8/15/2019 Marketing Principles Gabriel
1/27
October 30Marketing Principles
2013UK College of
Author name: Gabriel Novac Business and
ComputingHND Level 5
Contents
Background on Starbucks............................................................................1
Task 1.1.......................................................................................................2
Task 2.2.......................................................................................................3
Task 2.1.......................................................................................................4
Task 2.2.......................................................................................................7
Task 2.3.......................................................................................................8
Task 2.4.......................................................................................................
8/15/2019 Marketing Principles Gabriel
2/27
Page
Task 2.!.....................................................................................................10
Task 3.1.....................................................................................................11
Task 3.2.....................................................................................................12
Task 3.3.....................................................................................................12
Task 3.4.....................................................................................................13
Task 3.!.....................................................................................................14
Task 4.1.....................................................................................................1!
Task 4.2.....................................................................................................1"
Task 4.3.....................................................................................................17
#onclusions...............................................................................................18
$e%erences................................................................................................1
Background on Starbucks
Starbucks is a large international chain of coffee shops that does business in more than 60
countries and serves its customers in approximately 18,000 retail stores. he mission of
Starbucks is to inspire the human spirit ! one person, one cup and one neighborhood at a time
"Starbucks, #01$%. he products that Starbucks sells are coffee products, handcrafter
beverages, merchandise, fresh food and consumer products. &ccording to Starbucks "#01#%,
8/15/2019 Marketing Principles Gabriel
3/27
Page
the brand portfolio includes the Starbucks 'offee, Seattle(s Best 'offee, a)o ea, *volution
+resh, la Boulange and orrefa)ione talia 'offee.
ask 1.1
Marketing process
-arketing is defined by otler "#01#% as the process of meeting customer needs profitably.
he marketing process is the process by /hich the company analyses the needs and
reuirement of its target customers and brings to market products and services that fulfill
these needs. &ccording to otler "#01#%, the marketing process contains four different parts
situation analysis, marketing strategy, marketing mix decisions and implementation and
control.
2ithin the situational analysis stage, Starbucks thoroughly analyses the internal and external
environment of the company in order to assess the factors of influence that could affect its
long term plans. he internal environment includes the employees, management and
shareholders of Starbucks. he external environment is composed of the microenvironment
"competitors, customers and suppliers% and the macroenvironment "political, economic,
social3cultural, environmental technological and legal factors% "-anki/, #01#%. -anagement
tools that are commonly used for studying the internal environment are the S24 analysis,
5orter(s "187% +ive +orces -odel and stakeholder analysis.
he tools that managers use for analysing the external environment are the S24 analysis
and the 5*S* analysis. n Starbucks case, one of the most important steps /hen
performing the situational analysis stage is to assess the needs of the customers. he company
does that via customer uestionnaires, focus groups, complaint forms and social media
messages "Starbucks, #01$%. 'ustomer feedback is an essential part of the continuous
development of the company and its product line. &dditionally, Starbucks( marketing team
performs the stakeholder mapping and human resource strategy analysis "Starbucks, #010%.
he second step in the marketing process is to develop the marketing strategy. &s the best
opportunities to serve the customer needs are found, it is time for the company to create a
strategic plan that should include the strategic resources, the constraints and the strategic
goals of the company. &t Starbucks, the marketing strategy is developed in three stages
marketing segmentation, targeting and positioning. Segmentation refers to the process of
splitting the existing and potential customer base into groups that have similar characteristics
and reuirements. +or example, in Starbucks( case, the target market for flat /hat coffees is
busy professionals /ho do not have time to serve a large coffee and that /ant a uick
refresher "Starbucks, #01#%.
SWOT Analysis
he S24 analysis is a method to analyse the strengths, /eaknesses, opportunities and
threats that a company faces "otler, #01#%. S24 analysis is freuently used to summari)e
and illustrate the most important internal and external factors of influence that are foundduring the situational analysis. he internal factors are summarised by using the strengths and
8/15/2019 Marketing Principles Gabriel
4/27
Page
opportunities /hile the external factors are summari)ed in the opportunities and threats
section. he S24 analysis of Starbucks /as performed by summari)ing collected
information from the &nnual 9eports for the years #011 and #01# and by using the State of
the Snack ndustry 9eport from 2isconsin School of Business "#010%.
Strengths
:reat customer service policy and employeetraining
;aluable brand portfolio
+inancially po/erful and /ith lo/ debt
5resent in more than 60 countries
2eaknesses
he business is in a lo/ gro/th stage on the product life cycle
ack of gro/th in main markets
8/15/2019 Marketing Principles Gabriel
5/27
Page
Setting clear marketing ob>ectives and defining marketing ob>ectives is an important step of
the marketing strategy as is give the company the opportunity to develop targets and time
frames, it aids in the creation of budgets, it gives performance criteria for different
departments, managers and employees and it creates a common company3/ide strategy. he
marketing ob>ectives that Starbucks has should also include targets that are related to
customer service, relationship marketing, uality assurance and service and customer care
"Smith, 16%. Setting marketing costs normally involves defining uantitative andualitative targets in the follo/ing areas customer satisfaction, uality of products or
services, relationship marketing and financial return on the marketing campaign. n regards to
Starbucks, the company has a number of uality standards that, as part of the marketing
strategy, are to be maintained and improved. &s an example, the shop floor should al/ays be
clean and smell nice, the tables should be cleaned after each customer leaves the coffee shop,
the Agrande cappuccino should /eigh exactly $#0 grams and the Agrande &mericano
should /eigh C00 grams. &n emphasis on maintaining and improving these standards /ithin
the marketing plan /ill help on the operational level. *ven though this imposes some costs
associated /ith measuring, monitoring and imposing discipline, it is >ustified on the long term
because it may bring competitive advantages.
&ccording to otler and eller "#010% there are a number of marketing philosophies that can
be identified. his marketing philosophies or concepts refer to the emphasis, focus and
/eight assigned to the organisation, the business units of the organisation, its customers, its
stakeholders and the society. he competing concepts recognised in the modern marketing
literature include the production concept, the product concept, the selling concept, the
marketing concept and the holistic marketing concept. he production concept holds that
customers /ill prefer products that are /idely available and cheap "otler and eller, #010%.
he product concept suggests that customer /ill prefer the products /ith the highest uality,
performance or most innovative features. he selling concept considers that customers have
to be approached by using an aggressive marketing campaign in order to achieve high sales
gro/th. he marketing concept is a modern philosophy focused on identifying and satisfying
customer needs. +inally, the holistic marketing concept takes into account the needs of the
customers, but also goes on to address the needs of the society. n this respect, Starbucks(
focus is on holistic marketing because it tackles complex issues such as relationship
marketing, integrated marketing and social responsibility marketing.
ask #.1
otabe and @elsen "18% consider the micro3environmental factors as the factors of
influence of a company that can be directly managed and changed by the organisation. he
organisation can shape and defend from the micro3environmental factors. hese factors are
internal "such as the human resources, the management and the corporate culture% or external
such as the customers, suppliers, partners and other stakeholders. he microenvironmental
factors are audited and analysed using the stakeholder mapping, 5orter(s +ive +orces,
-arketing 9esearch, S24 analysis, internal audits, management revie/s and uality circles
"otabe and @elsen, 18%. he macroenvironmental factors are the external factors thataffect the business activities of an organisatioSn, but cannot be influenced by the
8/15/2019 Marketing Principles Gabriel
6/27
Page
organisation. hese factors of influence are analysed by using the 5*S analysis /hich
incorporates political, economic, social and technological factors.
Microenvironment Factors
1. Shareholders ! &s the holders of capital in the business, Starbuck(s shareholders are an
important factor of influence. he shareholders that hold stock /ith voting rights are allo/ed
to dra/ votes in the :eneral Shareholders -eetings and propose a ne/ board of directors
composition, pay packages, strategic directions and other issues. +or example, a large
institutional shareholder that takes active involvement in the management of organisations
such as 'arl cahn(s investment vehicle, could acuire an important stake in the company and
advocate for a different senior management "that /ould implement other strategic plans%,
higher dividends or a greener policy. &dditionally, besides the po/er to influence Starbucks
at a strategic level, the shareholders are also entitled to the residual profits of the company
and to the dividends. herefore, Starbucks( management should make financial decisions that
are to the long term benefit of its shareholders, and also take into account the needs of other
stakeholders.
#. Competitive Forces ! &ccording to 5orter(s +ive +orces -odel, the main factors that shape
the competitive environment are the bargaining po/er of suppliers, the bargaining po/er of
buyers, the existing competition on the market, the threat of substitutes and the threat of ne/
entrants "5orter, 11%. &rguably, the threat of ne/ entrants on the coffee shop market is
high, because the barriers to entry on the market are generally lo/. +rom a financial,
technological and intellectual capital point of vie/ it is relatively cheap and straightfor/ard
to open a coffee shop. @o/ever, due to its si)e, brand and other competitive advantages,
Starbucks has the tools to impose premium prices and achieve lo/er costs than its
competition. Secondly, the threat of substitutes is lo/ in the short term, but high in the long
term. he coffee3drinking social3cultural trend is currently very popular and is unlikely to
change in the short term. @o/ever, in years, people may develop taste for other beverages
such as shakes or tea and other methods of sociali)ing. hirdly, the existing competition on
the market is usually high in the markets in /hich Starbucks activates. +or example, in
ondon, there are a large number of small independent coffee shops that charge value prices
and offer good uality coffee and a number of large coffee shop chains that charge premium
prices and offer decent uality coffee such as Starbucks, 'osta 'offee, 'afD
8/15/2019 Marketing Principles Gabriel
7/27
Page
$? of the coffee purchased /as ethically sourced. o sho/ ho/ important the sourcing of
coffee is to Starbucks, the company has developed the 'offee and +armer *uity 5ractice
/hich outlines the organisational approach to sourcing high3uality coffee /hile promoting
social, environmental and economic standards "Starbucks :lobal 9esponsibility 9eport,
#01#%.
Macroenvironment Factors – !ST Analys
1. olitical 3 he political factors that may affect Starbucks are the government policies to/ard
foreign investments, fiscal policies, labor la/s, health and safety regulation, environmental
legislation and others. Starbucks, in the E /as put under considerable political pressure
/hen it /as revealed that the company has not paid enough taxes on its E revenues due to a
fiscal loophole. he company booked its profits in reland /here the profits are taxed at a
very lo/ rate. &ccording to the :uardian "#01#%, Starbucks has paid only F87 million in tax
over 1C years of operation in the E, despite having revenues of more than F$ billion in the
same period. =ue to public outcry, follo/ed by political pressure, the company offered to pay
F#0 million extra in tax by not claiming some deductions "BB', #01#%. @o/ever, the E government is discussing /ays in /hich to revie/ the fiscal code so as to limit the
deductions that international companies can make to countries /ith lo/ tax regimes and this
may reduce the after tax profits of Starbucks.
#. !conomic ! the economic factors that are most likely to affect the economic gro/th, the
inflation rates, the currency exchange rates, the unemployment rates, the disposable income
and the interest rates in the countries in /hich it has a presence. Some of the economic
factors /ill affect the demand side of company "the amount of money its customers are
/illing and able to spend on Starbuck(s products and services% /hile the rest /ill affect the
supply side of the company "the capacity of Starbucks to serve its customers%. +or example,the disposable incomes of the population affect the /illingness and ability of Starbucks
customers to purchase coffee and other products by limiting or expanding the amount of
money they have for such purchases. =ue to the economic crisis, the incomes of 9omanians
have decreased in real terms and therefore the amount of money set aside for coffee
consumption lo/ered. his is also due to the fact that Starbucks( coffee is a non3essential
product and has high price elasticity "/hen the price increases, the demand decreases more%.
he interest rate that financial institutions charge for loans have influenced the ability of
Starbucks to serve its customers by increasing or decreasing the company(s expenses /ith
investments, research and development, supply chain and other capital intensive business
areas. he lo/er the interest rates in a country, the more economically feasible /ill be for
Starbucks to invest in ne/ stores and put more money into research and development.
&dditionally, the lo/ interest rates generally make dividends more attractive and therefore
the company /ould be able to offer lo/er dividend rates and keep more of the profits to
reinvest in its operations.
$. Technologic ! 9ecent technological developments that have influenced the marketing
decision of Starbucks are the easier communication /ith customers via social net/orks and
instant messaging services, the expansion of mobile platform marketing channels and the
increased use of internet for marketing purposes. n this respect, Starbucks has allocated more
and more of its advertising and promotions budget for the internet platforms, including its
8/15/2019 Marketing Principles Gabriel
8/27
Page
o/n /ebsite. n regards to the mobile platforms, Starbucks has invested in three main mobile
applications that its customers can use to stay in touch /ith the company Starbucks for
&ndroid /hich allo/s its users to bro/se the offers of Starbucks, Suare 2allet /hich makes
payments /ith mobiles in Starbucks possible and a special application for i5hone users
entitled Starbucks for i5hone "Starbucks 2ebsite, #01$%.
ask #.#
t is more sensible and profitable for companies to use market segmentation as part of the
marketing activities because it allo/s them to extract more value from different categories of
customers ")an, #00G%. his is because by segmenting, Starbucks is able to address the
needs of certain segments of the market in a more effective /ay and therefore creating more
customer satisfaction. -arket segmentation entails the separation of customer groups in
segments based on geographic, demographic or psychographic characteristics "otler and
eller, #010%. he geographic characteristics offer the possibility of creating market segmentsfor customers in a country, region, city or even neighborhood. +or example, customers of
Starbucks in 9omania are more likely to purchase lattes and less likely to purchase matcha
lattes than customers in the E "Bock and Encles, #00#%. herefore it is more sensible for
Starbucks to put marketing focus on lattes rather than on matcha lattes in 9omania. he
demographic characteristics include the income, family si)e, age, social status, >ob
characteristics, family composition, gender, religion, ethnicity and nationality "otler and
eller, #010%. +inally, the psychographic characteristics are the personality traits, values,
beliefs and attitudes of individuals. +or example, Starbucks positions its products as ethically
sourced and obtained from fair trade suppliers to appeal to the individuals that value
corporate social responsibility and environmental protection.
o expand on the previous example, take the markets for hot beverages served in coffee
shops, in /hich Starbucks is an important presence. &n appropriate segmentation criterion is
the geographic criteria. +or example, t/o different market segments are the customers of
Starbucks in Bucharest, 9omania and the customers of Starbucks in ondon, Enited
ingdom. he geographic segmentation makes sense not because of the distance bet/een the
t/o locations, but because it underpins different economic, social3cultural, behavioral and
personal characteristics of customers. +irstly, customers in Bucharest are less used to have
coffee for takea/ay and more used to consume the coffee in store as a social event. Besides
en>oying a coffee as a social event, ondon customers also take coffee on the go rather
freuently. Secondly, the average ondoner has more purchasing po/er /ith hisHher income
than the average individual from Bucharest and therefore can afford to purchase more coffees
from Starbucks. Starbucks in Bucharest has to compensate for the lo/er individual demand
and appeal to a larger number of people. 4n the other hand, Starbucks in ondon can afford
to build lengthy relationships and loyalise its customers via promotions, loyalty points and
other offers. hirdly, the tastes for hot beverages for customers in Bucharest are sensibly
different from the tastes for hot beverages for customers in ondon and therefore Starbucks
needs to adapt its offering.
8/15/2019 Marketing Principles Gabriel
9/27
Page
¬her segmentation criterion for Starbucks customers is a psychographic characteristic. &s
an example, for the sand/iches section, the coffee shop chain could use the follo/ing
categories of customers the customers /ho en>oy a uick meal made out of uality
ingredients, but en>oy it at value prices and the customers /ho are very interested that the
ingredients in the sand/ich to have certain nutritional value, to be exotic and to be
ecologically gro/n. he first category /ould attract the value range of sand/iches that such
as the ham, brie and tomato sand/ich and baguette /hile the second category /ould attractthe premium range of sand/iches such as the ethically source salmon bagel. t is /orth it to
segment the customers in this manner, because, by producing different types of sand/iches
and by having a customised marketing mix for these sand/iches, the company can extract
more value from the customers.
ask #.$
he second step in the marketing planning process is the market targeting process. &ccordingto otler and eller "#010% the targeting strategy involves the developing and applying of a
customised marketing mix for the identified market segment for the purpose of obtaining
more value from the customers. &ccording to the same authors the available targeting
strategies are niche marketing, concentrated marketing, differentiated marketing and
undifferentiated marketing.
n regards to the sand/ich range, Starbucks could find it profitable to take advantage of
certain trends and undertake a niche marketing strategy. +or example, the coffee shop has
researched the market and found that people /ould pay premium prices for exotic sand/iches
and that a popular type of sand/ich in the specialty shop /as the 'hicken Ban -i. his ismade /ith -aui 'hicken ske/ers, iceberg salad mix, cucumber, orange peppers, rice vinegar,
@oisin Sauce, Soy Sauce and 'ilantro "Spark 9ecipes, #01$%. he company has created a
different marketing strategy for this type of sand/ich by customi)ing the elements of the
marketing mix. +irstly, the sand/ich /as created /ith ingredients that are very different from
the usual ingredients. he packaging used included elements of hai design and symbols and
differentiated it from other products. he label clearly sho/ed that the name of the sand/ich
is 'hicken Ban -i and its ingredients so that people are not confused about its nature. he
ne/ product /as promoted as a premium product that catered for the needs of more
adventurous Afoodies and it advertising influenced people Ato have a go "Starbucks, #01#%.
he distribution of the product /as similar to the other products, except for the display. he
sand/ich had its o/n separate place in the display /indo/ and it /as also located in the
premium sand/ich section. he price /as slightly lo/er than the premium sand/iches but
higher than the regular range of sand/iches "Starbucks, #01#%.
ask #.C
By analysing the buyer(s behaviour, Starbucks can find methods to deliver more value by
addressing the needs of its customers in a more efficient and profitable manner. he decision
8/15/2019 Marketing Principles Gabriel
10/27
Page
making process of buyers is composed of five main steps problem recognition, information
search, evaluation of alternatives, purchase decision, and post3purchase behaviour. o take
Starbucks( case, let(s say that a group of individual need to meet over a cup of coffee and
have a uick snack.
he first step in the buyer behaviour process is that the individuals recognise the need for
coffee and snacks. he second step is to search for information on companies that offer coffeeand snacks. hey might search online, they might search on the street for appealing coffee
shops or one of the group individuals might persuade the other to choose a particular coffee
shop. hirdly, the most promising alternative is chosen by the group based on a number of
criteria such as proximity to the current location, mix of products, price range, customer
service, cleanliness or other criteria.
8/15/2019 Marketing Principles Gabriel
11/27
Page
0
Page
8/15/2019 Marketing Principles Gabriel
12/27
Page
and environmental influences such as economic, technologic and legal influences. he
demographic factors include the age, income, generation, social status, family, ethnicity,
nationality and others. & /oman /ith children that enters a Starbucks could be interested in
offering healthy drinks and snacks for her children. 4n the other hand, her children might
pressure the mother into buying high3calorie chocolate bars and fi))y drinks. & more senior
person /ould possibly en>oy more traditional snacks such as an *nglish Breakfast ea /ith
biscuits. @o/ever, it is not /ise to generali)e these /ithout proper research.
/o basic models that try to explain the psychological influences of individuals during the
buyer(s decision making process are -aslo/(s @ierarchy of
8/15/2019 Marketing Principles Gabriel
13/27
Page
/ritten on it and struck by a thunderbolt. he drink /ill be made >ust as the
regular *spresso drinks are made.
5rice he price of Ahe Big 4ne /ill be slightly lo/er than t/ice the price of a
double *spresso. 'urrently, the price of a double espresso in 9omania is 8
ei and therefore the price of Ahe Big 4ne /ill be around 17 ei. his
/ill reinforce the idea that the drink has double the caffeine content and /ill
create the impression that the company offers a bit of value /hen purchasing
larger si)es.
5romotion he ne/ product should follo/ the general promotion techniues of
Starbucks. he company does not regularly engage in advertising and
promotion through mass channels such as television or radio "Starbucks,
#010%. @o/ever, the company could promote this ne/ product via some 59
stunts such as sho/ing in the ne/spaper some stars sipping from Ahe Big
4ne. &dditionally, the ne/ drinks could be promoted in store via signs,
banners, a special placement in the drink list and through coupons and
offers. +urthermore, Starbucks should also go for /ord of mouth promotion
and encourage people to talk about Ahe Big 4ne on social media
platforms and on discussion forums.
5lacement he placement of the product /ill be similar to the placement of other
drinks offered by Starbucks. @o/ever, as mentioned before, in the first
months, the drinks should occupy a special place in the drinks list and it
should be clearly visible that this is a completely ne/ offering.
ask $.1
&s sho/n by Barney "#00G%, competitive advantage is created by achieving points3of3parity
and points3of3difference /ith the competitors and by creating sustainable barriers to entry for
potential ne/ entrants on the market. he points3of3parity are the individual characteristics of
the marketing mix that are considered as standard on the specific market. +or example,
Starbucks should take into account that it is considered as normal for a coffee shop to offer a
range of different types of coffee such as latte, cappuccino, &mericano, espresso and flat
2hite and a coffee shop that does not offer this range could lose many customers. 4n the
other hand, to achieve points of difference, Starbucks should create difference /ithin the
marketing mix elements. 'ompete by creating different or innovative products, by having a
different pricing strategy, by having a more efficient distribution chain or by appealing more
to customers via effective promotional campaigns.
he first step in developing products /ith sustainable competitive advantages is to engage in
market research. his helps Starbucks analyse the needs of its potential customers,
preferences regarding the marketing mix and segmentation criteria. he second step is to find
a consumer segment that can offer value and gro/th for the company. his could be the
healthy food consumer segment or people that en>oy ndian cuisine or young students. he
8/15/2019 Marketing Principles Gabriel
14/27
Page
next step /ould be to use the researched differences and apply them on a product range. n
this respect, Starbucks can create a 'hicken eriyaki sand/ich for the customer segment that
en>oys ndian cuisine. he competitive advantages /ould be in this case from having a
product range that addresses a /ider array of tastes and therefore attracting more customers.
4ther sources of competitive advantages can be created by having a more efficient
distribution chain. &s opposed to a small coffee shop such as -ario(s 'offee Shop near
:range @ill Station, Starbucks achieves lo/er costs per kilogram of coffee due to its
advantages of scale and sources its coffee only from responsibly and ethically produced fair
trade coffee. n this /ay, Starbucks has higher profits and its brand is boosted by the
corporate social responsibility.
ask $.#
=istribution is one of the elements of the marketing mix and it refers to the processes and
methods of putting the end product on the market and displaying it. &ccording to otler and
eller, distribution of products and services should be arranged so as to create customer
convenience and availability. 'ustomer convenience means that the customer should spend as
little resources as possible in obtaining, using and disposing of the product or service.
'ustomer availability is achieved by making the product available to as many customers as
possible. n this respect, Starbucks aims to position its coffee shops as close as possible from
its most lucrative customers. his entails for Starbucks the positioning of its coffee shops near
large shopping centers and near business areas and districts. n ondon, Starbucks can mainly
be found on high streets, in shopping malls and near the business areas of ondon "such as
the Suare -ile% "Starbucks, #01#%.
&ccording to otler and eller "#010%, companies can choose from number of distribution
channels direct selling, distributors, /holesalers, retailers and agents. & distribution channel
is a uniue method of transferring the end product or service from the producer to the user. n
Starbucks( case, the company uses a number of distributors and /holesalers for some of the
products that it retails and direct selling for the products that it makes. +or example,
Starbucks might purchase the chocolate bars that it sells from a producer, a distributor or a
/holesaler. 4n the other hand, Starbucks makes and sells its coffees directly, in store.
ask $.$
5rice is another important element of the marketing mix and is the element that mostly
influences the demand for a product or service. he prices of products and services ultimately
determine the end revenues of the company. he price of a product is the total economic
value that a buyer is /illing to part /ith in order to buy, use and dispose of a product. +or a
customer of Starbucks, the price of a coffee includes the monetary value of the coffee "the
8/15/2019 Marketing Principles Gabriel
15/27
Page
actual money spent to buy the coffee%, the time spent to buy the coffee and the opportunity
costs of buying the coffee.
&ccording to otler and eller "#010%, in generally, the higher the price of a product or
service, the lo/er the demand for the product or service is. @o/ever, there are some goods
such as status goods "such high end cars or >e/elry% /here the inverse relationship does not
hold. 2ith this in mind, as Starbucks coffee is seen as a cool and fashionable place to drink
coffee, the company can afford to charge premium prices /ithout having to /orry much
about declining demand "@arrison et al, #007%. his is the premium pricing strategy. 4ther
pricing strategies include psychological pricing, predatory pricing, value pricing, perceived
value pricing, optional product pricing, cost3plus pricing, promotional pricing and niche
pricing "Best, #01$%. 4ne example of psychological pricing for Starbucks products is the
price of cappuccino F1.. here is a psychological bias that makes individuals perceive
F1. as closer to F1 than F# and companies are using this bias to make the products look
more affordable. 5erceived value pricing is /hen companies take the customers( perceptions
on the value of a product and use them in setting a price. +or example, the variable cost of
producing a cappuccino is normally no more than 17 ! #0 pennies per drink. @o/ever, as
customers are /illing to spend as much as F$ per one drink, it is better for Starbucks to take
advantage of this. +urthermore, the company needs to recover fixed costs as /ell and
therefore the total cost per coffee might be considerably more than 17 pennies.
he price of a product is a very complex decision and is made by senior managers. hey take
into account information from the marketing department "perceived value, competitive
situation, prices of competitors, promotional strategies and macroenvironmental issues%, from
the operational department "cost of production, cost of distribution, end product price,reuirements from the suppliers%, from the financial department "breakeven price, forecasted
revenues and costs, analysis of economic feasibility% and from the shop floor "customer
feedback, complaints, suggestions and empirical evidence%. @o/ever, even having a large
amount of complex information, taking a pricing decision involves some measure of intuition
"otler and eller, #010%.
ask $.C
&ccording to otler and &rmstrong "#01#%, marketing communication includes the means by
/hich firms attempt to inform, persuade and remind customers ! directly or indirectly ! about
the products and services they /ish to sell. -arketing communication tends to increase the
brand euity by shaping a distinct product image and by establishing the image in the
memory of its customers. he marketing communication mix consists of six ma>or categories
of communication methods advertising, sales promotion, events and experiences, public
relations and publicity, direct marketing and personal selling "otler and eller, #010%. 4f all
the promotional mix elements, the company uses advertising in print, events and experiences,
public relations and /ord3of3mouth marketing. he ads of Starbucks are mostly in
ne/spapers that have as main audience /ell3off intellectual people. &s a complement to the
8/15/2019 Marketing Principles Gabriel
16/27
Page
ads, the company sometimes does public relations activities and sponsors ne/spaper articles.
+urthermore, Starbucks is also involved in many corporate social responsibility events such
as supporting 'hildren(s S4S ;illages in :reece "Starbucks% and this brings the company
considerable brand euity. 4n the other hand, Starbucks has also suffered from negative
publicity from the exposure that the company is using legal loopholes to pay less tax in the
E "BB', #011%.
&ccording to Starbucks "#010%, the vision of the company is to create a Athird place besides
home and /ork, /here people can spend uality time and sociali)e. &ccording to +ellner
"#011% this strategic ob>ective of Starbucks is so successful because it appeals to a large
number of customer segments and therefore can address the needs of many potential
customers. &dditionally, due to the proximity of Starbucks coffee shops to shopping areas,
business districts and educational establishments, the company has created availability and
convenience for its main customer segments. ¬her successful marketing strategy of
Starbucks is to develop strong brands and distribute them through ma>or retailers. +or example, the company has been successful at creating and penetrating the instant coffee
market /ith the ;4 brand "Starbucks, #01#%. +inally, as part of its promotional efforts,
Starbucks has been successful at developing relationships /ith its customers via the
Starbucks oyalty 'ard.
ask $.7
n addition to the initial four elements of the marketing mix, marketing managers also take in
to account three additional dimensions the process, the people and the physical evidence"-c:rath, 186%. hey are especially relevant to the companies that activate in the services
sector. Starbucks could be thought of a company that activates in the services sector because
it offers experiences rather than actual products "the products offered have little value in
themselves%.
he process marketing dimension is concerned /ith the procedures, standards and methods of
/ork. he processes that are used at Starbucks are very /ell documented as part of the S4
001#008 uality assurance standard. +or example, the company has a standard procedure
for dealing /ith customer complaints that involves dealing /ith the complaint at different
levels of the company. f an employee or a team at a lo/er level fails to offer a satisfactoryresolution to the customer, only then the issue is escalated to a superior. ¬her example of
clearly documented process is the one of making coffees. he employees need to follo/ the
procedure exactly and take into account the standards of the coffee. +or example, the latte
milk needs to be creamy and be /eightier that the cappuccino milk /hich needs to be frothy.
he people of Starbucks include the back office personnel from the account and finance
department, the operations and logistics department, the strategic management department,
the human resources department and senior management and the front office personnel such
as the shop managers, supervisors, customer hosts and baristas. +or the company, the most
essential to the customer experience are the front office personnel because they are the ones
8/15/2019 Marketing Principles Gabriel
17/27
8/15/2019 Marketing Principles Gabriel
18/27
Page
• 5lacement he placement of the espresso is similar to the placement of other coffees served
by Starbucks. he coffee beans are sourced from its approved list of importers and
distributors and the coffee is produced and sold in3store.
-arketing mix for the caffeine intolerant people
• 5roduct &s the product is for caffeine intolerant customers /ho /ant to experience the
Acoffee drinking ritual /ithout the possibility of drinking caffeine. &s such, the espresso is
made /ith decaffeinated coffee. 4ther/ise, the same product si)ing is available single and
double. he packaging of the decaffeinated coffee is distinctive, /ith a different colour on the
cup than the regular espresso so that it can be distinguished.
• 5rice he price of the decaff espresso should be slightly higher than the regular espresso. &s
the price of a regular espresso in 9omania is 6 lei and of a double espresso is 10 lei, the price
of a decaff espresso should be G lei and the one of a double decaff espresso should be 11 lei.
• 5romotion he promotion of this niche product should be done /ithin specialty
communication channels such as maga)ines that focus on medicine, healthy living maga)ines
and ; sho/s, in3store advertisements and radio advertisements.
• 5lacement the placements of the decaff coffee should be distinctive. t should occupy a
distinct place in the drink list and it should be clear that the coffee does not have any caffeine
content. 4ther/ise, the decaff coffee is to be sold /ithin store, same as the other types of
coffee. he decaff coffee beans are to be sourced from the same importers and distributors as
the regular coffee beans.
ask C.#
-arketing for individual consumers and marketing for businesses reuire t/o very different
marketing strategies as they have distinct characteristics. he consumer market consists of
individual consumers /ith lo/ purchasing po/er and high heterogeneity /hile the business
market consists of organisations that acuire goods and services used in the production of
other goods and services that are sold, rented or supplied to others "Brennan and 'anning,
#010%. &ccording to otler and eller "#006% the follo/ing ma>or differences bet/een
organisational marketing and consumer marketing exist there are fe/er and larger buyers,
there is a closer supplier3customer relationship, professional purchasing, several buyinginfluences, multiple sales calls, derived demand, inelastic demand, fluctuating demand,
geographically concentrated buyers and direct purchasing.
8/15/2019 Marketing Principles Gabriel
19/27
Page
buyers. 4n the other hand, Starbucks has a large number of individual buyers /ith smaller
purchasing po/er and /ith lo/er value orders. Starbucks( customers do not have the
purchasing po/er and the ability to negotiate prices and customised delivery conditions. 4n
the other hand, depending on the contract si)e, the customers of -aven +oods do have the
ability to negotiate contractual terms. +or regular customers of -aven +oods, the relationship
bet/een the catering company and its client is normally closer as there are special procedures
and contracts that take a/ay the need to discuss each time contractual terms. +or example,
t/o businesses may use a contract of delivery template for each time the company supplies
food for an event and have regular discounts for large orders. 4n the other hand, it is less
possible to establish business relationships /ith Starbucks( customers as investing too much
money could prove unprofitable. Starbucks invests in creating customer relationships mainly
via its loyalty card system "Starbucks, #010%.
ask C.$
-arketing in an international context is different because the internal and external business
environment differs. +or example, there are considerable differences in the political,
economic, social3cultural, technologic, environmental and legal environments bet/een the
E and 9omania. Because Starbucks has a large international presence and it operates in
more than 60 countries, the organisation needs to customise its marketing strategy based on
the national and regional characteristics. &ccording to otler and eller "#010%, marketing in
an international environment brings the follo/ing issues the company is exposed to more
competition, the company has access to a /ider, broader and more complex set of customers,the company needs to abide by the environmental conditions of the respective geographical
area, the company has to account for language differences, the company needs to be careful at
business etiuette and that international marketing helps spread business risks.
+or example, in 9omania, Starbucks has adapted its marketing mix to the internal and
external environmental conditions. t uses a local importer and a number of local distributors.
@o/ever, the coffee is sourced from the same producers as the Starbucks in the E. he
supply chain is more complex due to the limitations of 9omanian transport "it is more
effective to transport the coffee to logistic center in ransylvania and thereon distribute the
coffee% "Starbucks &nnual 9eport, #008%. he pricing strategy in 9omania is adapted to the purchasing po/er of 9omanians, the economic conditions in 9omania, the competitive scene
and the value of the initial investment. herefore, the prices of Starbucks coffee in 9omania
are lo/er than the euivalent prices in the E. he products are not adapted to the 9omanian
cultural and social characteristics because this /ould negate the /estern cultural appeal
"9omanians tend to be attracted by the /estern life3style and its values%. 5romotional
strategies tend to focus more on price promotions such as coupons, loyalty card offers and
discounts rather than ne/ products or advertisements. n this respect, similarly to +',
Starbucks has used the standardi)ation strategy and not the adaptation strategy.
8/15/2019 Marketing Principles Gabriel
20/27
Page
'onclusions
he marketing strategy at Starbucks is very complex and reuires a considerable amount of
information and analysis. his is because the company is very large in si)e and any decision
has a large effect on the bottom line of the company. &s it has been successful in creating
brand a/areness and positive brand images for its brand portfolio /ithout investing large
amounts of money in promotion, the company should continue its formula of success and
adapt it to the changing environmental conditions.
9eferences
8/15/2019 Marketing Principles Gabriel
21/27
Page
&braham -aslo/, Motivation and Personality "
8/15/2019 Marketing Principles Gabriel
22/27
Page
Starbucks &nnual 9eport, "#01#%, KonlineL, available at
httpHHinvestor.starbucks.comHphoenix.)htmlQcR718MpRirol 3 irhome Kast accessed on #nd
of September #01$L
http://investor.starbucks.com/phoenix.zhtml?c=99518&p=irol-irhomehttp://investor.starbucks.com/phoenix.zhtml?c=99518&p=irol-irhomehttp://investor.starbucks.com/phoenix.zhtml?c=99518&p=irol-irhomehttp://investor.starbucks.com/phoenix.zhtml?c=99518&p=irol-irhome
8/15/2019 Marketing Principles Gabriel
23/27
8/15/2019 Marketing Principles Gabriel
24/27
Page
httpHHglobalassets.starbucks.comHassetsHa6616b8dc6C#G1ac8c10fbeeCG88C.pdf
http://globalassets.starbucks.com/assets/9a6616b98dc64271ac8c910fbee47884.pdfhttp://globalassets.starbucks.com/assets/9a6616b98dc64271ac8c910fbee47884.pdf
8/15/2019 Marketing Principles Gabriel
25/27
Page
)an, I. S. "#00G%. -arket Segmentation &nd 5ositioning for 'offee Stores &n *mpirical
Study on Starbucks &nd 87 , aichung.
8/15/2019 Marketing Principles Gabriel
26/27
Page
0
Page
8/15/2019 Marketing Principles Gabriel
27/27
Top Related