Principles of Marketing

FOCUS ON Ethics 1. Are marketers to blame for increasing obesity rates among children? Should the government ban the advertising of food products to children ages 17 and younger? Discuss the consequences of imposing such a ban. (AACSB: Communication; Ethical Reasoning)
The childhood obesity epidemic is a serious public health problem that increases morbidity, mortality, and has substantial long term economic and social costs. The rates of obesity in America’s children and youth have almost tripled in the last quarter century. The obesity rate among children in the United States is 17 percent, triple what it was 30 years ago. Now the big question is who’s to blame? I believe the parents are to blame as much as the marketers. With today’s health craze going on is also influencing the advertising on products to children ages 17 and younger. Imposing a ban on marketers would hurt the advertising industry; however these bans will help keep companies true to their words which at times does not happen. For example, a television ad claimed that the Klondike Lite Ice Cream Bar was 93% fat free. The FTC alleged that claim was false because the entire bar, including the chocolate coating, actually contained 14% fat. (The Commission concluded that a reasonable consumer – and certainly an ordinary child – is not going to eat the bar without its chocolate coating.) The Commission also challenged the implied claim that the bar was low in fat. Each bar actually contained 10 grams of fat per serving, an amount well in excess of any reasonable level to support a low-fat claim. 2. What actions have food marketers taken to stem the threat of a ban on marketing to children? (AACSB: Communication; Reflective Thinking)
Food marketers have changed in many ways to adapt to the want of the world today. Being healthy is become more and more popular in the United Sates and the rest of the world. Fast food industries are giving their customer more healthy choices on their menus and finding new methods to reduce fat and calories in their products. Also cable TV channels are banding unhealthy food advertising from their programs. Like for example, the Walt Disney Company, in an effort to address concerns about entertainment’s role in childhood obesity, announced that all products advertised on its child-focused television channels, radio stations and Web sites must comply with a strict new set of nutritional standards.

COMPANY Case
Starbucks: Just Who Is the Starbucks Customer?
Questions for Discussion

1. Using the full spectrum of segmentation variables, describe how Starbucks initially segmented and targeted the coffee market.
Starbucks used the psychographic segmentation that divides buyers into different segments based on social class, lifestyle, or personality characteristics. At first the typical customer was wealthier, better educated, and more professional than the average American. The customer was far more likely to be female than male, predominately Caucasian, and between the ages of 24 and 44. Also starbuck had made a goal and their initially segment was a geographic segmentation, starbuck or Schultz intentions to open 10,000 new stores in just four years and then push Starbucks to 40,000 stores. In 20 years time, Schultz grew the company to almost 17,000 stores in dozens of countries.

2. What changed first—the Starbucks customer or the Starbucks Experience? Explain your response by discussing the principles of market targeting.
The first to change was the Starbucks experience because as the atmosphere in each store turned to “hustle and bustle,” it became a less attractive place to hang out. This customer shift was inevitable; there simply were not enough traditional customers around to fuel the kind of growth that Schultz sought. The new breed of customer was less affluent, less educated, and less professional. Not only was Starbucks drawing in different customers in places where stores already existed, but it was also putting stores in different neighborhoods, cities, and countries.
When evaluating different market segments, Starbucks had to look at three factors: segment size and growth, segment structural attractiveness, and company objectives and resources. Another issue often mentioned was that Starbucks had developed an identity crisis with respect to its target customer and they realize the customer was far more likely to be female than male, most likely Caucasian, and between the ages of 24 and 44, and also the Starbucks customer profile was clearly defined. The typical customer was wealthier, better educated, and more professional than the average American. However, with the 2008 market crash their customer changed. With this change Starbucks had to adapt their marketing targeting strategy.

3. Based on the segmentation variables, how is Starbucks now segmenting and targeting the coffee market?
Starbucks uses the micromarketing which is the practice of tailoring products and marketing programs to suit the tastes of specific individuals and locations. As the customer profile evolved, the Starbucks Experience grew to mean something different. To the new breed of customer, it meant good coffee on the run. It was a place to meet and then move on. The more accessible Starbucks was, the better. Speed of service was more important than a barista who wanted to get to know their customer. This new customer came in much less frequently than the traditional customer, as seldom as once a month. However, this client base was not enough to keep Starbucks going so throughout 2009, the owner Schultz continued to direct activities aimed at increasing growth. Starbucks launched a campaign designed to educate consumers that Starbucks really wasn’t as expensive as they thought it was. These efforts helped the growth of 2009.
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4. Will Starbucks ever return to the revenue and profit growth that it once enjoyed? Why or why not?
With all the changes and having to find a new client bases but not lose this high-end coffee image made Starbucks stronger as a company. Starbucks now is going after customers who don’t normally buy Starbucks coffee. The three-pronged strategy provides three good reasons to believe that Starbucks growth story will return, even without opening nine stores per day. Also only one-fifth of Starbucks’ sales come from outside the United States. The company sees huge potential growth abroad. But perhaps the greatest strength in Starbucks’ new strategy is that it will allow the company to go after new customer segments while also restoring the essence of the Starbucks experience.