Introduction
Starbuck was established in 191 with the first store opening in Pike Place Market in Seattle, Washington by three partners Jerry Baldwin, Zev Siegal and Gordon Bowker. The main focus of the trio was to sell coffee beans and equipment. During the first year of their operations they purchased coffee beans from retailers. They started buying coffee beans directly from the farmers the subsequent years. Howard Schultz joined the company in 1983 and proposed that the company should also sell espresso drinks in addition to coffee beans. This ideas was not accepted by the other partners because it could have watered down the primary objective of the company. Schultz started a company II Guirbake coffee bar chain in 1985 in order to peruse his ideas. After two years the owners of Starbucks sold the company to Schultz’s II Giornale Company. Schultz chose to retain the Starbuck name and opened several outlets which enable them to quickly expand.
Today Starbuck is one of the largest coffeehouse companies in the world with its presence in 94 countries and 16,120 stores. The company has about 30 brands and single coffee in its stores. Starbuck products can also be purchased in the local retail shops and brewed from home. The company has a wider base of customers with about five million customers in a week worldwide. The customers are said to return to the shop at least six times in a month and eighteen times in a month for the loyal customers. According to Fortune magazine, Starbuck is one of the 100 Nest Company to work for in 2008 and is Business Ehtics 100 Best Corporate Citizens in four consecutive years (Malhotra, 2008).
Product overview
Starbuck has a wide variety of products on its shelf. The products line can be categorized into fresh brewed coffee, hot and iced espresso beverages, non coffee blended beverages, Tazo, tea, baked pastries, salads and sandwiches. The equipment product line include; coffee grinders, coffee brewers, music CD’s, espresso machines, movies and gift cards. The worldwide consumer products of Starbuck include; the bottled Frappuccino, iced coffee and espresso drinks, coffee liqueurs and premium ice cream. The main advantage of Starbuck in the market is product differentiation (Moon & Quelch, 2003). This is a concept that they have mastered and ensured that they overcome their competitors in the market. They understand the consumer perception and have managed to stand out among the many companies. The value of Starbuck has been a key component to the growth of the company. Other important factors that has led to the growth of the products is the strong reputation of the company about the quality products, that is superior and consistent customer service.
The company leadership believes that the product value is the key factors for the continued success of the company hence there is a need to sustain the product value for the future of the company. Perception from the customers about Starbuck products is based on personal qualities. They have created a place where loyal customers come to relax as they enter onto a serene, regal atmosphere where they take their favorite brands (Dibb & Simkin, 1996). It serves as a third place between home and workplace. The company in the bid to retain its products and market they have copyrights of several brands and trademarks of their brands. The copyrights are for packaging, promotion materials, in-store graphics and training materials. The company has also registered systems and designs. They have also registered permanent internet domains such as Starbucks.com and Starbucks.net.
Market structure
Starbuck brands have loyal customers and loyal followers despite the fact their products are of high prices. Starbucks have been able to come out as a luxurious lifestyle where coffee is similarly identified with Starbucks. This company operates in a monopolistic competitive market despite the fact that there are other coffee brands. This is because they have inflated prices of their products which other companies cannot maintain. Starbuck differentiates its products from others in the market by the use of its logo and high quality products. The main focus of the company on the market is to maximize on its ability to produce high quality products in the market.
Market segmentation
Targeted marketing is where a company chooses a particular group or organization to sell to. It is also referred to as differentiated marketing. This is a new field because we are used to mass marketing or undifferentiated marketing. This is where the company went into mass production and selling its products to everyone. Mass marketing is where the company utilizes all the available media to communicate to everyone in the market. There are many benefits of coming up with a segmented and target markets. Segmenting the market does not mean that the company reduces the consumer base. To the contrary, it is enables the company to enlarge the customer base by having information that enables the organization to reach targeted market. The company can effectively deal with specific issues such as price, level of services among others. With segmented market the company is able to avoid head-on competition with other companies who may be looking for the same customers. This means that there can be more than one coffee company but with market segmentation each of them deals with specific customers. Segmentation also ensure that the organization offer new products and expands the profitability of the brands and product line. It is also possible to indentify early adapters in the market if the company has a selected market. Like Starbuck, segmentation ensures that the customer comes up with products that they can deliver best to the customers. The company also remains risk free if consumers move to the competitor’s brand.
The current marketing strategies involves coming up with precise and on target marketing. There are tools and market research that can be used to come up with a specific market segment. There is no room for guesswork and estimation in the current marketing plans. This means that companies that have the right tools to come up with market segmentation will have an advantage over mass marketing companies. Some of the information for market segmentation can be found in the government agencies databases. For instance, the U.S bureau of statistics has data about different aspects of people and the economy which can be used for market segmentation. Starbuck uses such information in setting up new stores and coming up with new products. With technology it is also easier for the company to segment its market. Website users and the traffic is another source of getting information for selecting a market. Starbuck can collect information about customers from social medial and other networks. This ensures that target customers are served with the best quality products.
Segmenting and targeting Starbucks customers
Companies have realized that it is not possible to appeal to all the buyers in the marketplace or all the buyers in the same way. This is because of the unique characteristics of the customers. They are scattered, too numerous and very different needs and buying practice. There is variation in companies in terms of the abilities to serve different segments of the market. The company must establish which part of the market it can serve well. Just like Starbuck targets a particular clients. Starbuck has come up with the right strategies to come up with the right relationship with the customers. Customers at the Starbuck stores feel that they are part of the company and they are valued. Just like many other companies, Starbuck has moved away from mass marketing to target marketing. To come up with a segmented market, the company comes up with the customers it will serve. Starbucks established a reward for faithful customers of Dunkin Donuts in Phoenix, Chicago and Carlottein Noth Carolina $100 a week just to buy coffee. Dunkin Donuts also did the same with Starbucks customers to switch to its products. This is a fierce competition for the market share. Starbuck is positioned as high class “third place” outside home and office. It has classy couches, eclectic music, wireless internet access and art-splashed walls. The customers of Dunkin Donuts were turned off by the many laptops in the store and it was hard to find a seat. They were also wondering what was special about seating on couch. Although they agreed that they would like to take coffee in fancy places, they were more understandable with the Dunkin Donuts store. At the same time, Starbuck loyal customers who switched to Dunkin Donuts stores felt that they were not valued and treated in a special manner (Kotler Bowen & Makens, 1999). They also complained of the low quality products. This means that each store can have its own market segment and make profits. The company needs to carefully choose the customers it is going to serve based on the strength they have on their products and services.
Steps in market segmentation, targeting and positioning
Market segmentation is where the company divides the market into smaller groups of buyers with unique needs, characteristics and behavior.
Segmentation is done using several methods where the market segment is profiled. Market targeting is the next step of market segmentation. In this step, each market segment is evaluated to come up with an attractive segment for the company. At this point the company establishes which market segment to enter. They can choose one or two of the segments. After Starbuck evaluated different segments they decided to go with the high-class market segment. This is because they wanted to offer a services and products of high quality that consumers are willing to pay an extra coin for the services. Value positioning is the last two steps according to the figure above. This is where the company will decide on how to come up with value for the customers. Starbucks is one of the companies that has emphasized on value for the customers. This means that it is a company that ensured that value for targeted clients is well researched (Kotler, Bowen & Makens, 1999). Most of the customers Starbuck serve aims at giving them an experience of high quality services and products. This is the value created for the target customers.
Differentiation is the last step where the company now sets its offering to ensure that superior customer values are created. Positioning is where the company aims at positioning itself in the market to a clear, unique and desirable place to ensure that they compete favorably in the market. Starbuck has positioned itself as a global coffee powerhouse. This is because of the strong brand they have managed to develop.
The buyers on the market differ in one way or another. It is the work of the marketer to come up with different segments based on combination of variables. This ensure that there is a strong market segment that the company targets. Starbucks has segmented consumer markets based on geographic, demographic, psychographic and behavioral variables.
Geographic segmentation
Geographical segmentation is where the market is divided based on different geographical units such as nations, states, regions or cities. Starbucks targets different geographical location apart from the US and UK markets. They have opened up stores in Asia; in China, Japan among others. They have also opened up stores in Latin American and the rest of Europe (Kotabe & Helsen, 1998). Their market segmentation in terms of geographical location based on the neighborhood, cities, counties, countries and global regions.
Demographic segmentation
Companies today localize their products and come up with promotions and advertising programs that suite the region. Demographic segmentation is where the market is grouped according to different variables such as age, gender, family size, family life cycle, occupation, education, race among others. For Starbucks, the market is segmented based on the age, income, gender and education. The company targets married and well educated men and women at the age of 40. This coffee store is created for mature and prestigious purposes. Since the market is for mature and married people, it is also essential to have a segment for children. Starbucks has products for children who often accompany their parents to the stores. In terms of gender, most of the customers are women within the age of 18-42 who have children. The shop also targets collect graduates with high income.
Psychographic segmentation
Psychographic segmentation is where buyers are grouped based on social class, lifestyle and personality characteristics. This means that people can be in the same demographic group but they have very different psychographic features. High income college graduates who like to socialize are the main target for Starbucks Company. The company also targets those who want to go out just to relax and have fun. They have free wireless connectivity which means that they are of high tech consumers with laptops to surf the net. The use of couches in the shop targets a high class lifestyle of those who love comfort. They are the consumers who would to be given personalized service and attention.
Behavioral segmentation
Behavioral segmentation is also another way of segmenting the market. There are those who would like to go and have a cup of coffee as they do their tasks. This is the type of market that Starbucks targets. They have facilities that enable consumers to relax, socialize and do their tasks. They have capitalized on the working class group who carry their tasks from the office on their portable devices. Consumers are categorized based on the knowledge, attitude, uses and responses to a product. Behavior is the most important part of market segmentation.
Conclusion
Companies have realized that it is not possible to appeal to all the buyers in the marketplace or all the buyers in the same way. This is because of the unique characteristics of the customers. They are scattered, too numerous and very different needs and buying practice. There is variation in companies in terms of the abilities to serve different segments of the market. Starbuck is positioned as high class “third place” outside home and office. The company has positioned itself in a place where competitors and new entries in the market does not affect its profits. The company has worked so hard to capture the segmented market which is the high class people in the society. It has products that are of high value, quality but also inflated prices. Despite the fact that the company has high prices, it has managed to stay in business because of proper market segmentation.
References
Dibb, S., & Simkin, L. (1996). The market segmentation workbook: Target marketing for marketing managers. London: Routledge.
Kotabe, M., & Helsen, K. (1998). Global marketing management. New York.
Kotler, P., Bowen, J. T., & Makens, J. C. (1999). Marketing for Hospitality and Tourism, 5/e. Pearson Education India.
Malhotra, N. K. (2008). Marketing Research: An Applied Orientation, 5/E. Pearson Education India.
Moon, Y., & Quelch, J. A. (2003). Starbucks: Delivering Customer Service. Harvard Business School.
