Starbucks Case Study

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October 19, 2015

Starbucks

MKT 530

Team 3

         Morgan Bailey

                                                       Mark Flatley

Helio Liu

          Juan Mendez

      Arbab Salahuddin

Starbucks (20 points)

1. What are the primary value propositions elements that Starbucks provides to the consumer?

        Starbucks presents a very clear value proposition for their customers.  A value proposition is a promise of value to be delivered and acknowledged and a belief from the customer that value will be delivered and experienced. There are several value proposition.  

• You are not just getting a cup of coffee,  but an experience.  Starbucks pledged to their customers that they were giving them a special experience that they could”weave into the fabric of their everyday life. This was expressed through Starbucks brand strategy “live coffee.”
• Along with the experience, comes an unmatched atmosphere in the shop. They wanted the atmosphere to be so inviting and nice that customers would not want to leave.  
• Starbucks would offer extremely high quality coffee to their customers, a quality unmatched in the current market place.
• They would have a wide offering of products, including in a variety of locations. Such as in grocery stores and on-line.
• They would also offer customers the highest possible level of services. This would be accomplished by having excellent employees and training. Some examples are remembering customers drinks and calling out their orders by the customers name.

2. What are the consequences of successfully aligning the value proposition with the respective target market?

        There are several consequences of successfully aligning the value propositions presented above with a respective target market. If this alignment is done successfully, then Starbucks is able to set consumption patterns and brand identity as an experience and the highest quality coffee and service.  

Reinforcing a brand identity

• The best quality coffee
• The best service
• An atmosphere of a european coffee house
• A great place to go to relax
• A great meeting place  

Setting consumer consumption patterns

• Make Starbucks part of a routine (a part of your morning, a weekend stop)
• The environment leads customers to stay longer and drink more
• The barista’s knowledge of your drink makes it more appealing and welcoming leading to you wanting to return
• A great meeting place here too.  

3. Ignore the current macro environment forces for a moment.  Starbuck’s success resulted in a loyal base of customers.  At the time of the case, Starbucks attracted a new type of customer.

1. Define the consumption patterns of the loyal base segment in contrast to the new customer segment

• Loyal Customer Base: Loyal customers visited Starbucks locations 8+ times per month and typically had a higher average spending than the new customer base. Typically, these customers were white-collar females between the ages of 24-44.  They tended to be well educated and affluent.   The loyal base of customers had a 44% overall opinion of Starbucks. Loyal customers found Starbucks to be known for their specialty coffee (60%), found them to be the coffee expert (45%), and trusted the brand (50%).
• New Customer Base:  New customers visited Starbucks less frequently and had different perceptions than the loyal base customers.  These customers tended to be less well-educated and had lower incomes.  They were also much younger that the company's loyal customer base. Starbucks also experienced a growth in different ethnic groups with it expansion into more areas of the United States. The new customer base had a 25% overall opinion of Starbucks. 20% of new customers found Starbucks to be a high quality brand, 30% trusted the brand, and 44% found them to be known for their specialty coffee.

1. Is there a conflict emerging between these two segments and if so what is it?

        Yes,  there will be a conflict between both customer segments.  Although customers used the stores the same way, the segments are fundamentally very different.  Starbucks’ old customers are affluent women who are going to Starbucks for a specialty cup of coffee and find the coffee to be worth paying more.  They trust the brand, they like sitting in the coffee shops to relax and catch up with friends. Starbucks also pays a very important role in their day to day activities. They use Starbucks as a meeting place for clients, friends, and colleagues. The new customers do not necessarily identify with the brand, as only 15% of them find Starbucks to be “for someone like me” and do not find their coffee to be worth paying more.  This segment does not particularly like Starbucks, but uses it for its convenience, with so many locations. They are less likely to have a strong type of the atmosphere elements Starbucks is attempting to generate with their customers.  Eventually, one of the two segments will find a new location that caters to more of their own segment.