Marketing and Starbucks

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Strategy on Market Segmentation Targeting and Positioning with the Marketing Mix

1.0 Introduction:

The Starbucks Corporation was founded by three entrepreneurs at the place called Seattle in 1971. Initially they were selling of whole bean coffee in one Seattle store and by the year 1982 the business had grown tremendously and has opened five stores selling the coffee beans, a roasting facility, and a wholesale business for local restaurants. When the Starbucks started its business it was only a small retail coffee shop as like the other coffee shops. The main vision of the Starbucks owners was to educate customers about the fine coffees and feel the smell of the Dark roasted coffee, selling just the coffee was not their aim as the coffee was sold in the USA since 1960's (Starbucks case study).

Howard Schultz was recruited as the manager of retail and marketing and it was Howard who brought new ideas to the owners, but he was turned down. Schultz in turn opened his own coffee bar was named Il Giornale in 1986 based on Italian coffee cafes, selling brewed Starbucks coffee. By 1987, Schultz had expanded to three coffee bars and bought Starbucks from the original owners for $4 million and changed the name of his coffee bars from Il Giornale to Starbucks. His intention for the company was to grow slowly with a very solid foundation. For the first two years, Starbucks losses doubled as overhead and operating expenses increased with Starbucks expansion. Schultz stood his ground and did not sacrifice long term integrity and values for short-term profit. By 1991, Starbucks sales increased by 84% and the company were out of debt. Starbucks grew to 20 stores by 1988. By 1996 it grew to 870 stores with plans to open 2000 stores by the year 2000.

2.0 Marketing stategyof Starbuks:

Marketing strategy is carrying out segmentation, targeting and positioning. Doing the detailed understanding of the marketplace into strategic decisions and the targeting of appropriate customer groups. This targeting should emphasise on any differential advantages and adopt a suitable positioning within the target segments (Dibb and Simkin, 1996). Starbucks has adopted a Differentiation strategy it is a strategy which seeks to provide product or service that offer benefits and should be different from competitors that are widely valued by customers. The aim this strategy is to achieve advantage by offering better products or services at same or higher price. When Starbucks was launched there were many coffee bars in the United States at that time but Starbucks wanted to stand unique from the others. Marketing has powerful potential to contribute to the highly important aspects of the organisational competitiveness, namely innovation (Kerin, 1992) and competitive analysis (Varadarajan, 1992) and Schulz wanted to innovate and recreate the experience of the Italian coffee bar culture. Starbucks mainly focused on the strategy of new products, a stronger connection with the customers as the Third place and expanding store locations in the United States and abroad. Starbucks has followed the simple STP process (Segmentation, Targeting and Positioning).

2.1 Segmentation:

Market Segmentation is a process of dividing a market into distinct groups of buyers with different needs, characteristics, or behaviour that might require separate products or marketing programs is called Market Segmentation (Kotler and Armstrong, 2006). Initially Starbucks was based as a Socio-Economic segmentation base in consumer Markets as it has concentrated on social class particularly the business class people those who are working at the office and wanted to have a cup of coffee with a good atmosphere and facilities. Starbucks also had segmented his market by geographic and demographically by selecting the store location where they can find the educated and coffee lovers (Dibb and Simkin, 1996).

2.2Targeting:

After a company has defined market...
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