Marketing Strategy For Starbucks Expansion

Starbucks is the top-ranked specialty coffee shop that has received huge appreciation from its target market. It has the aim of providing high quality beverage products especially coffee at premium prices along with rich experience that will enhance the customer’s experience in the outlets. Starbucks has capitalized its unique positioning in the market by developing outlets that are furnished with finest quality furniture that is comfortable for the customers along with supporting amenities such as music, Internet facilities and handicapped access so that the customers are provided a complete superb experience in the outlet.

Starbucks has successfully created its position as the best place for socializing other than office and home. The only way to enter the new markets is to implement that same global marketing strategy that it has been following for each of its expansion plan. Hence, it should slowly enter the markets of Trinidad and Tobago so that the customers in the region accept the concept of specialty coffee shops and have an excellent experience in the coffee shop.

Table of Contents

Introduction to Starbucks

Starbucks Coffee was started as a small coffee shop in 1971 by Gerald Baldwin, Ziey Siegl and Gordon Bowker and it has completely revamped its image by growing into the number one coffee retailer for those people who want specialty coffees. It is present in more than thirty countries and has been doing expansion on a continuous basis. There are more than 10,000 coffee shops of the company worldwide and about 60% are owned by the corporation and remaining are franchised and licensed. The primary aim of Starbucks Coffee is to establish as “a highly respected and recognized brand in the international market” (Starbucks, 2012).

Situational Analysis

Current Marketing strategy

After careful analysis of marketing strategies highlighted by Michael Porter, cited by Alison (2010), Starbucks is following a differentiation strategy. Initially, the main element of its business activities was focused strategy with strong emphasis on creating differentiated products within the target consumer market. However, the company soon realized that it needs to strengthen its position in the market by developing a differentiation strategy and the success of Starbucks is evident from the fact that it has developed an excellent marketing mix for its customers.

In order to expand its operations in international market, it is offering same “coffee experience” to the international customers by providing them premium quality products and aesthetically designed ambiance (Tu, Wang & Chang, 2012). It has ensured that there is uniformity in its marketing activities by using only third party mediums for promoting its product and service offerings. According to Michelli (2007), Starbucks has allocated only 4% of its total cost on the advertising budget.

One of the key elements of differentiation strategy is to introduce new and innovative products in the market and Starbucks has been exceeding its customers’ expectations by offering them products that are totally different from the existing ones (Parayani, 2011). The innovation element of its marketing strategy gives it a competitive edge in the specialty coffee industry. In order to ensure that it develops entirely new offerings, a huge amount of money is invested in the research and development.

Most importantly, Starbucks has earned the reputation of possessing excellent distribution network within the specialty coffee industry and it is apparent from its growth strategy. When it plans to enter into any new country, it first conducts in-depth market research so that it is able to penetrate easily and effectively get the attention of its target market (Boyd, Mullins & Walker, 2006).

The key factor that has become UPS of Starbucks is the excellent customer service as it creates the ultimate ambience for the customers to give them an exceptional coffee drinking experience. The experience that is given to the customers is the fact that attracts them to the outlet so that they can have an amazing time with their friends, families or even enjoy quiet and soothing environment provided by the outlet.

The marketing mix is the basic pre-requisite of developing a marketing strategy. It is manifested in the efforts of Starbucks that it aims to provide a wide range of high quality products and services so that the customers can get value for their money, the prices of the products is high but it is compatible with the exceptional service quality provided to the customers, the store is present in each neighborhood so that everyone can do to the coffee shop easily and conveniently and promotional mediums used are website, banners, posters, billboards and Starbucks cards (Thomson, Trickland & Gamble, 2007).

Segmentation, Targeting and Positioning

Starbucks is the leading name in the market as it has been striving to capture the market share of the specialty coffee industry. According to a survey by Paryani (2011), the market share of Starbucks in the coffee retail industry is 33% in USA and it has increased its efforts to enhance it by expanding its operations worldwide. One of the key factors that have been a source of Starbucks success is the creation of brand image as “the best place for socialization between work and office”. The strategy has proved to be beneficial for the corporation and this image along with perception of an affordable luxury brand has allowed it to avail the opportunity of charging premium prices from the customers.

The target market of Starbucks can be described as:

Age: 18-40 years

Gender: Male and Female

Occupation: Depending on life-stage but mostly students, faculty members, managers, executives, housewife and business person

Lifestyle: Adventurous, Fun-loving, Love for socializing, Value excellent customer service, Thinkers, Achievers, Innovators and Experienced

Income level: Depending on life stage but slightly on higher range

Technology: People who are technology savvy come to the coffee shop for carrying on their important work and like to use iPad, Tablets, Mac and many more.

Starbucks always wanted to position itself of the upscale brand and offer a rich experience in addition to an exclusive range of coffee products. As the initial target market of Starbucks comprised of young college going students, neighborhoods and social classes who are willing to buy a cup of coffee i.e. $3 and want to have a fun-filled time with their friends and family. As a result of continuous expansion and growth, its target market now comprises of every individual of every age group and it is targeting every rural community, small town, ethnic neighborhood, highway rest shops and etc.

Starbucks has positioned itself as a place where people like to spend their time besides home and work. In order to create a soothing and calm ambiance, the outlets were furnished with comfortable furniture and light music is played to enhance the mood of the customers. In the last few years, Starbucks has included other offerings such as complimentary books, wireless Internet, common areas for collaboration and handicapped access. The stores of Starbucks have been positioned as the locations where very customer can have a contented setting and all of its products are positioned as having premium quality and prices.

Strengths and Weaknesses

The main strengths of Starbucks are as follows:

Existing market share – It has a good market share in all of its regions, well-built customer base and has ample amount of finance that allows it to do expansion in other markets easily.

Strong brand image – Starbucks is perceived as the premium quality brand that offers exceptionally high quality products and services.

Unique value proposition – The value proposition that Starbucks has created on the experience that is given to the customers by providing them superb ambience in the outlet.

High ethical and professional standards – Starbucks has highly efficient workforce that strives to enhance the reputation by strengthening the ethical values and improved commitment to the community activists and environment.

The weak areas of Starbucks that need to be improved are following:

Too much presence in domestic market – Starbucks has three-fourth of its cafes in domestic market i.e. USA and it needs to expand in international market strategically so that it can grow in other regions conveniently.

Innovation in beverage industry – There is too much dependence on innovation in the beverage industry so it can fall over time as it will have to introduce new and innovative products at an accelerating rate.

Less options for diversification – Starbucks has limited options when it wants to diversify in the coffee retail industry. It can significantly lower its diversification speed.

PESTEL Analysis

The PESTEL Analysis of Starbucks shows that it is operating in a stable political environment but there are some strict legal requirements that the companies have to comply with for operating their business; economy is recovering from the recession and people have good amount of money to spend on luxury items; and social factors of the customers are changing as they like to socialize a lot and are looking for avenues that can help them in having exceptional time with their friends and families.

The technological innovations are happening at an accelerating pace and Starbucks is offering all services for latest technological gadgets; Starbucks is environmental friendly company as it has undertaken various initiatives to demonstrate its responsibility towards protecting the society; and there are various laws that need to be followed by Starbucks to ensure compliance with all business ethical and professional code of conduct so that it does not violate any of the government rules and regulations.

Recommended Objective and goals

As Starbucks is planning to enter Trinidad and Tobago, it has to ensure that it enters the market by following the same strategy that it has followed in all its international expansion projects. Considering the marketing strategy, PESTEL analysis and strengths and weaknesses of the coffee shop, following are the recommended objectives:

To open four outlets in Trinidad and Tobago (two in each region) by the end of May 2013 to get 5% of the retail coffee shop’s market share.

To introduce a new product line of beverages and fast food items in the outlets by August 2013.

To open four new outlets in each Trinidad and Tobago with the aim of capturing 10% market share of specialty coffee industry by November 2013.

Recommended Marketing strategies and Programmes

In order to successfully enter the market, the marketing strategies and programmes that will be implemented in the respective new markets are as follows:

During the first year of expansion in Trinidad and Tobago, the company will organize an event in which people of the regions will be asked to visit the venue and interact with its workforce. The visitors will be given free samples of the products so that they can test their quality and taste.

On the outlets, customers will be given 10% discount on buying more than two cups of beverages and 15% discount on their third visits.

Advertisements will be done in the form of billboards and posters along with inserts with the local newspapers so that more and more customers are attracted to the outlets.

On Internet, social networks will be developed so that all customers can interact with each other and discuss about the brand. On Facebook, LinkedIn, MySpace and other social networking sites the pages of Starbucks will be created so that the customer base in the region can widen with the passage of time.

In the outlets, all offerings from products to services such as soft drinks, hot and cold coffees, light snacks, smoothies, tea, Internet facility and each and everything will be provided so that the customers are given a sensational experience at the outlets which is the company’s USP.

Conclusion

Hence, Starbucks can follow the same expansion strategy that it has implemented in its other growth plans when launching its products in international market. It will have to develop the concept of specialty coffee shop in Trinidad and Tobago as these regions have low trend of these shops. Starbucks will slowly penetrate in the market so that its idea is accepted by the target market and people are looking forward for its new outlets and new offerings. It will have to monitor its performance on an ongoing basis so that it is assured that it will manage its marketing strategy of differentiation effectively and successfully.