R. J. Yung
March 13, 2006
Since its foundation in 1971, Starbucks has been working uncompromisingly to achieve the company objective of becoming the world's leading coffee brand. Having gone through various stages of growing pain, today the Company is operating with over 10,000 stores in 37 countries. Starbucks' success was mostly a direct result of its aggressive expansion plan, that consequently turned the Starbucks coffee beverages into a most familiar and popular world-leading brand. Although Starbucks has been successful over the past 34 years, there are some potential drawbacks as identified on this Marketing Audit that might warrant some careful considerations.
The first finding is Starbucks' rather higher pricing strategy compared to its direct competitors such as Dunkin' Donuts. Although it may be good to maintain product prestige with a higher price tag, however, the reality is that not every average consumer can afford to spend over $50 in coffee drinks per month. Therefore the high prices may discourage customers from returning. The first impression may be the last impression. It may be easy in discovering new markets and new customers, but maintaining customer loyalty is not as easy. Thus the Marketing Audit recommends that Starbucks should consider price reduction strategies in lowering the prices to a more appropriate level for all consumers.
A second noticeable finding is Starbucks' market concentration of mostly active young adults. This may not be the Company's primary focus, but the perception seems to be the case. This Marketing Audit believes that the older adults such as those retirees, can be developed into a bigger market segment with appropriate offering of products and services. Thus the Marketing Audit recommends Starbucks to look into the potential of developing this market segment, perhaps with a different coffee shop environment that is tailored to older folks.
A third potential drawback is Starbucks' only focus on coffee specialty drinks. As today's consumers are being more health-conscientious, tea beverages have been gaining high popularity because of their high perceived value of healthy benefits. Hence this Marketing Audit recommends Starbucks to look into developing more varieties of tea specialty drinks.
The Fourth finding concerns Starbucks' company policy regarding to consumer relations. In the past few years, there have been controversies concerning Starbucks coffee cup quotations and the Company's inability to donate to the U.S. military. Since the start of these controversies, the Company was a little slow in reacting to clearing up the conflicts. Some controversies may continue to damage the brand name if they are not settled in a timely manner. Because of this, the Marketing Audit recommends Starbucks to review its company policies to see if any updates are warranted to accommodate different consumer relation issues.
The last finding deals with worker relations. Evidently Starbucks was accused by the Workers' Union for unfair labor practices and unfair pay scales as noted on the Union's official website. Starbucks' inability to settle the accusations in a timely manner seems to be a direct contradiction to one of its guiding principles of providing "a great work environment and treat each other with respect and dignity" (Starbucks, 2006). The labor force is the Company's most important asset. Therefore, the Marketing Audit recommends Starbucks to completely settle all worker conflicts as quickly as possible. In addition, Starbucks should survey the costs of living in different Starbucks areas, to see if locality pay is necessary to compensate some employees in those high costs of living towns.
Overall Starbucks has been very consistent in achieving its goal of becoming the world-leading brand in coffee specialties. Perhaps this is the time the top management should take a hard look...