Starbucks Introduction of Reusable Red Cups

Word Count

1. This essay focuses on the Reusable Red Cups introduced by Starbucks Corporation that was debuted in November 2^nd, 2018 in the U.S market (Whitten, 2018). The reusable cup itself costs $2 (all prices in this essay are denominated in U.S currencies) and customers who bring the cup back to the store after 2 p.m. between November 3, 2018 and January 7, 2019 get 50 cents off a medium holiday drink (Frigerio, 2018).

Source: Starbucks Coffee (2018)

Every business needs to carry out successful marketing strategies to be noticed by consumers and forge brand identity, Starbucks is no exception.

As for this new offering, the demographic segmentation’s main group is between 25 and 40 years of age with higher incomes, the second target group is 18 to 24 years of adults whose families are richer (Froom, 2014). When it comes to psychographic segmentation, it indicates that customers belong to the middle class and generally have higher, including college and postgraduate education (Rafii, 2013).

Below are some likely key success factors for Starbucks competing in this new market.

1) Global Brand Recognition. Starbucks has a significant geographical presence across the globe and maintain an approximate 39 percent market share in the U.S market (Wolf, 2018). Starbucks is also the most recognized brand in the coffee house segment and is ranked 57^th in the best global brands of 2018 (Interbrand, 2018).

2) Strong Market Position. Starbucks effectively leverages its rich brand equity by merchandizing products, reusable red cups and licensing its brand logo out. The use of the logo at Starbucks is crucial since it can be found on every product and is highly recognisable by all individuals who love coffee or not worldwide. Trademarks play an important role in the protection of the “Starbucks culture”, due to the copyrights and registered trademarks all the beverage names, images, logos, slogans, or websites common to the company cannot be copied by anyone else (Starbucks, 2011).

Such strong market position and global brand recognition allow the company to gain a significant competitive advantage in competing in the U.S market.

2. Starbucks introduced this new reusable red cup at the beginning of November with the goal of getting people in the habit of using reusable cups more often to protect the environment. Execution of corporate social responsibility is one of Starbucks’ main strategies to make this reusable red cup stand out in the U.S market.

When it comes to judging the successfulness of this new product, the apparent criteria that would be used is Starbucks customers passion of purchasing the product. According to Social Bakers (2018), Starbucks Coffee is the most followed brand on Twitter worldwide with 11,458,560 followers.

On November 1^st, the day before releasing this new product, Starbucks Coffee tweeted at its official account that “Introducing the limited-edition #Reusable #RedCup! Tomorrow (Nov. 2), get yours for free with the purchase of any holiday drink, and celebrate all season long.” (Starbucks Coffee, 2018). Many consumers who were trying to purchase this product complained that stores ran out of cups within the first couple hours – or minutes, in some cases. (Filloon, 2018).

3. As Blankson and Kalafatis (2007) point out in the Journal of Services marketing, positioning has received little attention from marketers but is very useful in defining and modifying the tangible characteristics of the product and its intangible perceptions.

At Starbucks, customers are buying an expensive product of high quality (tangible), but they also have the personalised in-store experience enhanced by the trained employees, for example, the customer’s name is written on the reusable red cup where their beverage will be served in (intangible).

The staff at Starbucks is highly trained and taught to deal with problems quickly following company’s models. (Bdaily, 2013). Motivation at Starbucks is high since social responsibility is also applied to its employees who can develop careers and have adjusted working times (Nelson, 1998). Motivation is very high and the employees work in a community, and this helps to have a friendlier and relaxed environment to work in, benefiting both the employees and the customers.

This unique selling concept is especially important in an evolving world where technology is becoming more personalised and where social interactions are decreasing; the customers can find some human contact in their everyday lives in a Starbucks store.

According to Starbucks former CEO Howard Schultz (2011), the environment Starbucks endeavours to create is “Ideally, every Starbucks store should tell a story about coffee and what we as an organization believe in. That story should unfold via the taste and presentation of our products, as well as the sights, sounds and smells that surround our customers…Our stores and partners are at their best when they collaborate to provide an oasis, an uplifting feeling of comfort, connection, as well as a deep respect for the coffee and communities we serve.”

4. Strategic Marketing Objectives, Strengths and Weakness

Starbucks attempts to unite its customer under the main value of protecting the environment by introducing this reusable red cup. In an fast-moving world where media is gaining unprecedent attention, it is critical for companies to have rules and ethical values in place. Numerous corporations competing in today’s market function with a given framework of ethical rules give particular attention to Corporate Social Responsibility (CSR).

As explained by Podnar and Golob (2007) in the Corporate Communications: An International Journal, taking a CSR marketing orientation is a value creation that goes beyond profit maximisation, but includes the long-term business survival by meeting the stakeholder’s societal expectations.

As discussed above, Starbucks builds goodwill among communities where they operate. Their stores are community friendly, focused on recycling and reducing waste (Starbucks, 2018). This newly introduced reusable red cup helps Starbucks to better achieve its environmentally-friendly goal as a multinational corporation. The well-known mission statements at Starbucks is to inspire and nurture the human spirit – one person, one cup and one neighbourhood at a time (Starbucks, 2018). Starbuck’s brand equity is built on selling the finest quality coffee and related products, and by providing each customer a unique “Starbucks Experience”, a third place between work and home (Starbucks, 2018). Outstanding customer service, clean and organized stores reflect the culture of the communities where they operate, thus building a strong foundation among loyal customers.

According Starbucks CEO Kevin Johnson, the reusable red cup costs $2 (Whitten, 2018).   A medium size latte costs around $3.65 US dollars, a medium size caramel macchiato costs around $4.45 (Fast Food Menu Prices, 2018). Even though Starbucks ranks first in the US coffee market, with an approximate 39 percent market share, higher price is an undeniable issue faced by Starbucks (Wolf, 2018). In an increasingly economically integrated world, an economic crisis like the one in 2008 and the unpredictable ones that are going to happen in the future could hurt Starbucks revenues as consumers with limited budgets do switch to competitor’s products whose prices are lower and forgo paying the premium. Increasing  pressures on Starbucks from its main competitors in the U.S like Dunkin Brands, with a 22 percent market share and other smaller players, around 38 to 40 percent market share have posed threats to its further growth (Ibid).

Like any large corporation, Starbucks does come under increased scrutiny and have to invest more in customer relationship management to retain existing loyal customers and attract prospective consumers.

Customer Relationship Management, as defined by Rigby and Ledingham (2004), is put in place to track and strengthen customer relationships.

There are 14,451 Starbucks Stores in the U.S market on June 14, 2018 (Loxcel Geomatics, 2018). With such a large number of stores in the U.S, promotion does not happen through traditional media channel like television or radio, but rather through word of mouth and online presence. The social and ethical image along with efficient public relations on social media are the main drivers of Starbucks’ marketing.

Such behaviour and customer loyalty is important for the future, as Grissafe (2014) explains in the American Marketing Association journal, individuals create a relationship with brands and word of mouth is very important as it establishes trust. If a mother drinks Starbucks, her child will have a tendency to want to drink the same product as her.

Winchester et al. (2008) further explain that there is a relationship between associating a brand with a belief and consumer brand choice, and it is therefore very important for Starbucks to communicate a positive image of their brand in order to attract customers and create value for them.

It is likely this reusable red cup will be successful over the next three-to-five years because of the strong customer base derived from Starbucks loyal customers. In their research, Sisodia, Sheth, and Wolfe (2007) identify the most valued organisations worldwide by international consumers. Starbucks was one of the 25 companies along with IKEA, Harley Davidson, Toyota, and Whole Foods that were most voted for; a large percentage of consumers could not imagine living without this brand. The authors further found that the following companies had very high employee satisfactory levels which created a friendly and relaxed working atmosphere. Starbucks decided to create value for its customers through this matter; the friendly in-store experience differed from other fast food stores and helped them gain competitive advantage.

Recommendations

As can be seen from the graph below plotted in the Excel using fictional numbers, by using product life cycle curve, product management understands which products they are selling and are therefore able to determine its value.

A Reusable Red Cup (Introduction Stage)

C Traditional Hot and Cold beverages (Maturity Stage)

As discussed above, Starbucks main products are its high quality beverages. While these products’ sales are at a maturity stage, Starbucks can further promote its reusable red cups currently at the introduction stage that have not been accepted by most Starbucks customers.

There are various ways Starbucks can move this product from introduction to growth stage.

1)      Offer higher incentives to customers who use reusable cups to attract consumers who tend to use one time paper cup to reduce waste.

2)      Utilize its strong social media presence to promote reusable cups and convey its core corporate social responsibility and ethical values.

3)      Build and retain better relationships with reusable cups manufacturers and suppliers to get premium price and increase its distribution channel.

Conclusion

In conclusion, Starbucks does have various marketing strategies which generally rely on customer loyalty and word of mouth or the ethical considerations of the company along with involvement in the community. Starbucks is still perceived as a luxurious and responsible brand by the customers. In the future, Starbucks must return to their core marketing strategy and focus on their customer’s individual needs and wants.

Reference List

• Fromm, J. (2014) Why Starbucks is Still Number One With Millennials. [Online]. Available from: http://millennialmarketing.com/ 2014/02/why-starbucks-is-still-number-one-with-millennials/ (Accessed 26 November 2018)
• Rafii, L. (2014) The Starbucks or McCafé Crowd: Who Counts More Politically. [Online]. Available from:  http://www.huffingtonpost.com/ladan-rafii/the-starbucks-or-mccafe-c_b_4262104.html (Accessed: 26 November 2018)

• Interbank (2018) Best Global Brands 2018 Rankings. [Online]. Available from:  https://www.interbrand.com/best-brands/best-global-brands/2018/ranking/ (Accessed 24 November 2018)
• Starbucks (2011) Terms of Use. [Online]. Available from: http://www.starbucks.com/about-us/company-information/online-policies/terms-of-use (Accessed 25 November 2018)

Reference from Paragraph 2:

• Starbucks Coffee. (2018) 1 November. [Online]. Available from:  https://twitter.com/Starbucks/status/1057950379508424704  (Accessed 25 Nov 2018)

Reference from Paragraph 3:

• Blnakson, C. and Kalafatis, S.P. (2007) ‘Positioning strategies of international and multicultural-oriented service brands’, Journal of Services Marketing, 21(6). pp. 435-450.
• Bdaily (2013) ‘Starbucks: 3 Inspirational Ways it Develops its Staff’, Business Daily, 12 June [Online]. Available at: https:// bdaily.co.uk/opinion/12-06-2013/starbucks-3-inspirational-ways-it-develops-its-staff/ (Accessed: 26 November 2018).
• Nelson, B. (1998) ‘How Starbucks Is Offering Not Just Jobs but Careers’, Workforce, 1 November [Online]. Available at: http://www.workforce.com/articles/how-starbucks-is-offering-not-just-jobs-but-careers (Accessed: 26 November 2018).
• Howard Schultz and Joanne Gordon, Onward: How Starbucks Fought for its Life Without Losing its Soul (New York: Rodale Books, 2011), pp. 273-274.

Reference from Paragraph 4:

• Podnar, K. and Golob, U. (2007) ‘CSR expectations: the focus of corporate marketing’, Corporate Communications: An International Journal, 12(4), pp. 326-340.
• Starbucks (2018) Community: Creating Pathways to Opportunity [Online]. Available from:  https://www.starbucks.com/responsibility/community (Accessed 1 December 2018)
• Starbucks (2018) Our Mission [Online]. Available from: https://www.starbucks.com/about-us/company-information/mission-statement (Accessed 1 December 2018)
• Starbucks (2018) Our heritage [Online]. Available from: https://www.starbucks.co.uk/about-us/our-heritage (Accessed 1 December 2018)

• https://www.nreionline.com/retail/growing-competition-both-national-chains-and-neighborhood-coffee-shops-threatens-starbucks (Accessed 24 November 2018)
• Ibid
• Rigby, D.K. and Ledingham, D. (2004) ‘CRM Done Right’, Harvard Business Review, November [Online]. Available from: http://hbr.org/2004/11/crm-done-right/ar/1 (Accessed: 26 November 2018).
• Loxcel Geomatics (2018) How many Starbucks Stores are out there? [Online]. Available from: https://www.loxcel.com/sbux-faq.html (Accessed 1 December 2018).
• Grisaffe, D. (2014) ‘Feeling the Brand Love’, American Marketing Association, [Online]. Available at: https://www.ama.org/publications/MarketingNews/Pages/Feeling-the-Brand-Love.aspx (Accessed: 26 November 2018).
• Winchester, M., Romaniuk, J. and Bogomolova, S. (2008) ‘Positive and negative brand beliefs and brand defection/ uptake’, European Journal of Marketing, 42(5/6), pp. 553-570.
• Sisodia, R.S., Wolfe, D.B. and Sheth, J.N. (2007) Firms of Endearment: How World-Class Companies Profit from Passion and Purpose. Upper Saddle River, NJ: Wharton School Publishing.