Jennifer Nguyen MK255 Principles of Marketing 6 November 2009

Starbucks SWOT & Marketing Plan SWOT Analysis Strengths: Founders of premium coffee (superior quality, therefore higher price)

o They only use 100% natural roasted Arabica beans o Even their Via instant ready brew coffee is a premium player. Starbucks created a

microground coffee that maintains the rich and aromatic flavor of premium coffee beans. Via is portable coffee that doesn’t sacrifice quality. Via is also for the value customers who can’t or won’t splurge on a regular coffee purchase. Via provides a quality cup of coffee for less than a dollar.

o March of 2008, CEO Schultz announced the acquisition of Clover machines to Starbucks. The machine is a technological hybrid of a French press and vacuum. The Clover is the first coffeemaker that lets the user program three key variables: dose, water temperature, and brew time.

Created the “Starbucks Experience” o The experience is not simply provided by their premium coffee. Starbucks isn’t in the

coffee business serving people rather they are in the people business serving coffee. o Their mission statement works towards bringing a Starbucks experience to all

Mission Statement: “To inspire and nurture the human spirit— one person, one cup, and one neighbourhood at a time. ”

• By striving for a higher quality of life for all persons, Starbucks is strategically brand positioning themselves on strong beliefs and values

o Starbucks creates an appeal to a diverse range of individuals Appealing to non-coffee drinkers: Frappaccino Appealing to home coffee brewers: Starbucks has a co-branding deal with

Kraft to bring its coffee into supermarkets. (Starbucks roasts and packages the coffee and Kraft markets and distributes it.)

Appealing to the charitable: Fair Trade products (Develop sustainability by better trading conditions and securing rights for workers); Ethos Water (Helping children get clean water); Product Red (HIV/AIDS awareness)

Appealing to new geographical markets: Store expansion into new U.S markets (smaller cities) and new global markers

o Created the idea of a “Third place” For everyone to go between home and work. Providing more than 15,000

stores in over 40 countries. Extra in store products and features:

• Wi-Fi accessible, lounging environment (chairs, lighting, music), lunch and dinner items added to the menu, available in store (gourmet coffee, tea, gifts and related goods)

Excel in product development (new products for current market) o New products

Partnered with PepsiCo to bring bottled Frappaccino and DoubleShot Expresso drinks

Partnered with Dreyer’s to bring Starbucks coffee flavored ice cream Partnered with Hershey’s to bring Starbucks chocolate Starbucks Liqueurs

o Starbucks Entertainment Hear Music record label

• XM Satellite Radio Partnered with Lion’s Gates to co-produce movies and market them in

Starbucks (EG. Akeelah and The Bee) o Media Bars

Allow customers to download music and burn CD’s in select stores Weaknesses:

• Pricing o The premium category is under attack with the conditions of the economy. This

once affordable luxury is no longer available to the average working class. Only the elite class can afford to spend approximately $500 annually on five times a week purchases of a Venti brewed coffee.

o The high pricing is limiting the brand to elitists (Upper middle class white demographic)

• Promotion o Starbucks relies too heavily on word of mouth marketing

This can further isolate Starbucks as an elitist drink if the non-regular customer is unaware of Starbucks and doesn’t give it a chance

Opportunities: • Boston provides Starbucks with the opportunity of a demographic that has not been

targeted on a large scale-college students! o Right in Boston alone, there are 25 prominent colleges and universities o Starbucks has the opportunity to carve out its own section of market share

provided by students and young professionals in the metro area Threats:

• McCafé (“Premium player”) o Owned by McDonalds. First one was launched in Melbourne, Australia in 1993.

There are currently 1,300 worldwide. o Product Positioning

“McCafé Your Day: Give it up for the accent mark” • Plays off the name. An awareness campaign. Ad’s feature different

experiences that is more pleasurable when the accent is added. (EG. Choré, Parté)

o Value Proposition The same for less

• McDonalds’ drinks are almost $1 cheaper than Starbucks’ • McDonald’s strategy of opening McCafé’s in existing franchises

saves them money. It cost at least triple the amount of money to invest in one Starbucks what it cost for a McCafé.

o Aggressive marketing

McCafé billboards take jabs at Starbucks • “Four bucks is dumb”

o Gains an advantage by attacking Starbucks high prices and then providing a “Same for Less” value proposition

• “Large is the new grande” o Gains an advantage by attacking the pretentiousness of

Starbucks while assuming the position of a widely recognized brand -McDonald’s

• Dunkin Donuts o Bill Rosenberg founded the first store in Quincy, Massachusetts in 1950. He

began franchising the name throughout the Midwest and Southeast. o Product Positioning:

“America Runs on Dunkin” • Creates this appeal of a quick and convenient service • Going after the average Joe • Target customers are usually middle-income blue and white

collared workers. • Dunkin Donut customers want to be part of the crowd unlike

Starbucks customers who want to stand out as individuals Specifically, Dunkin Donuts is a threat to Starbucks in the Boston Area.

Dunkin Donuts is a prominent East Coast coffee that has created a strong brand loyalty.

Marketing Plan Objectives Explaining/outlining goals:

Goal: To Capture Market Share from Dunkin Donuts and McCafé o Problems

In order to capture market share from Dunkin Donuts, Starbucks would have to position itself as coffee for the everyday Joe

• This move would be a brand killer. By making Starbucks friendlier to the “average Joes,” (customers who want to be part of a crowd) Starbucks would be devaluing their premium status. Dunkin Donuts and Starbucks are positioned in two completely different markets. Dunkin donuts is a commodity player. They do not provide high quality coffee and they operate in low scale environments. Starbucks on the other hand operates in high scale environments, provides premium coffee and quality customer service. The overall problem with this scenario is that you cannot combine Dunkin Donuts customers and Starbucks customers without alienating one or the other.

In order to capture marker share from McCafé, Starbucks would have to provide lower prices. McCafé’s greatest advantage on Starbucks is that it provides premium (Newman’s Own) coffee at a significantly lower price.

• This move is also a brand killer because Starbucks customer want to stand out from the crowd. They view themselves as

loyal customers who understand the value of paying a higher price for better coffee. Starbucks would alienate these customers if their prices were synonymous with a low-end brand such as McDonalds. Also, Starbucks does not want to reposition itself into the thin profit margins of the commodity players.

o Solution Starbucks needs to target a specific niche of the McDonalds and

Dunkin Donuts market. Then Starbucks needs to market to this niche in a way that will get them to try the brand. Finally Starbucks can use its strongest asset-its premium status/quality-to gain customer loyalty.

Main Objective: o Target College students and use promotional discounts to capture the markets

attention. The only obstacle here is getting students to give Starbucks a try. Execution Action Programs:

Run a promotion where one day of the week every student that comes in with a college I.D receives a percentage off any drink in the store.

o Starbucks is saying that they are doing something specifically for students. And by catering to the college community, Starbucks is building a relationship with students.

Through the print medium run ads specialized for college students. There are two key locations.

o The T The T is a central cornerstone of just about every college students’ life

here in Boston. Students will be made aware of Starbucks presence. Students will relate to Starbucks. Ads should feature college students

and establish an emotional connection with students by concentrating on their wants and promoting their values.

• A specific ad that should be made for The T is one that promotes the idea of Starbucks as a “third place,” between college students’ dorm rooms and classrooms. No longer is will this “third place,” be reserved solely for the professional world to go to between “home and work.” Students want a hangout or an extra library/office and they value space.

o College and University newspapers College students specifically read college newspapers. Starbucks will advertise the promotional day where every student that

comes in with a college I.D receives a percentage off any drink in the store. The advertisements in The T are to target college students and expose them to Starbucks, where as the advertisements in the school newspapers are signaling a call to action through a discount tactic.

Follow up and Closing

Starbucks does not need to reinvent itself. The real objective was to get students interested enough in Starbucks to give it a try. Starbucks can then follow through on capturing customer loyalty by providing students with the same premium coffee, quality customer service and up scale environment that they have been providing since day one. Once students are exposed, the hope is they will make Starbucks their “third place,” between their dorm rooms and their classrooms, spread Starbucks’ by word of mouth and come back for more every time.