sbux single cup campaign...! 3! ExecutiveSummary&!...
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Starbucks Single Cup Campaign Nick Conte Emily Fitzpatrick Liza Hood Carolyn Lenahan Janelle Scudder
Transcript of sbux single cup campaign...! 3! ExecutiveSummary&!...
Starbucks Single Cup Campaign
Nick Conte Emily Fitzpatrick
Liza Hood Carolyn Lenahan Janelle Scudder
2 Table of Contents
Executive Summary 3
Background Information 4
Situational Analysis 6
Goals & Objectives 8
SWOT Analysis 9
Market Segments 10
Strategies 12
Media Tactics 13
Budget 16
Evaluation 17
Summary 19
Appendices 20
Sources 23
3 Executive Summary
The single-‐cup coffee market is the fastest growing segment in the coffee
industry. Starbucks Coffee Company sees an opportunity to expand beyond their
traditional retail stores and into the single-‐cup coffee market. To jump start
progress within the market, Starbucks has partnered with the dominant leader in
the U.S. single-‐cup market, Green Mountain Coffee Roasters, Inc. Green Mountain’s
Keurig single-‐cup brewing system controls 80% of the market share. This
relationship gives Starbucks an incredible opportunity to enter and have immediate
success within the growing market. Last year the single-‐cup segment approached $2
billion and that figure is expected to almost double by the end of next year.
Starbucks believes that over time they can generate sales in excess of $1 billion
across all channels.
Starbucks target market of premium coffee drinkers has been the fastest to
adopt single-‐cup coffee into their routines. In order to reach these markets,
Starbucks plans to promote their new single-‐cup coffee product through print
advertisements in magazines and major metropolitan newspapers, social media
pages on Twitter and Facebook, the Starbucks website, and in-‐store promotions.
4 Background Information
Starbucks Starbucks Coffee Company is one of the most successful and admired companies
today. They grew from a small coffee shop in Seattle, Washington 33 years ago into a
$4.1 billion international company. Starbucks promises customers on genuine
service, an inviting atmosphere, and an excellent cup of coffee. Starbucks' mission
statement is “to inspire and nurture the human spirit – one person, one cup and one
neighborhood at a time”. By doing so, they believe in serving the best coffee
possible. Starbucks Coffee Company has become an outstanding success story,
operating in more than 50 countries with 17,009 stores (as of January 2, 2011).
Starbucks is traditionally a specialty and premium coffee brand. However, Starbucks
sees potential for higher profit margins by making their product available to
consumers whenever, wherever, and however through the single-‐cup coffee market.
Single-Cup Coffee
The single-‐cup coffee market has been increasing over recent years. Single-‐cup
coffee machines have been introduced to the workplace and to consumers’ homes.
Many people’s lives in the 21st century are fast paced because they are constantly on
the go; therefore these machines are perfect for a quick and delicious hot beverage.
Starbucks hopes to enter into this market through the Keurig brewing machine.
Keurig “K-‐Cup” machines are designed to quickly brew a single cup of coffee. Keurig
systems are gaining popularity because they cater to U.S. consumers' demand for
convenience and customization. Unlike traditional drip coffee brewers, the
5 machines make one cup at a time and different users can have different brews. After
purchasing a pack of the K-‐Cup coffee pods, the consumer places one into the Keurig
machine, pushes the brew button and within 20-‐60 seconds the coffee is ready and
drips into the mug. They are especially efficient in offices, at home, or when in a
rush. Keurig is a wholly owned subsidiary of Green Mountain Coffee Roasters, Inc.,
and the K-‐Cups come in many teas, flavored coffee, and roast/blend options, mainly
of Green Mountain Coffee. However, Foldgers Coffee, Caribou Coffee, and Dunkin
Donuts all have or will have their coffee available through Keurig by this summer.
By partnering with Keurig, Starbucks has the ability to become a leader in the
single-‐cup market and pass their competitors in this segment.
6 Situational Analysis
Single serve coffee is the fastest growing market in the industry with U.S.
retail sales likely to approach 4 billion dollars in 2011. Starbucks has a stated goal
to, “extend the brand beyond our retail stores.” Starbucks is eager to grab more
business in the single serve market following its launch of VIA instant coffee in
October 2009, which accounted for $194 million in sales. However, Green Mountain
Roast Coffee’s Keurig brand single serve sales were $1.19 billion in 2010 (sales
include Keurig machines and K-‐Cup coffee pods). Keurig related revenue accounted
for 88% of Green Mountain’s overall sales and Green Mountain controls 80% of the
North America single cup market. Furthermore, Starbucks VIA coffee is instant
coffee and not whole bean coffee that is roasted, ground and brewed like the coffee
offered for Keurig single-‐serve brewers.
Other than Starbucks VIA coffee, Starbucks was involved in the single-‐cup
market through a deal with Kraft Foods to develop products for its Tassimo single-‐
cup system. Kraft’s Tassimo product accounts for only 3% of the single-‐cup market.
Starbucks terminated this deal on March 1st of this year. Considering Starbucks
stated intentions to be the definite leader in the single-‐cup market, Starbucks made
a deal to be Keurig’s only “super-‐premium” K-‐Cup brand just nine days after the
Kraft deal was terminated. Shares of Green Mountain soared to 41% to close at
$61.71 while Starbucks’ stock rose 10% following the announcement of the deal.
Oppenheimer analyst Matthew DiFrisco called the deal "incrementally
positive" for Starbucks and joined some other analysts in raising earnings estimates
for next year: "It is an immediate low risk and low investment solution to address
7 the fast growing at-‐home single-‐serve market, in turn furthering the growth of
(Starbucks) higher margin consumer products division". Starbucks and Green
Mountain Roast Coffee plan to make Starbucks K-‐Cups available through Starbucks
café’s as well as food, drug, mass, club, specialty and department store retailers
throughout U.S. and Canada beginning in the fall of 2011.
8 Goals and Objectives
Goal
To extend the Starbucks brand beyond the retail stores.
Objectives
•Awareness: To have 75% of regular Starbucks customers aware of
Starbucks K-‐Cups before their release in the fall of 2011.
•Conviction: To have at least 80% of customers consider Starbucks K-‐Cup
coffee to be just as good as in store coffee by the end of the “Single Cup Challenge”.
•Action: Of the 80% of Starbucks customers who do not own a Keurig
machine, have 50% of these customers purchase a Keurig within the first year of the
release of Starbucks K-‐Cups.
9 SWOT Analysis
Strengths/Opportunities
• Only 20% of Starbucks customers own a Keurig (large potential for growth
within the market).
• Keurig dominates market controlling 80% of the market share.
• Premium Coffee customers have been the fastest to switch over to single-‐cup
brewers.
• The United States single-‐cup market is estimated at about $2 billion annually
and growing.
• Non-exclusive deal. Starbucks is free to explore other single-serve coffee market
opportunities.
Weaknesses/Threats
• Starbucks competitors (Dunkin Donuts, Caribou coffee, and Foldgers) all are
available or will be available in K-‐Cups by the summer of 2011.
10 Market Segments
The Starbucks customer is a very well defined individual and the company
has done an excellent job on narrowing in on a very specific market. The average
Starbucks customer is in their early 40s with a college education and earns a $90k
income. Research has also shown that Starbucks tends to skew towards the female
consumers as well. Starbucks has also been known to serve the “urban commuter
family” a demographic described as a dual income, college educated household.
Starbucks’ most vivid consumer group is known as the “yuppies”, short for
Young Urban Professionals. These individuals are in their mid 20’s to 30’s, college
educated and are in well paid professional positions. They are described as having a
“work hard to play hard” mentality along with the idea that they “focus on making
money to fuel a lifestyle filled with expensive toys”. It has also been shown that
yuppies generally date or marry other yuppies, therefore doubling their already
high incomes.
Yuppies are already devoted Starbucks customers, so it makes sense that
they would be interested in bringing the Starbucks experience into their own home
with the Keurig machine and Starbucks K-‐Cups. Yuppies also have the discretionary
income that allows them to buy somewhat high priced devices as a Keurig machine.
These hard working professionals would benefit from having the comfort and
quality of the café brewed Starbucks in their own home, but with the ease and
convenience of brewing it in their own home with a Keurig.
Another demographic Starbucks should consider marketing too would be the
baby boomer generation. This generation is between the ages of 46 and 64,
11 representing the largest generation. While this generation was known as the “live to
work” type, the majority of them are now either entering or already in retirement.
This generation is also known to be experiencing a “well-‐off” or wealthy post-‐work
lifestyle and while many are frugal with their money, there is a large portion that
spends their hard earned money on indulgences. This generation is also seen as a
generation who “embraces new technology” and it has been reported that,
“…boomer woman are the fastest growing group on Facebook”. It is clear that this
generation should not be passed over and could prove to be a beneficial move for
Starbucks.
This opens an interesting market segment for Starbucks as they find success
in selling Keurig machines to baby boomers. This group is an on-‐the-‐go group, and
could benefit from having their Keurig and Starbucks K-‐Cups. Even if they are
traveling or rushing somewhere they can still enjoy their Starbucks coffee. This
generation also embraces new technology and feels comfortable spending money on
various toys, such as the Keurig machine.
12 Strategies
After determining the goals and objectives for the campaign, Starbucks
needed to find the best available approach to reach their target markets. The
majority of the target market is made up of working professionals who rely on
professional trade magazines and newspapers for their daily source of information.
By advertising in these publications Starbucks can secure a large amount of
publicity directly to members of the Starbucks community who would be most
interested in Starbucks K-‐Cups. Also since the target markets are professionals,
advertising in metropolitan areas on subways and trains will prove beneficial.
Social media is the best possible way to reach both the yuppie market as well
as the baby boomers. Both market segments are heavy users of social media as a
way to stay connected with friends and family, share ideas, and promote favorite
products. By announcing Starbucks K-‐Cups on its Facebook and Twitter sites we can
gain mass publicity from these two groups.
Both of these market segments are already devoted consumers of Starbucks
coffee, making weekly and daily trips to get their favorite coffee. Promoting K-‐Cups
in Starbucks cafes will provide the best possible opportunity to encourage the
committed customers to buy into the new product. Through in-‐store taste tests
Starbucks can also provide proof to their consumers that the Starbucks coffee they
love will not change between store and K-‐Cups but will instead become more
convenient and readily accessible for them.
13 Media Tactics
The Starbucks identity is based around the concept they have created of the
“third place.” The “third place” is another location, other than home and work,
where customers can go to relax, do work, or meet with friends. Due to this homey
atmosphere, Starbucks avoids large corporate advertising campaigns in favor of a
word of mouth approach.
With the launch of the Starbucks K-‐cups, the corporation is trying to bring
the escape of the “third place” to both home and work with the help of the Keurig
brewer.
Print Advertising
This traditional advertising technique will be focused on subway and train
advertisements, as well as within news-‐based print media. The subway and train
advertisements will be present in metropolitan areas as to be visible to young
business professionals commuting to work. These advertisements are visible in the
terminals where commuters board and exit the trains, as well as being placed on the
train so riders are exposed to them throughout their commute. The news-‐based
print media will included publishers such as the Washington Post, New York Times,
Wall Street Journal, and Newsweek magazine. Such publishers are frequently read by
baby boomers because they depend on print media to get updated on current
events. Young business professionals also use these sources to stay current and
competitive within their business fields.
14 In-Store Promotion
To best reach our established consumer base, in-‐store promotion will be
utilized through the creation of the “Single-‐Cup Challenge”. With this challenge,
Starbucks will have Keurig single cup brewer sand K-‐Cups available for samples in
the Starbucks cafes, advertising Starbucks K-‐cups on the beverage sleeves, as well as
having a raffle for a Keurig single cup brewer. The “Single-‐Cup Challenge” will allow
customers to have a blind taste test of a K-‐Cup versus in-‐store brewed coffee. The
barista will record the customer’s response and inform the customer of which cup of
coffee was the K-‐Cup and the in-‐store brewed cup. This opportunity will prove to
customers that the Starbucks K-‐Cup will be just as delicious as an in-‐store brewed
cup of coffee. Having both the Keurig single cup brewers and the Starbucks K-‐Cups
in-‐stores will allow for a chance for direct purchase for the frequent cafe consumer.
This builds a stronger relationship between Starbucks and the Starbucks K-‐cups for
the consumer.
Starbucks will be advertising the arrival of the Starbucks K-‐cups on their
beverage sleeves that they provide for customers to raise awareness of the K-‐cups
prior to their release in the market, in addition to making their presence known
when they are for sale in stores.
In order to encourage purchase of the Keurig machine and the K-‐Cups,
Starbucks will have a raffle in select stores across the country. The customer will be
given the chance to fill out a form with their basic information and enter to win a
free Keurig machine with a twelve-‐pack of Starbucks K-‐Cups. On a specific day, the
winner will be announced and they will receive their prize. The idea behind this
15 tactic is to push the products and rely on the consumers’ promotion through word
of mouth.
Social Media
Social media is an integral aspect in reaching the target markets and
generating greater word of mouth for the Starbucks K-‐Cups. The Starbucks fan page
on Facebook will allow followers to increase their knowledge of the K-‐Cups and
share information on the product with their Facebook friends. Through Twitter,
Starbucks will be able to update followers on all news related to the K-‐Cups. The
Starbucks blog at MyStarbucksIdea.com will keep all Starbucks enthusiasts
informed about developments in relation to the partnership with Keurig and the
creation of the Starbucks K-‐Cups. The blog will also allow for direct feedback on the
K-‐Cups. All of the social media methods will keep Starbucks informed of the increase
in public’s knowledge as well as to the response to the release of the Starbucks K-‐
Cups.
16 Budget
For the Starbucks single-‐cup campaign, the budget is going to be $75 million.
Because Starbucks is releasing an entirely new product, the campaign will be
nationally promoted through print advertising, social media, and in-‐store
promotions.
$75 million campaign Print Advertising- 50% -‐ Magazines -‐ In store posters -‐ Newspapers—Wall Street Journal, New York Times, Chicago Tribune, L.A. Times -‐ Subway/ Train advertisements Social media 14% -‐ Advertising -‐ Fan pages on Facebook -‐ Twitter account -‐ Employees monitoring sites -‐ Starbucks blog In-store- 35% -‐ Single-‐Cup Challenge -‐ Raffle Our salaries- <1%
17 Evaluation
Awareness: To have 75% of regular Starbucks customers aware of Starbucks
K-Cups before their release in the fall of 2011.
In order to measure the awareness of Starbucks K-‐Cups before their release
Starbucks’ social media will be used. One way of looking at awareness will be
through the Starbucks’ Facebook page. We will count the number of “followers” and
“likes” we receive on the Facebook page. We will also monitor the number followers
of Starbucks on their Twitter site. Lastly we will look at the activity on the Starbucks
blog concerning comments from our K-‐Cup posts and other related feedback.
Conviction: To have at least 80% of customers consider Starbucks K-Cup
coffee to be just as good as in store coffee by the end of the “Single-Cup
Challenge.”
In order the measure conviction we will monitor the Single-‐Cup Challenge
results of whether or not Starbucks customers believed the coffee brewed in
Starbucks is just as good as the coffee brewed using the K-‐Cups. After administering
the challenge we will record the customers’ responses. By the end of the challenge
we will tabulate and reveal the final results.
Action: Of the 80% of Starbucks customers who do not own a Keurig machine,
have 50% of these customers purchase a Keurig within the first year of the
release of Starbucks K-Cups.
18 One way to monitor the Keurig machine sales to Starbucks customers is by
selling them in Starbucks cafes. This direct, in-‐store sale will enable us to keep an
accurate track of current Starbucks customers who now want to own a Keurig for
the purpose of using Starbucks K-‐Cups. We will also track sales of Keurig machines
through the Starbucks website.
19 Summary
Starbucks’ venture into the single-‐cup brewing system is a bold move for the
company known for their premium and specialty coffee retail chain. However, this
move is highly advantageous, with low risks and an array of available opportunities.
Starbucks’ market segments are also prime audiences to sell the single-‐cup system
too. Advertising in print media, social media, and in-‐store promotions will enable
Starbucks to reach their main demographics and push the Starbucks K-‐Cups. If the
strategies are done correctly, Starbucks will see immense profitability in the single-‐
cup system and rise to be the dominant player in the single-‐cup industry.
20 Appendix A
Subway Advertisement
21 Appendix B
Newspaper/Magazine Advertisement
22 Appendix C
In-Store Advertisement
23 Sources
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