Starbucks

Marketing Concepts in the Case

Market Segment

Shultz identified two market segments, people who seek a place to go to get away from work and home just to relax and people who like premium coffee. His experience in Europe convinced him that these market segments existed in the US. Starbucks re-invented the coffee drinking business by tapping into the latent demand for the premium coffee drinking experience. Starbuck targeted those customers that repeatedly visit its locations and desire top-notch service and quality coffee.

Branding

The Starbucks experience was a three component branding strategy. The first component was to offer the highest quality coffee available anywhere. The second component was to develop customer intimacy though superior customer service. The third component was to offer an atmosphere that will encourage people to linger and return. The Starbucks brand is not just coffee, it is the entire experience and this experience is what has made Starbucks successful.

Starbuck is extending its brand. The company sells and markets teas under the Starbucks name. Starbucks coffee is partnering with other companies to use the Starbuck name to sell products in grocery stores. Starbucks partnered with PepsiCo Inc. to produce a bottled version of Starbucks Frappuccino, a cold, sweetened coffee drink. Another partnership with Dryers was formed to produce Starbucks branded ice cream products. Starbucks is successfully extending its brand not only into new products but also new distribution channel.

Service Triangle

Starbucks uses the service triangle concept effective with its internal and interactive marketing. Starbucks effectively internally markets to its employees through training. It empowers its employees to take an active role in the sale of the coffee. In fact, its employees are respectfully referred to as "partners". This training allows for the service to be almost as important to the customer as the coffee itself. Interactive marketing the baristas and the customer is critical to Starbucks' success. The baristas suggest drinks and ensure that every customer has a satisfying coffee experience. Starbucks relied on word of mouth as its primary means of external marketing. It relies on satisfied repeat customers to spread the word about the quality of the coffee and service. Word of mouth marketing has made Starbucks a brand is recognized all over the world.

Channels

Starbucks controls the vertical channel as much as possible to insure the supply of the highest quality supply of coffee beans. The company buys beans directly from the growers. Starbucks oversees the roasted the beans and controls the distribution of the beans to it retail outlets. This is not discussed in any detail in the case.

Starbucks retail outlets were its primary distribution products and represented 77% of their sales. Another channel was the distribution of the beans to food service accounts like restaurants and hotels and this represented about 5% of sales. Domestic and foreign licensing, international stores, grocery stores, warehouse clubs and grocery channels represented together less than 10% of sales combine.

Problem

Christine Day, Senior Vice President of Administration in North America, is concerned with a recent market survey that shows Starbucks is not meeting customers expectations. She has a plan to change how stores operate in order to improve customer service. It is our belief that she is misreading the data and the underlying product is not that there is something wrong with Starbucks but that the demand for Starbucks' products is too great. This does not mean the company can do nothing if it wants to continue to be successful.

Starbucks should not change the core product, the Starbuck's experience. We recommend Starbucks keep the core Starbucks experience intact so long as customers are line up out the door. Significant changes to the Starbucks experience or coffee could have disastrous results.

Recommendations

Starbucks should diversify its complement products. Stores should offer new food products to go along with its coffee products. The food products should consist of high