests as the foundation that promotes arts, culture, education, and

the environment (starbucks.com). The company satisfies their customers through their

advertising, support programs and, of course, their coffee.

This large portion of the coffee consuming market is attractive because Starbucks has the

money, resources, and time to cater to young adults. In 2002, an innovative ordering

program was created—customers can pre-order and prepay for coffee, etc. via phone or

the Starbucks Express website (Isidro). This initiative and the drive-through are examples

of how this market segment is attractive. Customers want fast service and/or ideas and

methods that will save time. Now that Starbucks has established itself it is able to spend

time to increase success among different segments. Since Starbucks has the resources to

be innovative, they have captured the attention of the younger generation which is filled

with individuals willing to shell out the extra dollar for great service, atmosphere, or even

items that are affiliated with the brand.

By catering to young educated adults, Starbucks will see increased profit levels now as

well as in the future as the generation ages. Drinking coffee is a long-term growing trend

that is becoming more and more popular among adults, especially the younger adults who

make up the largest portion of the market.

Segmentation

Starbucks is a company that embraces diversity, not limiting themselves to one specific

demographic, behavioral, or geographic segment. Individuals appreciate how, regardless

of any little difference, at Starbucks they are always treated as equals. Most adults are

very open-minded which is why they are a good target market. The company promotes

minorities and women who own businesses. It works to encourage diversity and thus set

new goals to create more inclusive businesses. This helps to increase the feeling among

all their customers that they are valued (starbucks.com).

Adults like to see companies embrace all groups because in that way their children will

be prepared to be part of the global community where people of diverse backgrounds will

have to learn to work together to promote greater harmony in the world.


Starbucks advertising is under a heavy “sensitivity review,” which refers to the idea that

any offensive material will be altered to avoid upsetting certain ethnic, racial, religious,

or youth groups and other aspects that could turn customers away from Starbucks

(starbucks.com). Adults have strong opinions regarding a large variety of issues, such as

religion, race, age, money, and politics, and there are many things that could be

potentially upsetting to various communities. This review is highly important because it

prevents customers from becoming angered, and thereby avoiding negative publicity. The

advertising may be for adults but it must remain child-and-minority-friendly. The

“sensitivity review” works to keep customers coming back.

Product Positioning

Starbucks is listening to the needs of the educated by devoting its business and research

to developing ways to cater to this group’s wants and needs (Pigott). They’ve begun to

revamp its company by creating a “drive-thru” for the popular urban areas. The drive-thru

caters to the new generation of coffee drinkers because college-age students and the

general population are always in a rush with little time to spare (The Gale Group). The

drive-thru stores came out in 2004 and have been enormously profitable, making the

process of buying coffee easier by eliminating long lines or creating alternative ways to

buy coffee faster and avoid the prospect of impatient customers (Isidro).

Starbucks continues to create a retail store experience that attracts customers and has

them repeatedly coming back. In 2001, the coffee stores began to offer wireless high-

speed Internet access to enhance the gourmet coffee experience for its new-age

consumers who consist of students, business travelers, and web surfers (Isidro). By

offering Internet service, customers are feeling more and more comfortable, allowing

people to sit back and enjoy their coffee while enjoying the opportunity to be virtually

connected to the world or listening to their favorite song.

The company knows that the younger generation is concerned with brand affiliations and

they have begun to diversify their product line. Later this year or in 2008, they plan to

introduce CD burners so that customers can sample online music while sipping their

coffee (Isidro). The company currently has mugs, bags, and other durable products with

their logo which have been gobbled up by consumers who are coffee lovers. These

promotions are also methods with cash in mind. By detaining customers in the stores,

there is a greater opportunity for more purchases, whether they are more cups of coffee,

food items, or other products.

The world today as we know it is mostly based on convenience, electronics, and the latest

new fad. Most of the new additions such as a drive-thru, a diverse selection of music

aimed at different types of individuals, and high-speed internet access are all attempts

aimed at younger individuals with less time on their hands (Isidro). By being innovative

and increasing store ambiance, an environment that enhances and complements the coffee

drinking experience has emerged.


Brand Image

Starbucks has positioned itself so that it keeps customers satisfied the minute they walk

in, to placing an order, to receiving the cup of fresh coffee within a timely manner, and

finally to either being able to relax and feel at home in the rich ambiance that is offered or

moving on with their daily routine (Isidro). A large reason for Starbucks’ success is

accredited to the fact the company is dedicated to keeping customers satisfied. There is

not one strategy in which the corporation partakes that is not directed at satisfying

consumers.

Furthermore, Starbucks does not market children or youth directly, but uses advertising

and event-sponsorship programs for community activities that are important to a younger

audience. The company supports youth education programs that benefit diverse and

undeserved communities in order to please adults and attach the brand name to a good

cause. These events and programs are usually child-friendly, which pleases the parents

who tend to be the Starbucks customers (starbucks.com).

Starbucks has entered the age where it is now a known brand with positive affiliations in

the community as well as towards helping children. By being involved in community

activities and education programs for children, Starbucks is indirectly earning the respect

of its consumers who are the future of the company. Another good reason for satisfying

parents or communities is that later on, when the children become of age, they will buy

the coffee that they have seen their parents or older individuals drink. Educated

customers with a large degree of discretionary income know that any of the products

purchased will be satisfactory and enrich their coffee experience.

Marketing Mix

Product “The customer base is asking us to be innovative,” says Richard Feinberg, director of the

Perdue University Retail Institute, on behalf of Starbucks. “Our organization is really

looking to enhance the food side of our business” (Schouten). It would be most beneficial

for Starbucks to focus on their in-store items and baked goods. The test locations have

already started to focus on this trend, and have given positive feedback and results.

The focus product will be the in store made sandwiches. This breakfast option is

scheduled to go company wide within the 2007 fiscal year (starbucksgossip). Multiple

choices are available in Washington D.C. and other locations already (Zimmer). These

variations include: ham, bacon, sausage, eggs Florentine, turkey with spinach and sun-

dried tomatoes. Also, modifications of these made-to-order products will be available.

The breakfast sandwich is largely based on the company’s need to compete with

McDonald’s fast food restaurant, that has recently added “Gourmet Coffee’s” to its menu.

Although Starbucks coffee sales continue to rise, McDonalds has become a strong

competitor in the industry. “Egg McMuffin” is often used as the general term for


breakfast sandwiches, and Starbucks is attempting, with their own products, to break that

name brand association.

These sandwiches are similar to the McMuffin, but with a much wider range of freedom

for their customer’s palettes. For example, Starbucks will offer a whole-wheat muffin,

sourdough muffin, and plain white muffin for the product base. There are multitudes of

options for the meat, including: turkey, chicken, ham, sausage and bacon. Also, a mix

and match of toppings gives the customers an extended opportunity to personalize their

choices.

A variety of “house selections” will be created, and the chalkboard menus will allow

variation from store to store; week to week. Such options will include: Eggs Florentine

Muffin, Turkey Jack Muffin, Lumberjack Muffin, etc. These pre-fabricated sandwich

options will be described in full on the menu board.

Another product that will be promoted is a breakfast parfait. This product is in direct

competition to the McDonalds breakfast parfait (Kramer). Starbucks customers have been

looking for healthier options, and along with their fat-free and reduced-fat baked items,

this fruit-filled option has already been a success in Starbucks test stores (Kramer).

The breakfast parfait will contain a non-fat vanilla yogurt; while McDonalds offers a

plain yogurt. There will be seasonal fruit options including: watermelon, strawberries,

blueberries, raspberries, blackberries, cantaloupe, honeydew and pineapple. McDonald’s

parfait contains only strawberries and blueberries. Whole-grain granola will be added to

the parfait as well to provide texture and fiber to our consumers. This option will

succeed due to its’ high health benefits and high portability as well.

Price The breakfast sandwich will range in price from $3.99-$5.99 depending on location and

type of sandwich. In general, Starbucks will be making a 15%-30% profit off of each

sandwich produced. This will vary and can be higher in simpler menu items. For

example, the meatless “Egg Classic” will produce a 50% profit, while the “Lumberjack

Muffin” that contains a variety of meats only comes in at an 18% profit.

Due to the fact that Starbucks’ breakfast sandwiches are a much higher quality than those

of McDonalds, Starbucks prices will be set marginally higher. McDonalds also offers a

greatly limited variety of products, and Starbucks customers will be willing to pay the

increased price for a customized product, rather than a flash frozen fast food creation.

Starbucks customers have strong brand loyalty, and the breakfast line will give them

more of a quality “one-stop-shopping” experience, rather than a “fast-food” experience.

The breakfast parfait item is currently offered in the New York metropolitan test markets

at $3.45 (Kramer). This price will vary slightly due to the change in demographics of

each store, as it does with their basic menu items. Although the company will be using


seasonal fruits as well as frozen, the price will remain constant year round in order to

provide stability to their customers.

Place With over 8,000 stores worldwide, Starbucks’ products are well-tested in multiple

locations prior to distribution company-wide. Their test markets include thier larger

stores, such as those in Indiana (Schouten), Washington D.C (Zimmer), New York City,

Connecticut, and their California Markets (Kramer). With success in these locations,

Starbucks is certain to succeed with their test products in other locations as well.

Starbucks announced this year that it wants grow worldwide from 12,000 stores to more

than 40,000—a strategy that requires rapid expansion outside densely populated

metropolitan areas (Starbucks Pours it on). Indiana has become a headquarters for that

strategy. Two years ago, Starbucks opened a regional office in downtown Indianapolis

that supports coffee shops in 18 states. The company also has used Indiana to test new

products including warm cereal and desserts, breakfast sandwiches and a new kind of

whipped cream.

Well over 1,000 stores are located in Supermarket locations (Major). For this reason,

testing in this atmosphere is important. Supermarket stores are projected to do very well

in the breakfast segment of their company sales as more and more people continue to

visit for a sit-down experience either before or after shopping. Since Starbucks does not

franchise their supermarket stores, a consistent “Starbucks quality” product being

produced to this niche is foreseen.

These items will do spectacularly in overseas markets as well. For example, take the store

in Dublin, Ireland. Unlike most Irish coffee shops, Starbucks is open during their

standard “American” coffeehouse hours, while the locals don’t open until mid morning

(Hammonds). This will provide clientele a means of breakfast to go along with the wake

up call of coffee. There are similar situations in other overseas stores as well.

Promotion Nobody has ever seen a Starbucks ad, billboard, television commercial, or mass media

marketing; this is something that is, and will continue to be, part of the Starbucks

company philosophy. “Avid fans and devoted employees can do more to boost a brand

than the best of marketing programs,” says CEO Jim Donald (Pellet). Through their

strength in consumer brand loyalty, Starbucks will focus on delivering a high-quality

product and letting word of mouth, miniscule local advertising, and Internet blogs and

websites carry their products forward. The chart on the following page shows the top ten

Restaurant Chains. It tells the percent of market share each company holds and the

amount of dollars each company spends on mass advertising. Starbucks ranks sixth in

the market share percentage and uses the least amount of dollars for mass media

advertisements. This company will continue to have the philosophy that word of mouth

and good service is far superior to mass marketing.


Starbucksgossip.com proves to be one of Starbucks’ biggest sources for marketing. The

company uses the site to display new products that will be hitting the shelves—and at

which stores customers can visit in order to obtain these products. Success can be tracked

through the number of “hits” on this link, and by reading the consumer responses to the

ideas and postings. Not only will the company be able to read consumer responses

through this website, but our partners (employee’s) responses as well (starbucksgossip).

This website will help determine the company’s post service response as well.

(Chart provided by John Moore)

The company’s biggest source of post service response will be through the dedication of

their partners. Being that they are trained to provide above-average customer service and

are already expected to communicate with their customers (Pellet), the company expects

nothing less from them on this matter. They will continue to provide quality service and

post service, making sure their customers are satisfied fully with their purchases. If a

customer has not had a satisfactory experience with the new food product, a short verbal

survey will be conducted in order to discover what could make the product more

satisfactory. The answer handed in to management for changes.

Starbucks customers are not quiet in their feedback methods. They send in thousands of

comment cards daily with both positive and negative critiques. These are helpful and

necessary for the company’s success. Pre-stamped comment cards will be handed out in

take out bags, hoping to increase response about the new breakfast line. A Likert Scale

will be the method of response, with a comment line available after each question, and an

additional space for comments at the bottom. These cards will help to measure the

success of the Starbucks breakfast line.


Again, dependence on all of their partners in the promotion of Starbucks breakfast items

cannot be stressed enough. CEO Jim Donald says it best: “You have to continue to

engage all of your partners.” If everybody in the company is on board with this project, it

will be a tremendous success. This includes not only their partners on the “in-store”

levels, but their growers, corporate members, franchisees and franchisers, and most

importantly—the customer. With the support of all of the Starbucks partners, the new

breakfast line items will succeed.

Recommendations

Drive-Thru

Starbucks is popular enough to sustain the possible downfalls of taking risks. The drive-

thru may not be risky but we recommend that there be risks taken to diversify it and

differentiate it from the usual drive-thru. Perhaps, while customers are waiting,

interesting non-elevator type music could be played. Or between the windows of making

the order to collecting it, there could be a widescreen television advertising Starbucks

products.

Especially in urban areas, it is harder to keep customers captivated because there are

always companies coming out with new ideas in regard to satisfying the latest wants and

needs. However, since Starbucks has managed to maintain its popularity, it should take

some risks and show their customers that they are better than ever. A drive-thru is a good

opportunity for a lot of new publicity and higher levels of sales.

The key to making the drive-thru a success is to insure that it runs efficiently and

customers leave satisfied. Workers need to communicate effectively with the customers,

and if a customer is not satisfied they need to find out why. The idea of a drive-thru is

fantastic but it needs to be operated correctly.

A drive-thru will do best in urban areas where there are a lot of students, and in family-

oriented areas where families with children have been reported to be the purchasers of the

second largest chunk of the coffee sales. The idea of a drive-thru may not be original but

it is popular among those in a rush and should be incorporated into the majority of

Starbucks’ stand-alone stores across the nation for the greatest benefit of the company.

New Advertising Venues

Brand management today means figuring out how to reach out to surprise and delight

customers wherever they may be—the Internet, a retail store, a bar, a street corner-rather

than just through media advertising (Pellet). For Starbucks, that translates to devoting

zero dollars to national television or print campaigns, and a "very small amount for a

company of our size" to local marketing efforts. Instead, the company's retail outlets

serve as its only ads.


However, it’s known the company mainly aims to see itself as an experience—an

environment that is created in a store and becomes a community that is meaningful to the

people who go there. "Our goal is to continue to stay on point for new areas of focus we

can convert into beverage and food offerings and other forms of keeping the Starbucks

experience out in front of everyone," says Donald, who notes that the company vets each

potential extension for appropriateness and practicality. "We have invisible guardrails

that we stay between by making sure that what we put out is core to the coffeehouse

experience and that it works for our partners [store employees]. A new food offering, for

example, has to be something our partners can deploy without reducing the speed of

service."

Exclusivity of New Food Products We highly recommend Starbucks promote their line of made-to-order gourmet

sandwiches and specialty food items and make permanent this launch of new product

offering. The new line has already been tested and deemed successful, and the company

is looking for a way to take the lead in the gourmet coffee market. Its competitors are

right in line with their fast-food items.

The company must not stop innovating and taking risks. Expanding the entire Starbucks

franchise to include breakfast items as well is another great way to spark attention from

regular customers. Often times students and regular working citizens will purchase their

morning ritual drink of coffee or tea from Starbucks and then stop off somewhere to get a

bagel or such. Food items usually offered at Starbucks are not so breakfast friendly.

Bagels are becoming a more and more popular breakfast and anytime snack item, making

them a quite versatile and worthwhile marketing item. Having a selection of breakfast

foods to go along with the drinks offered at Starbucks will not only make current

customers happy but draw in new customers as well.


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