Marketing Mix

Starbucks: Delivering Customer Service

Starbucks is a widely recognized brand name around the world as a provider of gourmet coffee beans, coffee-based drinks and non-caffeinated beverages.

Starbucks customer-based value proposition is to create an "experience around the consumption of coffee that people weave into the fabric of their everyday lives"; they feel this is vital to their business because it sets customer expectation of the company and standard of behavior for the "partner" interaction with the customer. i.e. customer intimacy.

Starbucks started out as a market driving organization because when they started business there was no demand for this new concept of creating an "experience" around the consumption of coffee. Now that Starbucks is established they are now market driven and are catering to the wants and needs of the people they have captured by their business.

When applying the S-Q-I-P approach, service, quality, image, and price all work together to help Starbucks achieve its overall customer-centric goal of establishing Starbucks as the "most recognized and respected brand in the world"; Service - customized service, Quality - high quality specialty coffee products, Image - individual coffee experience, Price- luxury price for a luxury item.

Starbucks has positioned itself clearly by creating a coffee experience for the customer of which is centered on three main components; (1) the core product itself which is the "coffee experience"; (2) the tangible which is the high quality coffee; and (3) the augmented product which is the atmosphere that encourages people to linger and return. In essence Starbucks provided great quality products, customized, served in a pleasant atmosphere in a friendly and fast manner and provided a place for people to escape from home or work with an image that was supposed to appeal to people who like to interact with other people in a "third place", away from home or work.

Starbucks has used premium price strategy to position their product by charging a higher price for their coffee to imply higher quality. The thought behind this is the "Starbucks experience" was/is an affordable luxury. The Price skimming practice has proven effective for Starbucks and has allowed them to build a high quality image of its products and service. They are afforded this opportunity because the target market they have attracted are willing to pay for their product/service they provide at the high price they ask because they have established themselves as a high quality product with a perceived high quality brand image; there is little competition and threat for substitute products.

The unique service proposition created by Starbucks that sets them apart from the competition is the ambiance and customized service. Starbucks is clearly ahead of its competitors. Some of their competition are small specialty coffee chain (Caribou Coffee) and independent shops, and donut (Dunkin Donuts) and bagel chains. While this competition does not seem a serious threat to Starbucks because they have a large share of the current market, they must be wary because there is little product (coffee) differentiation between Starbucks and the competition. Substitute products are also a threat like espresso machines made for home use.

As part of Starbucks integrated marketing strategy to ensure the highest quality, Starbucks controls the vertical channels of operations which includes purchase of coffee beans directly from growers, overseeing roasting the beans, and distribution control of coffee beans. Additionally, Starbucks promotes their products and services at the service counters via the baristas; word of mouth advertising. They have established relationships with third parties to further expand their business in non-company operated stores which has allowed them to reach new customers. They also have taken advantage (piggy-backed) of well known companies (Pepsi-Co, Kraft Foods, and Dreyer's) channels of distribution and advertising campaigns which has allowed them to keep their advertising costs to a minimum. While the minimal advertising expense is attractive, it can have a negative impact on Starbucks brand image which will ultimately affect customer retention so they should not solely rely on the word of mouth and third party advertising.

Their internal market strategy is also a customer value strategy that provides customized customer service that goes to the nth degree to ensure customers satisfaction. Starbucks considers all its employees (baristas) Partners who are trained to work efficiently to provide fast service, while exercising the ability to customize handcrafted beverages. A value-added activity is the "Just Say Yes" attitude that empowers the baristas to provide the best service possible even if it requires going beyond company rules. Starbucks employee-training program is an example of Starbucks commitment to customer service. The