Katie Tewell Bethany Odom Kelly Snider
December 12, 2006
What was once a small coffee shop opened by Gerald Baldwin, Gordon Bowker, and Ziev Siegl in 1971, Starbucks Coffee Company has grown into the number one specialty coffee retailer. With over 10,000 coffee shops in more than 30 countries, of which 4,200 are licensed and franchised and 6,000 are owned, the company’s main objective is to establish Starbucks as the “most recognized and respected brand in the world,” (Moon). Currently, Starbucks is relying on retail expansion, product innovation, and service innovation to achieve a long-term goal once set by current chairman Howard Schultz: “The idea was to create a chain of coffeehouses that would become America’s “third place.” At the time, most Americans had two places in their lives – home and work. But I believed that people needed another place, a place where they could go to relax and enjoy others, or just be by themselves. I envisioned a place that would be separate from home or work, a place that would mean different things to different people,” (Moon). By working toward this goal, Starbucks wants to open new stores in both new and existing markets, expand their product development process, and cater to customers’ needs to eventually improve their financial position and dominate market share.
• Target Markets o In the early stages of development for Starbucks, Schultz identified their target market as “affluent, well-educated, white-collar patrons (skewed female) between the ages of 25 and 44,” (Moon). o Over time, market research teams have recognized the new target market as “younger, less well-educated, and in a lower income bracket than their more established customers,” (Moon). o Nonetheless, the original target market has not disappeared, but has expanded into the demographic of the store location. For example, southern California stores cater to a growing number of Hispanic customers. • Market Demographics o Geographics (Moon)
Data from 2002 showed that in the Southeast there was only one store for every 110,000 people. Whereas in the Pacific Northwest, there was one store for every 20,000 people. Hence, the company was far from reaching existing markets. International plans showed Starbucks was operating in over 300 company-owned stores in the United Kingdom, Australia, and Thailand. Also, 900 licensed stores were operating in Asia, Europe, the Middle East, Africa, and Latin America. o Demographics Young, affluent, tech-savvy customers (Hoovers) A 1999 estimate showed that 70% of customers were internet users, and today the estimate has exceeded 90% (Hoovers). Moms with strollers (Hoovers) People combining work and a coffee break (Hoovers) The most frequent customers average 18 visits per month, whereas the typical customer visits five times per month (Moon). Average age for an established customer was 40, new customers was 36 (Moon). Customers that started visiting Starbucks in 2002 were 45% female, 55% male (Moon). • Market Needs o Starbucks wants to create an experience for their customers that combine their on-the-go schedule, as well as a place to relax. Senior vice president of administration in North America Christine Day explains that, “people come here for the coffee, but ambience is what makes them want to stay,” (Moon). o Selection Starbucks menu contains brewed coffee, espresso traditions and favorites, cold beverages, coffee alternatives, frappuccinos, and the sale of whole beans. o Accessibility
Starbucks operates over 10,000 retail stores. Most of the 4,200 franchised stores are located in shopping malls and airports. Starbucks coffee brands are also marketed through grocery stores in the form of beans and even ice cream flavors. o Customer Service Starbucks employees are referred to as “partners.” As of 2002, Starbucks employed 60,000 partners worldwide, 50,000 of those in the United States. From the beginning...