Running head: STARBUCKS GELATO 1

Starbucks Gelato Marketing Plan

Jenise Bysterveld, Dawn McLaren, Aasim Raza, Clarence Le

Kwantlen Polytechnic University

Date: 15 April, 2013

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Table of Contents

Executive Summary ................................................................................................................................ 4

Background ............................................................................................................................................. 4

Company Mission, Values, Corporate Objectives, and Competencies................................................... 5

New Product Idea, Objectives, and Rationale ....................................................................................... 5

Market ................................................................................................................................................. 5

Situational Analysis ................................................................................................................................. 6

Internal Analysis.................................................................................................................................. 6

Employees ....................................................................................................................................... 6

Products........................................................................................................................................... 6

Community ...................................................................................................................................... 6

Financials ......................................................................................................................................... 6

External Analysis ................................................................................................................................ 7

Political-Legal ..................................................................................................................................... 7

Economic ............................................................................................................................................ 7

Social-Cultural .................................................................................................................................... 8

Technological ...................................................................................................................................... 8

Market Analysis............................................................................................................................... 9

Competitive Analysis ....................................................................................................................... 9

SWOT List ........................................................................................................................................ 11

SWOT List ........................................................................................................................................ 12

Vulnerabilities: .............................................................................................................................. 12

Constraints: ................................................................................................................................... 13

Key Issues ..................................................................................................................................... 13

Market Description ................................................................................................................................ 13

Market Segmentation Analysis .......................................................................................................... 13

Single Variable Segmentation ........................................................................................................ 13

Multi-Variable Segmentation ......................................................................................................... 14

Consumer Behavior/ Characteristics .................................................................................................. 16

Psychographics .............................................................................................................................. 16

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Demographics ................................................................................................................................ 16

Geographic .................................................................................................................................... 16

Lifestyle/ Behavioral...................................................................................................................... 16

Marketing Objectives ............................................................................................................................ 17

Marketing Strategy ................................................................................................................................ 17

Product: ............................................................................................................................................. 17

Price: ................................................................................................................................................. 18

Placement (distribution channels): ..................................................................................................... 18

Promotion:......................................................................................................................................... 19

Operational Plan: ........................................................................................................................... 20

Risk Management: ......................................................................................................................... 21

References............................................................................................................................................. 21

Appendix A - Age Distribution in Vancouver ........................................................................................ 25

Appendix B – Financials ....................................................................................................................... 29

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Executive Summary

Starbucks a household name specializes in coffee, full-leaf teas, pastries, snacks and a variety of

packaged foods. This traditional coffeehouse is looking to expand its product line. With the

growing demand for gelato (ice creams) Starbucks locations centred on Downtown Vancouver

will serve gelato products to their customers during the summer season. The product will be

designed to facilitate seasonal marketability and increased revenue from its gelato products. The

product and service format envisioned for Starbucks is to stimulate and supplement the growing

demand for gelato products with an astounding mix of flavours and espresso shots. The staff will

be trained in the traditional Italian production techniques to produce freshly made gelato

products. The decor, the product, and the brand to enhance the entire customer experience and

differentiate from the competitors to generate value for their business and position Starbucks as a

unique experience will complement gelato products.

Our gelato products will be made from all natural ingredients and not frozen in the way that

traditional ice cream products are. Freshly produced gelato will help enhance the image of the

business and its brand equity in terms of consumer appeal in terms of health, freshness and

quality. Starbucks will produce five products for three different segments; family, gourmet and

lifestyle. Each product will have different tastes, cream content, packaging...etc. Since gelato is a

seasonal product therefore gelato's marketing mix namely Product, Promotions, Price and Place

will be designed to peak the sales during the peak seasons.

The target markets are young people between ages 15 to 40 years of age, this represents a unique

opportunity for Starbucks to go after this target market and win market share. Advertising and

promotion will also be focused on children to offer compelling reasons for families to choose

Starbucks over other competitors. Over the past five years, there has been tremendous growth in

Vancouver Downtown region. The area is predominantly affluent with incomes ranging between

$40,000 and $80,000. The average age of the area's residents is 40. The three target segments are

teenagers, college-aged young people, and young urban professionals. The current survey data

on the residents of Vancouver Downtown region is that 71.2% of the residents are between the

ages of 15 to 64. This group percentage will grow as new construction continues in the area.

Background

Starbucks coffee company first opened in 1971 in Seattle and was founded by an English teacher

Jerry Baldwin, history teacher Zev Siegl, and writer Gordon Bowker. The word Starbucks

originated from the first mate in Herman Melville’s Moby Dick. The sea featuring a twin-tailed

siren from Greek Mythology inspired the logo. In 1987, Howard Shultz bought out a prior

Director of Retail Operations and Marketing Starbucks. Between 1987 and 1989 they expanded

from 15 stores to 55. The company went public in 1992 and sold its coffee mainly in Nordstrom

and Barnes and Nobles, and by 2003 they had a total of 7,225 stores. “We realized that we were

not in the coffee business serving people. We were in the people business serving coffee

(Shultz).” They are currently selling 45 different drink items including special holiday featured

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drinks, to-go coffee packets, k- cups, small snacks and quick-bite food items, coffee tumblers,

and cups and mugs, coffee makers, grinders, and whole to ground coffee beans. They have many

‘Social Responsibility’ programs including: Ethos Water Fun, new re-usable cups, Recycling and

Reducing Waste, Green Building, Youth Action, Volunteer Canada Partnership.

Company Mission, Values, Corporate Objectives, and Competencies

Starbucks core business is to ethically source and roast the highest-quality Arabica coffee in the

world, as they simultaneously create authentic connections with their customers and the

communities they serve. They are well received by all communities that they enter in, including

globally, for example: India, China, and Asia pacific. As well, they are “mastering the

transferable ability to scale our brand’s core attributes and expertise, while respecting and

reflecting regional customs and cultures so we may be locally relevant. When we strike this

delicate balance, we establish trust, which ensures the company has opportunities for continued

growth everywhere we do business.” They value the relationship fostered between the customer

and their brand and have created a loyalty program to strengthen that connections

New Product Idea, Objectives, and Rationale

We would like to introduce Gelato into Starbucks Product Mix to attract a new target market

using the Gelato as a lure for customers to come in later at night increasing the traffic flow

during the quieter hours near closing. The size to be offered will be named Mezzano, which

means regular. We will be offering six different flavors to start and test to see how well they

launch. We will start with the Chocolate, Vanilla, Strawberry, Coffee and 2 seasonal flavors. The

signature Gelato will be an Affogato, which is any flavor of Gelato with a shot of espresso

poured over top. Offering this specialty treat will bring in those customers who are looking for a

place to go out with friends and socialize. Offering this product will give them an advantage over

their current coffee competitors who are not offering the same expansion of dessert items. The

reason we chose Gelato is because Tim Horton’s is currently adding Coldstone Creamery into

many of their locations and serving Ice cream and is growing in popularity. This would be

Starbucks way of competing with a growing trend but keeping the prestige image they portray.

Market

Starbucks is currently in the retail and service industry. They serve freshly made drinks and also

sell merchandise, baked goods, and snacks. They position themselves to the middle to upper

class segment and is considered to be a self-esteem product on Maslow`s Hierarchy of needs.

They are the top competitors for the prestige coffee market. Starbucks targets those who want to

go for coffee in a relaxed environment and who love to socialize. Their most profitable times are

in the morning when customers are on their way to work. They also target students and business

people looking for a study area and a place to meet clients by placing big tables and lots of chairs

as well as free WIFI and plugins for computers. The geographic market for the launch of the

product is in Downtown Vancouver in 10 locations spread through the city.

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Situational Analysis

Internal Analysis

Employees

Starbucks is known for their well-trained employees. Starbucks employees go through a series of

training on and off shifts. They are trained to be enthusiastic and friendly and recognize and

respond to customer needs which is all taught through the Latte Method “We listen to the

customer, acknowledge their complaint, take action by solving the problem, thank them, and

then explain why the problem occurred”. Starbucks also refers to their employees as their

partners; this is a strategy that Starbucks uses to fulfill a self-actualization need for the

employees.

Products

Starbucks offers a wide variety of products that caters towards different needs and wants such as

50 – 60 hot and cold beverages depending on the season which including coffees, cappuccinos,

espressos, lattes, and tea. Starbucks also provides a unique service that customizes drinks. Aside

from beverages, Starbucks also offers pastries, snacks, ground coffee, mugs, tumblers, espresso

machines, coffee makers, coffee presses, and verismo machines. Starbucks currently has 21,000

retail outlets in 62 countries making it the largest coffee house in the world.

Community

Whether Starbucks retail stores are located or where their coffee is grown, Starbucks is

committed to helping communities thrive where they do business. Starbucks is currently

involved in communities in numerous ways such as their Global Month of Service project where

volunteers provide health and human services. Starbucks also has other community involvement

programs such as Volunteer Canada Partnership, Youth Action, Starbucks Foundation, and Ethos

Water Fund.

Strengths Weaknesses

Starbucks has a strong, prestige brand

image

Highly recognizable brand world-wide

Starbucks already has a large customer

base including loyal customers

Higher price than competitors

Current employees would need to be

trained on how to serve gelato

Financials

See Appendix B for Financials

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External Analysis

Political-Legal

In order for a product to be classified as gelato, it must have less than 10 percent milk fat.

(Gelato vs. Icecream). This percentage will be ensured by the in store recipe and ingredients will

be properly measured before placing them into the gelato making machine. Having this product

with a low percentage of fat will help influence those who are looking for a healthier dessert

option. We will also have to show all nutritional information on a pamphlet provided for those

who want one, available at the pickup counter. (Nutrition facts label). In volume terms this

category is projected a Compound Annual Growth Rate of 2%, indicating that unit price of

gelato is expected to increase from current rates (Matter). This is ensuring the product is in a

stable environment and will always generate profit. Regulations for the ice cream industry

include the Milk Industry Standards Regulations (Calibrator,2012), and the Milk Industry Act

(Milk Industry Act). Both laws are set in place to ensure quality milk is being produced, and

ethical treatment of the animals are being implemented, and applies to all vendors in the supply

chain. All suppliers for Starbucks must meet the ethical standards outlines in the “Starbucks

Supplier Social Responsibility Standards” regulation (Starbucks, 2013). Since Starbucks already

has the ingredients we require to make our product, we can be ensured that the distributor

already passes these inspections. Product labeling requirements include the Consumer Packaging

and labeling Act and Regulations (Topic, 1999). Since the new product will follow a similar

regime to the current Starbucks drink cup, similar actions will take place to implement the new

gelato bowls and lids.

Economic

Starbucks is in the growth stage in the business life cycle, they are constantly adding new

products and branching into new markets internationally (Starbucks, 2013). Cold and rainy

weather trends in Vancouver limit the year round popularity of the gelato industry (Climate of

Vancouver). Resource availability for this product will be high since the ingredients needed will

already be supplied to Starbucks through their current distributors. Our initial target market, the

Social Status Seekers, make an income of approximately 33,000 per year (Average income) and

household consumption are expected to rise 2.7 percent in 2013 (Eluta, 2013). This will help us

retain current customers and attain our goal of turning 5% of our current customer base into

gelato users.

The unemployment rate rising from 7.2% to 7.6% (Labour force), average hourly earnings have

dropped from 4.9% to 2.2% (Average hourly wages), and labour costs have increased from 109

to 110. (Refer to appendix D). We do not expect the number to affect Starbucks employees due

to the high satisfaction and benefits their employees receive. The Social Status Seekers do not fit

into the unemployment category since they are work-oriented individuals who seek employment

and status. Canada’s GDP (purchasing power parity) has registered a growth from 1330 to 1414.

(refer to appendix F).The GDP per capita has increased from 39000 to 40,370 (Country).GDP

numbers help determine whether to increase or reduce employment. Management will have to

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evaluate capital expense projects based on GDP. Canadian economy is has witnessed a slump in

the GDP, dropping from 3.1 to 2.5. (Refer to appendix E). It will also help Starbucks evaluate

business opportunities domestically in order to develop their cash deployment strategies

Social-Cultural

According to the 2011 census, the population of Downtown Vancouver is 603,502 people

compared to 2,426,200 people in Vancouver’s entire metropolitan area. (Census Profile)

(Population of Census). The percentage of the working age population, ages 15 to 64, was 71.2%

(Census Profile), a large portion of this statistic includes our target market, the Social Status

Seekers.

Vancouver is a culturally diverse area filled with people who are willing to try new things (City

of Vancouver). The attitudes of people are changing as people are becoming more health

conscious and they want to purchase quality products. Currently in Vancouver, there are growth

trends for healthy eating organic or whole food products. As for gelato, the industry is becoming

increasingly popular and high growth rates are continuously expected (Gelato Growth Trends).

Consumers have the rights to be informed of the ingredients are in the gelato, especially

concerning allergies. We will be providing pamphlets with such information and the employees

will be knowledgeable about which ingredients are in the gelato flavours since every batch is

made in-store (Consumers Association of Canada). In British Columbia, and consumer spending

has gone up 3.8% (Positive Economic Indicators), and spending on recreational food has

increased from $3810 to $3987, which will include the purchases of gelato and retain sales

(Changing Recreational Patterns). The Canadian ice cream category is set to grow by 3% in

current value terms in 2012. This growth has been driven by unit price increases as volume sales

have declined slightly. The biggest ice cream category in 2012 is take-home ice cream, with 70%

market share, followed by retail artisanal ice cream, with 16%, and impulse ice cream with the

final 10% (Matter). Since take-home products account for a large amount of the market, it would

be wise for Starbucks to take the opportunity to expand to other retail stores and sell their gelato

in containers. Once the results from the test market have been reviewed, they can decide whether

this route will be likely for the company. Consumers are becoming increasingly aware of health

and nutrition, and are more conscious about that they eat.

Technological

The Internet is convenient to communicate and Starbucks has a large interactive website where

consumers can find any information they need and share their ideas and suggestions. Various in-

store technologies have grown over the last few decades that aid in managing stock in a more

efficient and effective manner leading to new in-store services, which will include the visual

displays that the gelato is stored and kept cold in. These developments also raise concerns

associated with the ability of commercial parties to collect, process, and track the purchasing

habits of consumers, although the new gelato customers will be given the opportunity to fill out

the online satisfaction survey so we can generate feedback (Phone).

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Market Analysis

Gelato is a frozen dessert included in the ice-cream market, however, it is said to be of richer

flavor and more dense than ice cream. The global ice-cream market expanded by 8.7% in the

first five years after the millennium. Since then it has been steadily growing, giving proof that it

is not just a trend. The industry is estimated to attain 9.3% growth rates. It is also interesting to

note that impulse buys were 1.3 billion of the overall market in 2005, which is 14.3% of total ice

cream sales. The artisan ice-cream industry constituted 9.9% of the market while frozen yogurt

only had 9.4%. In Jean Chatzky’s article,

http://money.cnn.com/magazines/moneymag/moneymag_archive/2006/08/01/8382224/ he states,

“There is a movement towards artisan ice-creams.” The average customers per day in a

Starbucks store are 515. See Appendix A for more statistics.

Competitive Analysis

Bella Galleria: has carved out a unique identity for its shops in downtown Vancouver. By

focusing on making small batches of handcrafted gelato and sorbetto each morning in their Coal

Harbour gelateria. In order to ensure that their customers always get fresh gelato and sorbetto,

they only make 24 flavours. There are 16 classic Italian flavours, which they serve everyday all

year, as well as 8 new flavours that change weekly with the seasons. They also serve gelato

cakes and desserts with customised flavouring and also cater to customer orders for special

events. Corporate events, conferences and charity activities. They follow the old world Italian

traditions of using organic milk and the best raw ingredients to create fat free healthy products

strategically tailored for their target customer groups.

La Casa Gelato: prides itself in producing the finest gelato, sorbetto and yogurt found anywhere

around the world. They are located in Vancouver, Canada and have been serving the lower

mainland for over 20 years. With 508+ flavours and growing it is the only shop in the world to

carry 218 flavours on location at a time. They carry: non-fat, non-dairy, low-fat, and sugar-free

products. The company's advertising is also children-oriented to attract families as they have

built a kids corner to entertain kids and families.

Gelormy Gelato: they specialise in Soya gelato, which contains no cholesterol, as all ingredients

are vegetable and fruits in origins. It is also rich in proteins; mineral salts, and has no added

sugar. They also have line of frozen yogurt, for which the yogurt base is imported from Italy. In

addition to the regular scoops, Gelarmony gelato is also available in half-litre and one-litre Take

court sizes, for which they also offer containers to keep the gelato fresh on the way to home.

They have more than a 100 flavours to choose from and that too with a unique selling strategy of

selling different assorted flavours each day and changing menu every four hours of the day.

MARIO’S GELATO: located in the heart of downtown Vancouver, they specialise in gelato,

sorbettos, frozen yogurt and novelties. Since 1929, Mario’s gelato has grown significantly

throughout the years expanding its line of products to include over 500 different flavours and

items. Mario Gelato’s brands are also available through its affiliate retail locations Amato Gelato

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Cafe, where customers can find specialty flavours and bulk sizes to take home. Mario Gelato

building also houses a banquet facility for weddings and special events.

QOOLA: Their genuine fresh frozen yogurt is made from 100% natural ingredients, and packed

with live and active cultures. Qoola offers fat-free, gluten-free, and certified kosher frozen

yogurt. Their vast arrays of fruits are freshly cut every morning to complement not only their

yogurt, but also their organic whole grain waffles and signature crepes, which are made from

scratch.

They also take pride in being purely Canadian and endeavour to support fellow Canadian

producers and vendors. They also make an effort to give back to their community through

awareness and fundraising.

To stand apart, Qoola maintains a constant initiative to reduce unnecessary waste by offering

biodegradable, compostable and recyclable products in an initiative to support the Go Green

movement. Lastly, they also offer catering service for a party of 25 to 350 heads.

TIM HORTON’S#: is a Canadian-American fast casual restaurant known for its coffee and

doughnuts. It is also Canada's largest fast food service with over 3,000 stores nationwide. Tim

Hortons franchises spread rapidly and eventually overtook McDonald's as Canada's largest food

service operator. Aside from its coffee, tea, hot chocolate, and doughnuts in February 2009, Tim

Hortons announced co-branding with the popular American ice cream parlor Cold Stone

Creamery. The deal called for each chain to convert 50 stores into dual-operation franchises, for

a total of 100 stores. The ice cream is made fresh and served in three different sizes (small,

medium, large), and 15 different flavours.

Opportunities Threats

Ice-cream industry is estimated to attain

9.3% growth rates

The area is predominantly affluent with

incomes ranging between $40,000 and

$67,090#.

The average age of the area's residents is 40.

Digital City’s survey on consumer buying

habits in Los Angeles County indicated that

55% of ice cream shop customers are

between the ages of 15 to 40.

Over the past five years, there has been

tremendous growth in Vancouver.

Currently the area has over 603,502

residents where the percentage of the

working age population (15 to 64) is

71.2%.

High competition from the cheaper Ice-

creams

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SWOT List

Strengths Weaknesses

High visibility locations to attract customers

Established logo, developed brand,

copyrights, trademarks, website and patents

Company operated retail stores, International

stores (no franchises)

Good relationships with suppliers

Industry market leader with a globally

renowned brand

Customer base loyalty

Product is the last socially accepted addiction

Widespread and consistent

Starbucks owns the most recognizable brand

in the specialty coffee business, and the

Starbucks experience is an irreplaceable

differentiating factor.

Howard Shultz, founder and chairman of

Starbucks is the barista to the world. Shultz

has practically invented specialized coffee as

a mass product; his leadership and

innovative vision are very valuable assets.

The company has a loyal customer base

willing to pay premium prices for Starbucks

products.

Store location is an important competitive

factor, and Starbucks has secured its

presence in many of the most desirable

corners of the planet.

Starbucks is ahead of most competitors when

it comes to financial strength and

profitability.

Lack of internal focus (too much focus on

expansion)

Ever increasing number of competitors in a

growing market

Self cannibalization

Product pricing (expensive)

Health implications of coffee consumption

are a matter of debate, and many of the

company´s products have high calories

and fat content.

Opportunities Threats

Gelato expansion into retail operation

Technological advances, gelato can be made

in store

New distribution channels (delivery)

Produce fat-free, allergen free and a healthy

alternative to ice cream

Increased competition from coffee shops

and others (restaurants, street carts,

supermarkets)

Coffee price volatility in developing

countries

Negative publicity from poorly treated

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New products

Distribution agreements

Brand extension

Emerging international markets

Continued domestic expansion/domination of

segment

Better to compete with Tim Horton’s by

introducing a frozen desert to their product

line

farmers in supplying countries

Consumer trends toward more healthy

ways and away from caffeine

Fragile state of worldwide production of

specialty coffees

Alienation of younger, domestic market

segments

Corporate behemoth image

Cultural and Political issues in foreign

countries

McDonald´s is successfully expanding its

Mc Café stores on a global scale. The fast

food giant has an unparalleled

geographical presence and lower prices

than Starbucks in addition to a globally

recognized brand.

Dunkin' Brands makes 60% system wide

sales from coffee and other beverages, and

the company is expanding beyond its core

northeastern U.S. market. Dunkin Brands

is another relevant competitor with lower

prices than Starbucks.

High end competition is increasing too,

with companies like Panera growing

strongly both on a total sales and

comparable store sales basis

Panera offers high quality food and coffees

for premium prices, and in that sense it

goes after a similar customer group.

SWOT List

Vulnerabilities:

Starbucks faces a stiff challenge from the competitors who already have established a

strong footing in the gelato market and therefore making ingress in the gelato market on

par with the competition will not be easy.

Starbucks will be competing with specialty gelato stores, which have been operating for

the past 40 to 50 years in the downtown region and have a strong customer base, and

offer a dearth of flavors to their customers.

Starbucks although has a loyal customer base willing to pay premium prices for

Starbucks products, but that can/or may fickle with the reports emerging of poorly

treated farmers in supplying countries

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Starbucks has become synonymous with premium coffee, but with consumer trends

shifting towards more healthy ways, and away from caffeine, may siphon off customers

to the competitors if they fail to adapt to the changing trends in consumption.

Constraints:

The ice-cream industry is estimated to attain 9.3% growth rate. This presents an

opportunity for Starbucks to venture into, but Starbucks is lacking expertise in the gelato

market and might not be able to capture a huge market due to a highly concentrated

gelato market.

An expanding ice cream market offers a Brand extension opportunity for Starbucks, but

with competitive pricing and a competitive edge by other specialized gelato stores will

mean that Starbucks will need to offer consumers greater value by offering lower prices

or by providing greater benefits and service that justifies higher prices.

Although there is a surge in the international market for ice-cream products, Starbucks

may not able to make full use of this opportunity by appealing to an additional segment

of the market, due to limited flavours in gelato

Key Issues

The need to offer competitive pricing while maintaining the Starbucks’ prestige pricing

The need to differentiate their limited number of flavours compared to competitors who

have many more flavours

The need to capture the new market segment while retaining the current market.

Market Description

Market Segmentation Analysis

Single Variable Segmentation

Base Single Variables

Geographic Country Canada USA

Province BC AB SASK ONT QUE NS NFL

States AZ CO TX WA NY

City Richmond Burnaby Vancouver Surrey Langley Abbotsford Chilliwack

Density Suburban Urban Rural

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Demographic Generation Generation Y

Generation X

Babyboomers

Family Cycle

Single Married Married with Children

Married

with no children at home

Common law

Income $30,000- $50,000

$50,000- $100,000

$100,000- $250,000

$250,000 +

Psychographic Social Class

Middle Class

Upper

Middle Class

Lower Upper Class

Higher

Upper Class

Lifestyle Achievers Strivers Lazy

Personality Ambitious Hard- working

Partier Leader Social

Social Cultural Occasion Regular Special Holiday

Benefits Quality Service Convenience Speed Social Status

User rates Light Medium Heavy Randomly

Multi-Variable Segmentation

Diehard Bookworms

This segment is the youngest of the four, between the ages of 15- 30, male and female, and is

part of Generation Y. They are busy High School and University level students looking for a

space to study that is quiet yet has access to the internet. They like the homey atmosphere with

the big tables and comfy chairs. They study here as a group or on their own, and love their

coffee, mostly because it keeps them awake and are in a routine of buying coffee while doing

homework. Staying late at night is not rare and often buy deserts in order to keep themselves

calm while they work, doing a mindless thing like eating makes them relax. Income levels are

$20,000 to $30,000; they are most likely to have student loans and are penny pinchers on a single

income. High achieving is a way to categorize them in their life, they are devoted students who

spend many hours on their homework and often get the higher end grades. They also visit

Starbucks while not doing homework because of the routine started when doing homework, but

are light users.

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Social Status Seekers

This segment is between the ages of 18-35, male and female but mostly female, from

Generation X and the older Generation Y’s. They are between the endings of their job and the

beginnings of their careers. They live on a single income and are not family orientated. Time

commitments are not an issue and they have lots of flexibility when it comes to their daily

activities. They go to Starbucks to help achieve their self-esteem social status; Starbucks is the

more prestige version of coffee and its users like that status. They are medium users of the

coffee and go to Starbucks on special occasions. They are going to Starbucks to meet up with

friends to catch up on their daily lives, as well as re-uniting with others they have not seen or

talked to for some time. Outgoing and social, these social status seekers may also be meeting up

for dates, which needed a place to hang out and get to know each other.

Scale Watching Snackers

This health conscious segment is always looking for healthier options to their favorite

treats. They are ages 25-50, male and female, in Generation X. Average salary is $50,000 to

$70,000 and they are family orientated with double incomes. They are medium users of

Starbucks coffee. They are going through a time in their life where their body is changing and

they have to make a greater effort to keep weight off. They lead a life that is focused on keeping

active and watching their calorie intake. However their problem is they like to treat themselves

but know that they can’t have desserts like they used to. They are looking for the same great taste

but a more natural, less fat and calorie, content. They do not mind spending the extra money if it

means getting that treat that will satisfy their sweet tooth, but they are only willing to spend it on

quality products.

White Collar (Daytime) Rendezvous

This segment includes the 30 to 65 year old daytime white-collar business people. They are in

the Baby Boomer generation, male and female, and are well established in their career to coming

to the end of the career. They are high users of Starbucks especially for the specialty coffees and

desserts. They have very busy schedules and are not flexible with their time and use Starbucks

for business meetings and for catching up with acquaintances. They are married but none of the

kids are left at home and so have extra income. That extra income is used on dressing well,

going on holidays, going out for dinners and performances, and in doing so like meeting new

people.

Target Market

The target market that Starbucks will be focusing on is the Social Status Seekers. This segment

will be the most feasible because they are the most likely to be visiting Starbucks for reasons

other than getting their coffee. They are using Starbucks as an area to meet and hang out socially

and they have the disposable money to be purchasing the prestige items. They don’t have a lot

of financial burdens and can like to spend their money on themselves to help them, in the end,

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gain the feeling of high self-esteem. They are trendy and active in their social lives; they do not

have many time commitments or family that ties them down. Gelato is something they would

choose over ‘plain’ ice cream because of the status symbol of being a more elite product. They

care greatly about what other think of them and so are willing to spend what it takes to gain a

positive and respected reputation. They are impulsive which is exactly what Starbucks needs

because Gelato is mostly recognized as being bought on an impulse. These young individuals

like to do what they want when they want to and will do anything to get it. They are having the

time of their life right now and won’t let anything take that away from them.

Consumer Behavior/ Characteristics

Psychographics

The social status seekers are greatly involved in their politics, especially the Liberals. They

enjoy working for social causes, writing to their public officials and volunteering for political

parties and politicians who support their liberal views. They have lots of spending power and are

the main decision makers, who spend freely on music, books, natural foods, and electronics.

They support sexual permissiveness and the pursuit of originality. They like to acquire the latest

in fashion trends, newest foods and wines, and use dating services to meet other people. They

value their personal ID’s and all actions are based on gaining pleasures for themselves.

Demographics

This segment is young, between the ages of 18- 35, single or couples who do not have kids in the

picture. Their income ranges between $50,000 and $90,000 and are in mid-level jobs. They are

well educated and some are still going to classes to improve their education. They are ethnically

diverse with the main ethnicities being South Asian, Latin American, and Middle Eastern. They

are young Generation X and older Generation Y males and females. They are included in the

upper middle to lower upper social classes.

Geographic

The social status seekers that Starbucks will be targeting all live in the downtown Vancouver,

BC district. They live in apartments in the urban and suburban areas and either walk or take

transit to work. Statistics Canada says the population of the area where our target market lives is

603,502. The area is predominantly affluent with incomes ranging between $40,000 and

$67,0901

Lifestyle/ Behavioral

The study information from Environics claims that the target market enjoys spending their pay

cheques on themselves, they often purchase online and like buying brand name clothing and

electronics. They are night owls who frequent bars, nightclubs, restaurants, rock concert, art

galleries, and ballet performances. They are very active and in their spare time they like to go

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skiing, scuba diving, aerobics, yoga, visits film festivals, ballets, operas, and symphonies. They

live urban, tech savvy, limited worries lifestyles.

Marketing Objectives

To turn 5% of the already current coffee users into Gelato eaters within the first year.

Within the first year Starbucks should not only break-even but make a profit of $26,000

To gain a market share of 1% of the artisan ice-cream industry within the first year.

Marketing Strategy

Product:

We will sell premium gelato by the scoop in ten selected Starbucks locations in Downtown

Vancouver. The gelato will be made fresh in store with quality ingredients; milk, real eggs, fresh

cream, and natural flavourings (More egg yolks, and less cream than ice cream). Once the

ingredients have been measured by a Starbucks employee and put into the gelato-making machine,

gelato will be stored in the visual display where it will be kept cold at -12 to -15 degrees Celsius.

Customers will be able to see the flavours displayed and choose their flavour(s). Since the gelato

only takes 10 minutes to make with the machine, gelato will be made fresh once a flavour runs out,

so there will be no need to store the gelato anywhere except the visual display. The Gelato will be

available year round, and served in 4 oz. portions in 6 oz. white paper bowls made with same

materials, and have the same Starbucks logo, as the current Starbucks drink cups. A plastic spoon

will be given with each bowl, and lids will be available for those who want them.

Starbucks gelato will include six flavours; Vanilla, Strawberry, Chocolate, Coffee, and two seasonal

flavours that will change every three months. The seasonal flavours will be a form of product line

extension; the Starbucks seasonal coffee flavours will be brought to life in gelato form. For Fall we

will serve Pumpkin Spice and Salted Caramel, in Winter we will feature Eggnog and Peppermint, in

Spring we will serve Hazelnut and Chai, and for Summer we will offer Coconut and Cookie Crumble.

Each seasonal flavour will be exclusive to the season, and only be available during that 3-month

period each year. Our Product mix has low breadth and low depth because we want the product to

be exclusive, and we want to ensure that quantity supplied is proportioned to quantity demanded

since selling gelato will not be our primary business focus. Each location in the test market will be

responsible to record the amount of gelato tubs they go through each month, and the number of

tubs they make for each flavour. These records will help when deciding if the company should

discontinue a certain flavour.

We want to know how customers are adapting to the new gelato offering so we will hand out a

small survey with each gelato cup sold to get feedback. The product itself is in its introductory stage

of the product life cycle, although the company Starbucks is in its growth stage.

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Price:

We will use a mixture of competitive and segment-based pricing approaches to arrive at the selling

price for Starbucks gelato. We want to ensure that our target audience, the Social Status Seekers, is

willing to pay the price we choose, but we will also take into account the prices of competitors in

the gelato industry. We do not want to price the gelato too high, so people will choose our

competitors over us, and we do not want our price to be too low because we want to match the

price of gelato at Starbucks, to the price point of the rest of the Starbucks product line, which is

higher than most competitors. Starbucks gelato will compete against other competitive gelato

companies such as Bella Gelateria, La Casa Gelato International, Marble Slab, and Tim Hortons/Cold

Stone Creamery. The competitors pricing is an average of $5.00 per scoop.

Starbucks gelato will be priced at $4.00 per scoop. This is an appropriate price because it is

competitive with industry pricing, and based on our research results, $4.00 is a price that people

are willing to pay for gelato.

Although this price is less than average industry pricing, the variable cost to make gelato is

significantly low, giving Starbucks a high contribution margin. (See financials in the Appendix for

full details). The variable cost includes the ingredients we will be using per batch (eggs, milk, cream,

flavours), the spoons for people to eat the gelato with, and the bowls and lids the gelato will be

served in. Since there are 30 scoops in every batch of gelato, we have calculated the variable cost to

be $0.15 per 4 oz. scoop, giving Starbucks a contribution margin of $3.85 per scoop. The fixed costs

for the first year will include 10 gelato machines, 10 gelato displays, 20 gelato serving spoons, 100

gelato pans, a project manager, research and development costs, and promotional costs that

amount to $181,060.00 total. In the first year, Starbucks will need to sell 47,029 scoops in order to

breakeven. Each store will need to sell 13 scoops of gelato per day in order to breakeven. If we set

the target profit to $35,000.00 for the first year, each store will need to sell 16 scoops of gelato per

day. Every Starbucks location has an average of 500 customers daily, so if we aim to gain 5% of the

current customer base as gelato users, then we will be able to reach this goal.

Placement (distribution channels):

The geographical placement for this new product includes ten Starbucks locations in the core of

Downtown Vancouver, with an initial emphasis on target market of Social Status Seekers. This is a

test market for the product, once we can measure the success of the product within the ten stores

we can branch into other areas, and possibly other channels of distribution. Starbucks will

distribute their product directly to the target market through in store retail sales, but if the demand

for Starbucks gelato is significant, the distribution can be extended to other retail chains, or even

online. The distribution intensity is exclusive to the chosen ten Starbucks retail stores, no other

channels will be used to the sell the product at this time.

Since Starbucks will already have all the ingredients they need once the machines and gelato

equipment are purchased, no new channel relationships will be made. Because we chose to

distribute directly, there will be no invoicing or warehousing necessary since the product is made in

store.

The retail environment includes the external storefront with window displays promoting the

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product, the internal environment with new stand up displays around the store to create

awareness, as well as the visual display refrigerator that the gelato will be stored in. The visual

display will be an extension of the counter so all patrons in line for purchase or waiting for their

drink to be made will see the tubs of gelato and the flavours being offered. The employees behind

the counter will be responsible for taking a gelato order and payment, as well as serving the dessert

to the customer.

Promotion:

The new product will be introduced to the Starbucks product mix in April 2014, at the beginning of

the spring season for the company.

Starbucks will employ a variety of promotional techniques to increase gelato awareness. For print

advertising we will be using pamphlets and in-store displays, for experiential marketing we will be

sampling the new product, for sales promotions we will have in-store coupons, for personal selling

we will have face-to-face interaction, and for public relations we will have online interactive

surveys. Pamphlets will be set up by the pick-up counter to allow customers to learn more about

Starbucks gelato selection and nutritional information. The in-store stand up displays will be

located at eye level and be placed on the ground. The main purpose for the stand up displays will be

to catch the eye of the customer, to raise awareness of the new product, and to promote the $1.50-

off coupon for completing the online survey. We will be sampling 60 scoops per day in each store

for two weeks, at the start of our new product being available, and 3 more times during the year at

the start of each season when we change our seasonal gelato flavour. Each scoop is 4 oz. so we will

be sampling the gelato at 1 oz. per scoop, which will amount to 240 samples per day per store

throughout the promotional period. Employees in store will be responsible to promote the gelato

and coupon offerings through word of mouth, making sure each customer knows about the online

survey and the coupon they will receive if they do so. Each customer who purchases Starbucks

gelato in the year, will be given a code on their receipt where they can go to the Starbucks website

and fill out a survey about the new product. Each customer whom submits the online survey will

receive a coupon for $1.50 off his or her next gelato scoop. This will be an incentive for the

customer to come back and try the gelato a second time, and we can learn about the customer’s

feelings towards this product through the feedback we gain from the surveys. For two weeks in

January, we will run a promotion to increase sales during the slower period for gelato sales. This

promotion will be a $1.50 discount coupon for one scoop with your food or beverage purchase. We

will be using the current Starbucks website as a technology platform. There will be a section on the

site designated for gelato, where potential and existing customers can view product information,

and make suggestions to what flavours they prefer and which ones they would like to see in our

product mix. We have chosen to not use social media as a platform for our campaign because we

will not be effectively targeting the demographic and geographic we have chosen for our test

market. We cannot promote the product widely yet because we have only chosen ten Starbucks

locations to promote the gelato in. We believe the best time to use social media will be when we

decide to branch out to all stores.

In total, our promotional budget is $11,108.75. The reason our promotional budget is so low is due

to the size of the test market, and because Starbucks chooses to use mainly in-store promotions to

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market new products and does not tend to advertise outside of their own stores.

To measure the effectiveness of the campaign, we will keep track of the number of coupons brought

back and compare the amount to the number of coupons distributed to customers. Another tactic

we will use will be information provided to us form the online survey, as well as from the

designated gelato feedback page on the Starbucks website. The information regarding the number

of tubs per month and the flavour is to be collected from each store to help track the popularity for

each item

Starbucks will be using the pull strategy to market their gelato, by only advertising with in-store

promotions. They will use the strengths of their retail locations and word of mouth to gain

respective gelato customers from their existing customer base, as well as new clients.

Operational Plan:

HR and other capacity requirements

Staff and Management Consultants Directors

· Organization's Vision, mission and Core values

· Organisation policies, standards and procedures

· Orientation

· Daily briefing

· Staff meeting

· Annual function

· Email, Internet, Newsletter, notice board

· Orientation

· Clinic workshop

· Internet, newsletter

· General meeting

· Annual function

·

· Internet, newsletter

· Product features and benefits

· Product specifications

· New development

· Customer Service

· Retail operations

· SOP

· Annual training plan

· Training workshop

· Newsletter

· Retail professional modules

· Newsletter · Newsletter

· New product launching event

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Risk Management:

Targeted Audience Cost Utilization Benefits

· Capture the targeted audience by focusing on ingredients.

· Diversify ingredients. · Manage supplies to reign in the costs.

· Ability to monitor costs.

· Prolonged product life.

· Stakeholders include Management executives and staff.

· Participate vigorously in creating awareness about the product.

· Continuous training programmes and workshops.

· New product line and product extension to keep the targeted audience interested in the product.

· Engage in corporate social responsibility e.g., children, hospitals, etc to promote a positive image of the company.

· Go Green, environmental friendly practices

· Rising creativity and innovative level to input life to existing products

· Updating knowledge, skills and ability or adaptability with roles and responsibility.

· Achieving business stability through Return on investment.

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Appendix A - Age Distribution in Vancouver

Age groups Both sexes Males Females

0 to 14 15.3% 16.1% 14.5%

15 to 64 71.2% 71.4% 70.9%

65 and over 13.5% 12.5% 14.5%

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Appendix B – Financials

Year 1 Costing Sheet

Variable Costs $ Ingredients 2.00 / 30 scoops (1 batch)= .07 each Spoons .01 each Bowls/ Lids .07 each Total Variable Cost per Scoop $.15 Fixed Costs Gelato Machine X10 25,000 Project Manager 100,000 Gelato Display X 10 30,000 Serving Spoons x 20 320 Research & Development 15,000 Pans x 100 1,000 Promotional Costs In-store Posters x10 200 Message creation 1,000 Brochures (2,500) 1,500 Stand-up Displays x10 300 Samples 60 scoops(240 samples)/ day x 2 weeks x 10 stores (This will run 4 times per year)

1,260x4= 5040

Free Product (awareness)* 375 Email creation 200 ½ price promotion (2 weeks)** 1125 Survey Coupons 1368.75 Total Promotional Costs $11,108.75 Total Fixed Costs $181,060.00 Assumptions: *50% of customers are included in the loyalty program *250 coupons per store **Sell on average 25 gelato scoops / day ***25 coupons used per day

Break Even Analysis Variable Cost / Unit $0.15 Total Fixed Cost $181,060.00 Suggest Selling Price $4.00 Break Even = Fixed Costs/Selling Price- Variable Cost 47,028.57 scoops Break Even Per Store Yearly 4,702.86 scoops Break Even Per Month Per Store 391.90 scoops Break Even Per Day Per Store 12.9 scoops Year 1: Target profit is $35,000 (All Stores) Breakeven with $35,000 profit 56,119.48 scoops Break Even Per Store Yearly 5,611.95 scoops Break Even Per Month Per Store 467.66 scoops

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Break Even Per Day Per Store 15.38 scoops

Situational Analysis

Fixed Cost Selling Price Variable Cost Contribution Margin

Break-even scoops

181,060 3.00 .15 2.85 63,529.82 190,000 4.00 .15 4.85 49,350.65 181,060 4.00 .15 3.85 47,028.57 181,060 4.00 .30 3.70 48,935.14

Year 2 Costing Sheet

Variable Costs $ Ingredients 2.00 / 30 scoops (1 batch)= .07 each Spoons .01 each Bowls/ Lids .07 each

Total Variable Cost per Scoop $.15 Fixed Costs Project Manager 100,000 Promotional Costs Brochures (2,500) 1,500 Free Product (awareness)* 450 ½ price promotion (2 weeks)** 2737.50

Total Promotional Costs $4687.5 Total Fixed Costs $104,687.50

Assumptions: *50% of customers are included in the loyalty program anniversary coupon *300 coupons per store **Sell on average 50 gelato scoops / day

Break Even Analysis Variable Cost / Unit $0.15 Total Fixed Cost $104,687.50 Suggest Selling Price $4.00 Break Even = Fixed Costs/Selling Price- Variable Cost 27,191.55 scoops Break Even Per Store Yearly (Ten Stores) 2,719.16 scoops Break Even Per Month Per Store 226.60 scoops Break Even Per Day Per Store 7.5 scoops Year 2: Target profit is $100,000 (All Stores) Breakeven with $100,000 profit 53,165.58 scoops Break Even Per Store Yearly 5,316.56 scoops Break Even Per Month Per Store 443.05 scoops Break Even Per Day Per Store 14.57 scoops

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Customer research

Name Preference x Month Try it? Price +Espresso Healthier Time of the Day

Hassan Gelato 1 Yes $2.50 No No Evenings

Hadi Gelato 1 Yes $2.00 No No Anytime in the summer

Kunal Gelato 1 Yes $2.50 Yes Yes Evenings

Jamie Gelato 1 Yes $2.50 No Yes Anytime in the summer

Jacques Gelato 1 Yes $2.00 No No Evenings

Brad* Gelato 0 No $1.25 Yes Yes Evening

Anonymous Ice cream 2 No $3.00 Yes Yes Evening

Katelyn* Gelato 1 Yes $4.00 Yes Yes Afternoon, Evening

Anonymous Gelato 2 Yes $3.00 Yes Yes Afternoon, Evening

Emily* Gelato 1 Yes $4.00 Yes No Afternoon

Shelby* Ice Cream 0 Yes $5.00 Yes No Dinner

Steve* Ice Cream 0 No $1.00 No No Night

Joanne Gelato 1 Yes $2.50 No Yes Afternoon

Sara Gelato 1 Yes $3.00 No No Afternoon Evening

Toby Gelato 2 Yes $4.00 Yes No Nigh

Kyle Gelato 1 Yes $4.00 No Yes Evening Night

Amy* Gelato 2 Yes $3.00 No Yes Afternoon Evening

Sarah* Gelato 1 Yes $3.50 Yes Yes Afternoon Night

Nicole* Gelato 2 Yes $1.89 No Yes Afternoon

Sara Ice Cream 0 No $2.50 No Yes Evening

Chartrelle Ice Cream 0 No $2.00 Yes Yes Afternoon Evening

Jamie Ice Cream 2 No $3.00 Yes Yes Evening

Melissa* Ice Cream 0 Yes $2.00 No No Evening

Erica Gelato 1 Yes $3.00 No Yes Afternoon Evening

Julia* Gelato 1 Yes $2.50 No No Afternoon Evening

Inga* Ice Cream 1 No $2.80 No No Evening

Laura* Gelato 1 Yes $3.00 No No Lunch Evening

Adrienne Gelato 1 Yes $3.00 No Yes Afternoon Evening

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*Social Status Seekers