Starbucks Strategic Marketing Plan PDF

Preview

Summary

MARKETING & BRAND MANAGEMENT FINAL PROJECT GIOVANNI MORRA Starbucks Strategic Marketing Plan Page 1 MARKETING & BRAND MANAGEMENT FINAL PROJECT GIOVANNI MORRA SITUATIONAL ANALYSIS Introduction The Starbucks corporation brand is ranked 88 on the Interbrand’s 2012 ranking worth $4.06 billion wh...

Description

MARKETING & BRAND MANAGEMENT FINAL PROJECT GIOVANNI MORRA

Starbucks Strategic Marketing Plan

Page 1

MARKETING & BRAND MANAGEMENT FINAL PROJECT GIOVANNI MORRA

SITUATIONAL ANALYSIS Introduction The Starbucks corporation brand is ranked 88 on the Interbrand’s 2012 ranking worth $4.06 billion which is up 11% year over year (Interbrand, 2013). The situational analysis to be conducted will be on the Starbucks coffee brand and will engage the 5C’s methodology of marketing examining the Company, Collaborators, Customers, Competitors and Climate (Winn, 2011). Company Starbucks Corporation is an international coffee and snacks Company started in 1971 in Seattle, Washington USA and now operates in 67 countries with more than 22,000 retail locations with 64% located in North America. (Starbucks.com, 2016). See figure 1.1 & 1.2 for Starbucks brands and product mix. Starbucks Corporation’s core identity is based on their unique consumer experience of the Italian espresso style bar (Michelli, 2006:28). The company’s main strengths are its leading market position, high global brand recognition, strong financials, product quality and their customer base loyalty. Some weaknesses include expensive product pricing, coffee bean commodity price volatility, market saturation from rapid expansion and increasing competition in the industry. Collaborators Starbucks primary product line is coffee which is sourced from many companies worldwide so one of its key collaborators are farmers. Starbucks promotes their coffee as being 95% ethically sourced with a focus on sustainability and investment in various farmer support programs (Starbucks.com, 2013). Starbucks has also partnered with Apple to support their technology platform to provide digital customer rewards and payment through innovative new Apple apps and free access to the Apple iTunes online store at all Starbucks locations over Wi-Fi. Customers Starbucks main target customers are adults (age 25-45) who tend to be professional with high income with a focus on social welfare which account for 49% of sales (Dominus, 2006). This segment is what the company refers to as its “core customers” average age of 42, educated, and earning an average income of $90,000 (Dominus, 2006). Their secondary target customers are young adults (age 18-24) normally college students which account for 40% of sales (Dominus, 2006). The coffee and snack industry has a total market revenue of $40 billion with an annual growth rate of 4.6% from 2011-2016 (IBIS, 2016). Starbucks customers are motivated to purchase the brand due to the tangible benefits of getting the best in class products sourced and quality controlled with the highest of standards. Starbucks customer’s intangible benefits include a unique value proposition that includes functional, emotional and self-

Page 2

MARKETING & BRAND MANAGEMENT FINAL PROJECT GIOVANNI MORRA expressive benefits situated in a relaxing in welcoming atmospheres and the pride of being a part of a distinguished society emitted by their strong brand image (Integrated Brands, 2013). Competitors Starbucks is considered the industry market leader holding a market share of 37%, while their closest competitor Dunkin Brands holds 25% and other competitors including Seattle’s Best, Peet’s, Caribou Coffee and Costa Coffee holding the remaining 38% (IBIS World, 2014). Some indirect competitors of Starbucks are fast food and convenience stores including McDonald’s, Wendy’s, Burger King and 7Eleven. Potential competitors include restaurants, privately owned coffee houses and other popular brand restaurant chains including brand spin offs like McCafe designed specifically to enter the café industry. The majority of Starbucks competitors other than the small privately owned coffee houses are positioned as low price alternatives that offer customers an acceptable product at a low price. The Starbucks brand quality and image is its main point of differentiation from its competitors. The main strengths of Starbucks competitors lies in their value offering to customers not in the high income brackets unwilling to pay for Starbucks premium brand. The main weakness of Starbucks competitors is the lack of retail stores and brand following that Starbucks commands in the industry. The core competence of Starbucks has been its ability to leverage brand quality and customer focus to create a unique ‘Starbucks Experience’ resulting in repeat loyal customers and somewhat of a cult like following. Climate The highly competitive retail coffee and snack product industry which is driven by the economy linked to consumer discretionary spending and other economic factors that affect household disposable income. Coffee bean prices are mainly driven by supply and demand and are projected to decrease between the years 2013-2018 which should result in higher profitability for companies in this sector (Trading Economics, 2016). The overall business cycle including the fluctuation of interest rates, inflation and other macroeconomic indicators can affect the demand for Starbucks products as they are linked to customer discretionary income. Political and regulatory factors affecting Starbucks include the importing and ethical sourcing of coffee beans. Import laws regarding commodity based products can change due to mounting political pressure to support the ethical and fair trade treatment of farmers and the sustainability of coffee bean sourcing. Both of these factors could affect the supply and pricing of Starbucks coffee products. Government policies around the acquisition of retail real estate space can also affect Starbucks as their growth strategy is to cluster stores to increase brand awareness and drive out competition. Government regulations regarding the use recyclable and compostable packaging can also affect Starbucks as they use a high volume of disposable packaging materials.

Page 3

MARKETING & BRAND MANAGEMENT FINAL PROJECT GIOVANNI MORRA Social factors affecting Starbucks include the trend towards a healthy eating lifestyle and high consumption of caffeine and sugar found in a variety their products contain these ingredients. Technology through the expansion of home use coffee brewers with single pod capability is also offering customers alternatives to the coffee house experience and could offer both opportunity and challenges to Starbucks in the future. Alignment of Strategies The Starbucks business strategy focuses on product quality and differentiation coupled with providing a superior service experience in order to attract and retain customers. Starbucks also employs a unique business strategy for expansion by clustering its branches to create the impression in customers minds that ‘they are everywhere’ which compels customers to shop at their stores. The Starbucks overall marketing strategy is founded on providing superior customer service through their highly trained employees they refer to as ‘partners’. They extensively train their coffee servers in the art of being a ‘barista’ which has its roots in the traditional Italian espresso bar service experience. Customer service focus resulting in word of mouth recommendations is the foundation of their marketing strategy as the company only spends 1% of revenues on advertising (Starbucks Investment, 2014). The Starbucks brand strategy is customer and people focused rather than specific to the products being offered. The Starbucks brand logo is an image of a seductive and mysterious Siren Mermaid symbolizing folklore of the past and emotional storytelling inspiring the future (Starbucks Blog, 2016). Starbucks uses social media channels like Twitter, YouTube and Instagram to engage closely with their customers and also to advertise these personal connection stories which further creates a deep emotional bond to the Starbucks brand. The Starbucks business, marketing and brand strategies are all aligned around being customer focused and quality driven. Although, the Starbucks brand is expensive in comparison to its competitors, the brand influence determines the perceived value to customers which increases demand and makes their products less substitutable (Rocha, 2014). This is necessary to maintain their brand differentiation, perceived brand value and overall financial profitability (Ducker, 1999). The company’s business strategy is focused on creating customer value through their marketing and branding efforts. The risk if all strategies are not aligned between the business units is that the company will not be working towards the same goals and objectives thereby negatively affect their brand offering which will ultimately result in loss of market share due to lower sales demand, revenue and a decline in profitability (McNamara, 1972:51).

Page 4

MARKETING & BRAND MANAGEMENT FINAL PROJECT GIOVANNI MORRA Starbucks International Expansion into Italy In order to compete with competitors, maintain steady growth and increase profits, expansion into international markets is necessary. Starbucks will venture into the untapped Italian market where ironically this is where the original concept of the Italian espresso bar experience was founded and where coffee consumption is one of the highest in the world at over 350,000 tons or 6kg per capita per year annually (Table 2.2 & 2.3) (ECF, 2014). The New Product Starbucks will launch the new product, Starbucks branded frozen yoghurt in Italy that will appeal to the segment of new generation Italians and tourists alike. The product is a healthier option to ice cream and gelato but with less fat and sugar and more overall health benefits. The new product line would complement their current brand promise of providing premium quality products with superior customer service. Frozen Yoghurt is a perfect complement to the Starbucks brand main product, coffee, because it a cold dessert with sales mainly higher during warmer temperatures versus coffee sales that normally rise during cold temperatures so the risk of sales cannibalization is low. (Table 2.1 for 2013 Global Stats). The Frozen Yoghurt industry growth from 2011-2013 was 74% versus the ice cream industry at 3.9% indicating increasing demand for the product (Figure 2.4). Market Research Approach The market research approaches for determining the demand for the new product will be to use quantitative data collection in the form of surveys as well as qualitative research through field testing and market panels. Surveys methods will be most effective in determining the relevant market segments for the new product providing relevant consumer data to identify behavioral, psychographic and profile variables needed to determine marketing mix strategies (Jobber & Chadwick, 2013:266). Surveys will be used to gather relevant market data from existing industry analysis, census and consumer data (secondary sources) as well as from respondent data (primary sources) to determine market characteristics and buyer perceptions (Lapin, Figioni & Sloan, 1994). Field testing and market panel research will also be used to determine causal and predictive factors including consumer attitudes to the new product as well as market climate (Lapin, Figioni & Sloan, 1994). The areas of market demand to be examined through these research methods are current brand strength, buyer behaviour and the buying process as well as customer segment characteristics.

Page 5

MARKETING & BRAND MANAGEMENT FINAL PROJECT GIOVANNI MORRA Brand Strength Starbucks current brand strength in North America is strong allowing them to command higher prices for their products. In order to test the potential brand strength for the new Italian market expansion, primary source research surveys will be conducted at Starbucks branded kiosk locations setup in Italy asking respondents to describe their perceptions, awareness and willingness to purchase both a generic frozen dessert product and the new proposed Starbucks branded Frozen Yoghurt measured by using the five-point Likert scale of brand equity from strongly agree to strongly disagree as described by Yoo et al, (2000). Buyer Behaviour and the Buying Process The decision for buyers to purchase a particular product over another, especially in the case of Frozen Yoghurt, where the product is simple and easily replicated needs to be researched as to what motivates buyer behaviors. This illustrates how the traditional consumer decision journey is changing to include various touch points mainly influenced by brand equity (Court et al, 2009). Field testing of buyer behavior will need to be conducted through opening test stores initially to observe and survey customer’s behaviors including their attitude, satisfaction, need and perceived value of the new product offering. Market panel studies will also need to be conducted to gather more in depth responses to gauge applicable customer choice criteria relating to the target consumer’s needs versus the new product value proposition. Customer Segment Characteristics In order to determine the customer segment characteristics for the demand of the new Starbucks branded Frozen Yoghurt in Italy, existing secondary source market analysis data and primary source panel studies will be employed that is relevant identifying the existing demographics (i.e. age, gender, income) as well as the needs or benefits to the new target buyers of the product (Boyd, 1989). The frozen desserts market in Italy is well established so gathering existing customer data should be easily accessible through secondary sources. Field testing will also be required to determine how target buyers will specifically react to the new product to be conducted through opening test kiosks providing samples of the product and gathering feedback from respondents separated into the applicable customer segments to be used for analysis compared to existing generic frozen dessert customer data.

Page 6

MARKETING & BRAND MANAGEMENT FINAL PROJECT GIOVANNI MORRA

MARKETING PLAN Starbucks Frozen Yoghurt Market Segmentation

Children & Teens

Age 5-19

Low income or parental support

Students

Impulse buyer

Social

Trendy

Prefers taste over nutrition

Adults

Age 20-45

Page 7

Middle to high income

Employed

Impulse buyers

Modern

Social

Health conscious

MARKETING & BRAND MANAGEMENT FINAL PROJECT GIOVANNI MORRA

Starbucks Frozen Yoghurt STP Analysis Brand Equity Strategic Plan The creation of brand equity to develop a value proposition through STP (Segmentation, Targeting and Positioning) is critical to the success of the overall marketing strategic plan for the new Starbucks Frozen Yoghurt product. The market for Starbucks Frozen Yoghurt has been segmented using three main groups including behavioural, psychographic and profile variables that will help to identify marketing decisions, benefits sought, purchasing behaviour, as well as consumer lifestyle and socio-economic factors that affective price sensitivity (Figure 3.1) (Jobber & Chadwick, 2013). In order to create or increase brand equity, the marketing strategy for the new Starbucks Frozen Yoghurt will include variables to promote brand awareness, loyalty and the perception of product quality (Seetharaman & et.al, 2001, p.245). The outline for the strategy to create brand equity for the new product, Starbucks Frozen Yoghurt will be to segment the market into two main groups, target each group based on their individual needs (Dibb and Simkin, 1991) through the use of television and online digital advertising and then to position the new product as a premium, fun, innovative trendy, healthy product that is offered with superior customer service in an upscale environment Segmentation Strategy Children & Teens Segment The Children and Teens segment is aged 5-19, are mainly students, tend to impulse buy, have low income or parental support and normally prefer taste over nutrition. The needs of this segment are mainly enjoyment of a fun, great tasting and trendy product with the ability to customize for selfexpression. This segment prefers social and modern environment. This segment has a tendency to impulse buy so is not very sensitive to price although due to the young age grouping of this segment despite the low income or parental support. Adults Segment The adults segment is aged 20-45, middle to high income, employed, impulse buyers, modern, social and health conscious. The needs of this segment is to experience new, innovative products that are perceived to be healthy and can be customized for self-expression. This segment prefers a relaxed, modern and social environment. This segment also prefers premium quality products, have middle to high income and tend to impulse resulting in low price sensitivity.

Page 8

MARKETING & BRAND MANAGEMENT FINAL PROJECT GIOVANNI MORRA Targeting Strategy The target marketing strategy to the children and teens segment will involve the use of colourful, bright packaging and the sub brand name for the product geared towards children and teens being “Starbucks FroYo”. The sizing of the product will be smaller than the adult size and therefore more affordable. The product will also be made to order with select toppings geared towards children and teens. Advertising to this segment will be mainly through commercials and internet web based as this would be most effective because they spend the majority of their free time watching TV and on the internet thus promoting maximum brand awareness. The target marketing strategy to the adult segment will involve the use of trendy, upbeat packaging with famous sayings or inspirational quotes written on it geared towards adults. The product will be customizable, new flavours of the month, be made to order with fresh fruit toppings with calorie and nutritional information clearly visible. Advertising to this segment will be mainly through social media channels like Facebook, twitter and Linkedin, internet content marketing and digital loyalty rewards. This target marketing approach would be most effective as this segment is more socially engaged and spend the majority of their free time online and engaged in various digital forums. The strategy addressing the demographic profiling and lifestyle indicators to fulfill the needs of the segments will use the essential criteria of measurability, substantiality, accessibility, differentiability and action ability to further increase brand equity (Kotler et al, 2012). Furthermore, targeting through television and online content marketing via digital newsletters, web promotions and social media will effectively promote brand awareness and therefore increase brand equity. Positioning Strategy The new Starbucks Frozen Yoghurt positioning strategy to the children and teens segment will be to emphasize the product features including being a great tasting, fun and customizable product. The main benefits of the product will be positioned around being a healthy alternative as parents will be the main income providers for children and teens. The value offering for this segment will be lower price due to smaller sizing for a higher quality product. The product differentiation from competitors with similar offerings of frozen novelties like ice cream will focus on the quality, freshness and being an alternative healthy choice. This strategy will be effective as it addresses both the perceptions of the child and the adult that is providing the income source by being a fun yet healthy product.

Page 9

MARKETING & BRAND MANAGEMENT FINAL PROJECT GIOVANNI MORRA The new Starbucks Frozen Yoghurt positioning strategy to the adults segment will focus on the value proposition to offer a unique custom made premium, healthy product served in a relaxed environment offered at a medium to high price point. The main benefits of the product will be positioned around being a high quality, fresh, innovative great tasting product that is better for your health than the alternatives. The product differentiation from competitors with ...