Starbucks Case Report
Founded in 1971, Starbucks was one of the wildly successful global brands in the world. The vision of Starbucks was coffee culture as community, the Third Place between work and home, where friends can share the experience and gourmet coffee.
After going public in 1992, Starbucks' strong financial performance and rapid growth made it a heated growth stock. Its growth was propelled by swift expansion in the number of stores, not only in the United States but also in foreign markets. The additional drive-through service, music label that sparked and sold CDs in stores and other add-on sales, including snacks and sandwiches, also fueled the financial growth of Starbucks.
Nevertheless, Starbucks' performance became bad in 2007 - the company reported its first-ever decline in the aspect of customer visits to the stores in the United States, which led to a 50% decrease in its share price. As a result, in January 2008, Howard Schultz, Starbucks' visionary leader and CEO from 1987 to 2000, was brought back to retake the charge, in a hope of turning the tide.
Starbucks' growth strategies may widely be advocated or analyzed, but what’s worth noticed more is the series of “non-brand’ decisions’ impact on the brand. Originally, Starbucks is a trendsetter with its unique brand positioning and differential values. What it offers is not only food or services but most importantly, the experiences. Starbucks can gain high customers’ motivation to pay with relatively low cost and earn reasonable profits. Those "non-brand" decisions, such as licensing arrangements, store locations and drive-through service, may financially make sense in a period of time. However, such short-term financial growth is in sacrifice of brand positioning and equity in the long term. When confronting the financial crisis and intensive competition, Starbucks becomes inevitably vulnerable. As a result, it needs both internal and external brand revitalization to regain its competitive edge.
The Positioning and Marketing Mix Strategy of Starbucks
In 1987, Starbucks was sold to Schultz and began its expansion. By the time Schultz acquired Starbucks, he changed the positioning of Starbucks and adopted the Italian coffee culture. Inspired by the romance coffee culture, Schultz decided to make Starbucks as the “Third place” for those people who busy with their works to relax and spend some time with friends.
1) Target market. As Schultz wanted Starbucks to become the “Third place” between home and workplace for the people hurry to work, the main customers that Starbucks targeted was the office workers, especially the female consumers, since Starbucks wanted to deliver the “romance” philosophy, which was more attractive to female consumers. And the target consumers were with middle to high incomes as well as had a desire to buy premium products. 2) Differential value
Functional Value: Starbucks provides a place for customers to enjoy coffee with comfortable surroundings, light music, personalized service and convenient ordering process. Experiential Value:
Taste and smell of gourmet coffee
Comfortable interior decoration
Lively background music
Relaxation from work/home
New knowledge about coffee
A place for self-indulgence or thinking
Self-expressive value: Good taste in daily life within the middle class.
Marketing Mix Strategy
1) Product. Since Starbucks positioned itself as premium in the market, it insisted to offer high standard, high quality and innovative product to consumers. For instance, they would take the consumers’ opinions into account when they designed new products, e.g. coffee with nonfat milk, Frappuccino. Seasonal products and some foods were also included. Starbucks also trained its barista well to give a high quality service to customers. What’s more, Starbucks...
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