Starbucks Marketing Plan 2

Running Head: Starbucks Marketing Plan

Starbucks Marketing Plan

Aquinas College

Zoe Loridas

Cody Zahm

Richard Deja

Mason VanDyne

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Executive Summary

Starbucks is an American coffee company based out of Seattle, Washington. Starbucks

has hundreds of store locations across the globe. Primarily they hold the global market share in

retail coffee industry. Each Starbucks location is a little different. Some take place within other

retail outlets, airports, schools, and others have stand-alone store.

The purpose of our research was to observe and collect data concerning what made up the

mass population of Starbucks consumers within the Grand Rapids area. These areas of interest

included: Gas Light Village, 28th Street Woodland Mall, Northland DR. NE, and Knapp Street.

Data was collected by two different methods; observation and questioning. Subjects of

observation included: age and gender of the consumer, what they purchased, and whether they

stayed or left after their purchase. Subjects of questioning came from members of the Starbucks

staff if manager or team leader was not present. Based off a sample size of 300 and four

interviews with Starbuck staff members, our data determined that most Starbucks consumers are

females between the ages of 21-39 that prefer specialty coffees, and leave after making their

purchases. Future research should be focused on how to better serve these group of customers

within their geographical areas.

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Table of Contents

Cover Page 1

Executive Summary 2

Table of Contents 3

Marketing Situation 4-11

Market Description 4

Product/Service Review 4-5

Market Segmentation 5-6

Unique Characteristics of the Marketing Environment 7-9

Macro-environnent Analysais 7-8

Micro-environnent Analysais 8-9

SWOT Analysis 9

Research Findings 10-11

Distribution 11

Marketing Objectives 11

Marketing Strategy 12-13

Product Strategy 12

Pricing Strategy 12

Promotional Strategy 13

Placement 13

Marketing Dynamics Summary 13-14

Appendix 14-17

References 18

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MARKETING SITUATION

Market Description

Starbucks is a very high product involvement company with the mission statement being,

“to inspire and nurture the human spirit – one person, one cup and one neighborhood at a time.”

(Mission Statement) The market for Starbucks is essentially to all people and every age. But as it

has been shown that there is an overwhelming number of female customers. Although it tries to

be marketed toward everyone, Starbucks still holds an image that it is for those who are very

much aware of social status. Customers who affiliate themselves as ‘Starbucks coffee drinkers’

want their coffee/tea easily accessible and fast. The customers are on the go most of the time and

like the fast environment that Starbucks holds, the grab and go aspect of getting their coffee. On

the other hand, though, there is the consumers that like to take a seat, relax, and even study at

stores while enjoying their favorite cup of coffee/tea.

Product/Service Review

Starbucks takes pride in their products and services with being one of the top coffee

houses in world. In the sector of products, beverages range from different forms of coffee to teas

and juices. There are even certain Starbucks that have started to carry wine, beer, and spirits in

order attract more customers. Stores hold a multitude of food options from sandwiches to baked

items. Other complementary goods are the mugs, tumblers, and thermoses that are sold to carry

the beverage of choice. When the holidays start to roll around, they start to carry ornaments of

their mugs and other items. All year-round coffee beans and specialty drink mixes are sold, as

well as VIA instant coffee mixture.

The company is a walk-in coffee shop that can be located in malls, grocery stores, or any

other big department store. The stand-alone shops, most of the time, have drive-thru’s that are

convenient for the customers that are in a rush, or just don’t want to get out of the car. There are

now online orders in which a customer can order and pay for their drink over an app and pick it

up already made in the store without waiting in the line.

A couple of years ago Starbucks came out with the ‘Gold Card Reward’ system. This

reward system at first gave the Gold Card members points each time they would swipe or scan

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their rewards card to pay. It didn’t matter how many drinks they paid for, it was the same amount

of points for each swipe. Now it has changed so that the points correlate to the amount of money

being spent. Another way that hooks customers in is by purchasing the one dollar reusable

grandee (medium) hot cup. When it’s reused it ten cents is taken off the drink the customer is

purchasing. It’s part of the efforts to reduce waste.

Starbucks competitive advantage in the market is the customer's patronage. The company

carries a huge advantage having a loyal base of consumers constantly flowing into the doors. A

disadvantage is that there are so many coffee shop chains that are building their own loyal

customers, like Big B and other local coffee shops. Over the years, to keep up with not only the

improvement of the coffee, but also the competitors, Starbucks has raised the prices slightly over

the years.

Market Segmentation:

Geographic Heavily Populated Cities and Suburban areas.

Demographics

Age Children 13-17, Young Adults 18-24, Adults 25-40, Matured 40+

Gender 41% Male and 59% Female

Income Mid to Upper Class, Making 35 - 100k yearly income

Ethnicity All

Family Life Cycle

Young and single Single income with no children Single parents Married with children Empty Nesters

Psychographics

Occupation (1) The Student:o Ranging from high school to college students. These

consumers are looking for a place to study, do homework, or write papers. They like having the easy

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access to their favorite coffee while they work.

(2) The Business Professional:o These individuals do not have time to spare, and require

fast and effective service. They are more likely to go through the drive through or use the Starbucks app to get their coffee fast.

(3) Entry level workers:o This group of consumers are post college; they hold

minimum wage jobs and require fast and effective service because of their busy and hectic schedules.

(4) Mother’s/Caretaker’s:o These individuals are in a hurry due to their busy family

life with young children. They are more likely to grab their coffee to go, but every now and then will decided to sit and relax.

(5) Retiree’s:o This group is made up of mostly adults 40+. Like the

student, Free Timers are more likely to sit and enjoy their coffee while doing an activity.

Motives A place to get work done or enjoy some time by yourself or with a few friends (1,5).

Easy and quick service for those that are always on the run (2,3,4).

A quick bolt of energy to get through a long day of a lot of work (1,2,3,4).

Lifestyles Very Busy with no time to waist.

Relaxed and in no rush at all.

Marketing Environment:

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1. Macro-Environmental Analysis (PESTEL):

Political/Legal:

o Major political issues that Starbucks could face ranges from new laws

concerning labor, government taxation, and possible bans or harsh

regulations on coffee beans. Starbucks remains competitive when it comes

to providing their employees adequate pay and benefits, but currently the

US Food and Drug Association have regulations on coffee products, and

the price of coffee has been rising for members of the World Fair Trade

Organization.

Economic:

o From an economic standpoint, Starbucks does face major threats from

other competitors, another possible economic recession, and an increase in

inflation or interest rates. While Starbucks does hold much of the US

market share in the coffee industry, stiff competition from cheaper

alternatives, that also possess a luxury feel, could take Starbucks by

surprise. This could be amplified by another US recession like we had in

2008.

Social:

o Changes in cultural tastes and social norms also threaten Starbucks. With a

good portion of the US population being more health conscious, and more

into buying local goods, Starbucks would have to try to cater to these

changing demographics by changing their exterior. Starbucks did benefit

from jumping on the green movement in its popularity. But changes in

their products and the presentation of their products must be their next

step.

Technological/Environmental:

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o While advancements in technology can be a positive thing, it could

threaten Starbucks public image negatively when it comes to providing

jobs, interacting with customers, and remaining to be environmentally

friendly. Advancements in robotics, while being cost effective, threaten

available jobs opportunities and creating a relationship between

customers. New technologies of how to harvest the coffee could also

interfere with Starbucks mission of going green.

o Other negatives from technological advancement can range from, much

needed capital for R&D, and training employees how to use the new

technology. (Opportunities and Threats)

2. Micro-Environmental Analysis (Porter's 5 Forces):

Threat of New Entrance:

o Because Starbucks holds much of the US market share, the threat of new

players is highly unlikely (Chart#6). It is considered too risky for others to

enter the market based off the knowledge and experience Starbucks has

accumulated over the years.

Threat of Substitute Products:

o Coffee has many different substitutes from tea, hot chocolate, soda, energy

drinks, to juice. Starbucks has combated this by offering these products

within each of their store fronts. This is allowing Starbucks to reach other

consumers, and possibly transition them into purchasing coffee products.

Other threats of substitution would come from pricing wars with other

coffee shops.

Bargaining Power of Suppliers:

o Since Starbucks does not own coffee plantations, farmers from Latin

America, East Africa, and the Pacific Rim have massive bargaining power

of their crops. Good relations are kept with these farmers, but Starbucks

could benefit by buying out a plantation to control their coffee supply to

reduce risk.

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Bargaining Power of Customers:

o Larger retail stores that sell Starbucks products, or allow Starbucks to

open shops within retail establishments hold a lot of bargaining power.

Stores like Meijer’s and the Woodland Mall bring in a lot of consumers to

buy Starbucks products. The more Starbucks relies on these larger retail

stores to sell and market their products, the more bargaining power is

given. It is important to note that this is an important part of their

businesses success, and is necessary.

3.) SWOT Analysis

Strength: The selling and promotion of coffee drinks

and coffee related products The number of loyal customers; especially

female Having that quick grab and go ease to

getting a coffee

Weakness: The selling of tea, even with the

tea company collaborations Having people sit and stay after

getting their coffee People buying their

complementary goods with a drink

Opportunity: “Quiet rooms” being established where

people can concentrate just on work/school

Live music to entice customers to get a coffee, stay, and enjoy

Redesigning of the store to fill more non-food complementary goods

Threats: Local coffee shops taking their

customers Raising prices again and having

the consumer number decrease Cheaper alternatives from larger

competitors.

Research Findings:

Method:

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The basis of our market research was to observe four different Starbucks stores within

Grand Rapids, MI, and find: the age and gender of the consumer, what products they purchased,

and if they left or stayed after their purchase. Additional information about the number of

purchases per day, popular menu items, and consumer demographics were also collected from

store management or shift leads through interviews.

Observations:

Based off a sample size of three hundred people, our findings suggest that females

represent 59% of Starbucks consumers (Chart#2). Out of that 59%, over 45% of the female

consumers were between the age of ten to thirty-nine, and 40% were forty and older (Chart#4).

Over one-hundred and four females between the age of ten to thirty-nine purchased specialty

drinks, while over twenty-three females between the ages of forty and above preferred to

purchase coffee (Chart#5). Females between the age of ten to thirty-nine were also more likely to

buy complementary goods and stay after their purchase (Chart#5).

Males represented 41% of Starbucks consumers, with 22% between the age forty and

above, and 19% between the age of ten to thirty-nine (Charts#2,4). Males in both age segments

preferred coffee in comparison to specialty drinks or tea, and were less likely to buy

complementary goods and stay after their purchase (Chart#5).

Questionnaire:

Depending on whether the Starbucks has a drive-thru window, the average number of

customers each day range from six-hundred to over a thousand (Starbucks Interview).

Management described their consumer demographics as being mostly female, but depending on

the location the exact age can vary.

Conclusion:

Based off the data collected from the field and outside sources, there is limited risk from

Starbucks being in the coffee market. To continue their success, Starbucks needs to find a way to

expand their fast service, and they need to make it more appealing for people to stay longer in

their stores. In our interview with Starbucks manager, Sean from Rockford, on average he serves

over a thousand people a day because of their drive-thru window. During our time at the

Rockford Starbucks we noticed that if the line in the drive-thru was not moving fast enough,

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customers would leave. To remain more competitive, we suggest having double drive-thru’s to

reach more people. On the other hand, a good portion of their customers are high school or

college students. These consumers also stay the longest and are more likely to buy

complementary goods. We would recommend having larger Starbuck stores with study rooms to

cater to these consumers.

Distribution:

As for growing, we want to see more stores popping up. Bringing more stores into highly

populated cities and areas where the workforce is high, will bring great revenue to the company.

With opening more stores/kiosks in college towns and on campuses will further the growth for

the company. Considering setting up shop near higher populated high schools, especially those

with open lunch hours, will bring in the students before and after school, as well as having them

there during the lunch hours. Starbucks needs to continue in the process of selling coffee

beans/grounds and VIA packets in grocery markets all around, to keep the name fresh in

everyone's mind and home.

Marketing Objectives

1. Being more environmentally friendly by reducing waste by using compostable cups. We

hope to reduce our waste by 70%.

2. Increase our customer turnover rate by adding double arch drive-thrus, utilization of

space to maximize revenue per square foot. We hope to increase our customer turnover

rate by 20%, and increase our revenue by 1.5%.

3. Increase Starbuck public recognition through the new campaign “There for Life's Big

Moments”. This campaign will create a type of nostalgia for all consumer demographics.

We are hoping this campaign will increase our brand present by 3%.

Marketing Strategy

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A.) Product Strategy: Starbucks attracts people that are aware of social status. Having a

Starbucks product is something that makes people feel like they’re in a higher class.

Starbucks have several products that include coffee, tea, pastries, Frappuccino’s,

smoothies, merchandise, baked goods, and select sandwiches. While we do not believe

that adding products is necessary we do believe that there are some products that could be

used more efficiently. For example, we wish to add a tumbler that will let people come in

and get free coffee. We believe that this allows the company to cut back cost. Every time

we sell a coffee we must pay for the cup, lid, and sometimes a straw. With these

tumblers, we cut those costs, and incentivize more people to come into their local

Starbucks, to fill up their favorite tumbler.

B.) Pricing Strategy: Starbucks employs a value based pricing strategy. A value based

pricing strategy means that they don’t use margins to determine their price. Starbucks

realizes that they don’t attract people that care about the price of their coffees. Meaning

that they attract people that see their product as an affordable luxury. Because these

customers aren’t worried about the pricing of these products, Starbucks can afford to

raise their prices incrementally. When Starbucks raises their average cost of product by as

little as 1% the company can increase profits by 11%. Because of this, we want to ensure

that Starbucks continues to prosper. We plan to increase prices for our “Tall” (Small)

product. We will implement a 1% price hike each year for the next three years to ensure

that our profits continue to be healthy.

Using data from our observational study, we have found that Starbucks needs to

improve their profit per square foot in each store. Because of this, we plan to implement a

new merchandising strategy where we have products available for people to purchase.

This will increase our overall profit for the company. And it will also put some of our

extra space into good use.

C.) Promotional Strategy: Because Starbucks has such a loyal, and trusting target market,

we do not believe that we should run to many specials that lower our prices. In our

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opinion, if we run to many promotions that lower our cost it might hurt the value of our

brand. Instead, we believe that our promotions should be more about giving back to the

community.

Our first major promotion will be “Saving the Planet, one Cup at a Time”. This

will be a promotion that works like a campaign. We will make our cups compostable, and

write the slogan on the bottom of each cup. We believe that the Starbucks cup is meant to

be simple, therefore we have chosen to put the slogan on the bottom of the cup. Along

with the slogan, we will have a fact about the impact composting can make.

Our second major promotion will be all about major life events and how Starbucks helps

along the way. We plan to launch commercials that show people going through their life.

Visually showing the ups and the downs, all the while not mentioning our coffee but just

associating Starbucks with life events and showing that we stick with people throughout

their major life events.

D.) Placement: Starbucks distribution is world renowned for being revolutionary.

Starbucks has created their hubs around where their products are made. This makes it so

that Starbucks doesn’t have to pay for transportation from their production to these hubs

that are the shipping centers. Because Starbucks has been so successful in this area, we

believe that changing something would be counter intuitive due to their proven track

record with the way things are now.

Marketing Dynamics Summary

Overall, our marketing strategy is based upon keeping our brands value high. We don’t believe

in lowering our prices, we believe in moving the money we do make into areas that can help

others. This strategy allows us to have promotions, without devaluing our brand. We also

decided to introduce a yearlong tumbler that allows people to get free coffee. This will cut down

on our fixed cost for the cups, and help attract customers to the stores. There are risks associated

with our plans. The tumbler is something that we believe will be very beneficial for Starbucks.

However, when you introduce a new product like that you never know how the market will take

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it. We believe that our profit margins on this product balance itself out enough to justify the risk.

There is also a risk that is associated with changing our cups to be compostable. The price of the

cups will go up slightly, meaning that the prices will once again slightly increase. As we have

said numerous times, we don’t believe that price hikes will affect Starbucks in a negative manor.

However, you never know when the market will have the next big thing, and when the prices

will not be sustainable. So, because of that, we believe that there is minimal risk associated with

these plans.

Appendices

Data Collection

(Chart#1)

(Chart#2)

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(Chart#3)

(Chart#4)

(Chart#5)

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(Chart#6)

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Starbucks Marketing Plan 17


References

Intelligently, P. (n.d.). How Starbucks Uses Pricing Strategy for Profit Maximization. Retrieved

December 11, 2016, from http://www.priceintelligently.com/blog/bid/184451/How-

Starbucks-Uses-Pricing-Strategy-for-Profit-Maximization

Mission Statement. (n.d.). Retrieved December 11, 2016, from

https://www.starbucks.com/about-us/company-information/mission-statement

Opportunities and Threats - Starbucks and Dunkin Donuts. (n.d.). Retrieved December 12, 2016,

from https://sites.google.com/site/starbucksanddunkindonuts/opportunities-and-threats

Starbucks Corp. (SBUX) Pitch. (2015). Retrieved December 12, 2016, from

https://10-c.com/2014/12/16/starbucks-corp-sbux-pitch/

Starbucks Interview [Personal interview]. (n.d.).

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Starbucks Marketing Plan 2