Starbucks Business Model; How it differentiates from other coffee shop chains?
Starbucks started its operations in 1971 in Seattle. In 1982 it was joined by Howard Schultz as director of retail marketing and operations. At that point intime, the brand started to get recognition and good restaurants and espresso bars. This was when Starbucks started to earn a good name for it. It was in 1983 when Schultz travelled to Italy and found out about the popularity level of espresso bars in Milan. He thought it was a good idea to launch a coffeehouse under the brand name. In 1984, Schultz was finally able to convince the founders to launch a coffeehouse in Seattle.
In 1985 there was a proper brand offering espresso and coffee which was brewed from Starbucks coffee beans. By 1988 Starbucks was offering full-time and part-time jobs to the employees. They were established and offering health benefits as well. From 1989 the number of stores started to rise rapidly. It went to the level of 84 stores and then in 1991 figure went to 116. By 1992 the number of stores increased to 165, 1993 it went to 272 and they also announced the two-for-one split. In 1995, Starbucks started to offer Frappuccino and expanded its locations to Hillsboro. This increased the number of stores and total stores went to 677. By 1996 the brand was offering bottled Frappuccino as well. That was also the year when Starbucks reached Japan and the number of stores was raised to 1015. In 1997 the management established The Starbucks Foundation and entered the market of Philippines and the stores increased to 1412.
In 1998, Starbucks launched an official website of the store chain and opened stores in small areas which were thought to be not good places for business. This step was taken in collaboration with Magic Johnson. The company launched CUP Fund this year and expanded its reach to countries like Thailand, New Zealand, England and Malaysia. The figure of opened stores went to 1886. In 2001, thecompany introduced Starbucks Card for the regular customers. they also introduced ethical coffee-sourcing guidelines. In 2002, Starbucks launched the facility of Wi-Fi in stores to attract more customers to the store. The number of stores by this time was 5886. In 2004, thecompany started Farmer Support Center in Costa Rica. In 2008 joined social media as they debuted on Twitter and Facebook.
In 2009 the company launched loyalty program and Starbucks Card mobile payment. In 2012, Starbucks introduced Blonde Roast and they also launched Starbucks Refreshers. In 2015 they launched a new product and named it Cold Brew iced coffee. The company also announced that they will hire 10,000 employees by 2018. By this time they already had 22,519 stores(Starbucks, 2017).
Starbucks holds a strong position in the market. There are many reasons why the company stands strong even such a competitive global market. First of all, they have earned a strong and trusted name in the market over the past few decades(Paharia, Avery, & Keinan, 2014). They have introduced multiple products over the years and that helped them beat many competitors. They do not serve a huge variety but also they have good service options. They also offer multiple payment options and loyalty cards are also available for regulars. Most of all their presence is the biggest pro they got.
They are present in places where not many brands dare to go and open a store. They have such a strong network that they can afford to open coffeehouses in the neighbourhoods which are not considered a good marketplace for the brands. They are able to target them as well with the help of collaborating partners and because of thestrong name they manage to run the stores even in those places in a fine way(Voigt, Buliga, & Michl, 2017). This is what makes the brand approach more people and make the market wider for them. No brand has all these features together and that makes Starbucks unique from all of them. They never compromise on the quality and keep introducing new products now and then which helped the brand survive through all these years.
Currently, the brand is using many tactics to increase the customer base and provide abetter quality of services. They have a trademark logo which gives customers a sense of quality because of the name linked to the logo. The logo has evolved over the time and now it is in its fourth form but the basic idea of the logo remained the same just the outlook changed a bit over the time(Jin & Yazdanifard, 2015).
For brand marketing, they use multiple online platforms as well. For example, they have awebsite which is updated regularly and all the updates and the history and previous achievements. They are also present on the Facebook and Twitter as well and that makes them interact with the customer regularly and get the feedback on the services and products.
Current Targeting and Positioning
Starbucks owns almost 33 percent share of the coffee market. They don’t target one specific area or gender. They are working to provide the best quality products for everyone. Although 49 percent of its total business comes from the adults who are between the ages of 25 and 40, they also focus on the young adult market that they have. 40 percent of their sales come from young adults who are between the ages of 18 to 24. They contemporary and presence of high-class people is what attracts the adults to come to Starbucks and at the same time, the store of Starbucks provides a comfortable environment to the youngsters so they can hang out there after their college with their friends(Dudovskiy, 2017).
The presence of the brand on social media helps the cause a lot as they have made it a cool thing to hang out at Starbucks more young adults are visiting the place(Du, 2016). The current growth of the adult visitors to the stores is increasing by 3 percent and the young adult visitors are increasing by 4.6 percent annually. Kids and teens can also find something there. Although they have aminimum chunk of themarket among this segment of themarket they still manage to get 2 percent of visitors from the age group of 13 to 17 years.
Starbucks uses three types of positioning for designing it strategy. They use mono segment positioning as they focus on premium customers as they try to get the attention of the individuals who are willing to pay more for thebetter quality product(Hota & Newlands, 2017). They use adaptive positioning, as they have introduced beverages that are made to maintain thehealth of the customers with controlled calories. They use stand-by positioning as many products as Frappuccino waited for the market to demand such product(Cho, Yu, Oh, Ryoo, Song, & Kim, 2017).
General Description of Campaign
Starbucks is using most of the means to stay in touch with the customers but still, there is much they can do to help their position in the market and increase their customer base. They have an option of mobile payment of Starbucks Card already. The next step can be getting online orders and delivering the product to the doorstep of the customer. If the brand introduces this service as well they might be able to provide better quality services to the customers. They can put an option of ordering through thewebsite and through amobile app.
The system needs to be efficient and intelligent enough to read the pattern of the user. It should first offer the drinks to customers to choose the drink and quantity and then it should provide the other products available at Starbucks. It should then give payment options to the customer so they can easily make choices. It is important to keep the interface user-friendly because otherwise it might confuse them and they might end up not using the service. The system should be intelligent to keep track and offer the relevant options first to the customers so they find it convenient to use the app and feel the importance that they have as a customer from the company. The display of the product is important at the app and website where the product is being ordered. This gives a sense to the customers of what they are ordering.
This option will help better to the customers who are new customers of the company. This will make the experience convenient for customers and will help the company to cover more area and diverse customers. There are many people who don’t like to go to a public place and this will help Starbucks to go to them. Advancement of technology has made most of the people lazy and introvert and this will help the company to exploit the technology in its favour and get to the customers. One of the most important factors linked to this campaign is the delivery of order system. It should be efficient and reliable service otherwise it will not only fail the campaign but also the credibility of the company.
This is important to handle this campaign because this can be a key to anew level for the brand. No big name is providing this service to the customers and Starbucks can be a pioneer of this. The presence of the company in most of the areas has always been a strong point of the company and this service make the position of the company even stronger than before. This will push the boundaries and will help the company reach every individual with convenience.
As this campaign is to make the comfort of the customer top priority and give them a sense that the company cares about them. The tagline of the campaign should “Starbucks at your doorstep”. This tagline will assure that the customers don’t need to go anywhere and they can get fresh Starbucks product at their doorstep. This will make people connect with the brand even more.
This will help the company to track the preferences of the people from specific regions. This will help the company to win the loyalty of the customers by providing them with the products they like and make sure that they feel a sense of connection with the company. This will also help the company know about the feedback without getting the customers to fill any forms. They can simply find the trail of the purchases and find out about the preferences.
The objective of the branding is to connect with the customers in a better and more productive way. This will increase the dependability factor of the brand and also this will help the brand interact with the customers at a deeper level. This will help the brand gain access to more people and make the process more convenient for them(Chawla & Lenka, 2017).
Although the stores of the company are well-established and there is a big chunk of asocial group that visits the stores everyday but this campaign will help the brand to reach out to those who do not like being in a social situation. This will definitely increase the popularity of the logo that Starbucks owns as it will be displayed as more virtual places than before(Sehgal & Malati, 2013).
The primary target will be to engage the regular customers into getting to know about the virtual interface. They will be encouraged to interact with the website and the mobile app while they are waiting for their order or if they are alone and having a beverage. This will give the initiative a head start and will make it easier for the company to introduce the new feature. After this, the next and important step will be to target the potential customers of the store who are not yet visiting Starbucks(Warren, 2015).
The main purpose of the campaign is to attract new customers who are not visiting Starbucks for some reason and that is why the company will have to go an extra mile to make this happen. One of the targeting strategies used in the modern world is to buy information of the customers from different sources and then using that information to publicize own campaign. This is one of the convenient options as this is new approach this will definitely excite people and once they hear about it they will definitely visit the forums introduced by the company. Once they are on the forum the rest will be done by the offers and options provided by the forum.
They can be targeted through advertisement campaigns on the social media. Starbucks already has a strong presence over the social media and that can help the company in advertising their new campaign. Advertising and then the operations of the system launched both are important for the company to make this campaign successful(Moriarty, Mitchell, Wells, Crawford, Brennan, & Spence-Stone, 2014). The word of mouth is also an effective methodology for the established brands like Starbucks. This approach can serve will help the budgeting plan for the campaign as well. The potential customers once involved then it is of much importance to serve them in the best way.
Make sure the website is up and running all the time. As Starbucks is a big name the website must be good enough to handle heavy traffic otherwise it might give a negative impression to the visitors. Once the traffic flow is constant and consistent the company can use it as an asset for the sake of advertising as well. The company can analyze the preferences of the people and introduce the products and recommend them to the customers. They can also use it as a feedback system to improve and customize their product for the targeted customers(Pascoe, Pascoe, Wright, Wright, Winzar, & Winzar, 2017).
The objective is quite straightforward. This will help the company to form new and strong relationships with the customers. This will help the company to optimize the interaction of the company with the customers. This will also help the company to engage the anti-social and introvert people in a better way. The main objective that is to be achieved is an optimum usage of the technology to increase the client base and approach the people who were out of reach before and make the presence of store more effective.
Media or Direct Marketing Tool Objectives
The main tool that will be used for this campaign is the internet and more specifically the mobile app and website of the company. The company can acquire email addresses and send updates to the personal email accounts of the people only if people are fine with it. The interaction through email can be more effective if sold properly to the people(Tiago & Veríssimo, 2014). People do not like getting atoo much promotional email in their personal accounts and that is why the company should be careful while using this medium of interaction. If the company uses this means sensibly it can be a strong form of connection between the company and the customers. Initially, the company can offer prizes for the people who help the company support the advertisement campaign. This will also be an effective and cheap way to advertise for thecampaign(Constantinides, 2014).
The campaign will cost almost $20,000. Out of this $7,000 will be spent on the process of theauto-email generation process. The database will be maintained with the emails of the customers in different categories depending on the types of products ordered. $5,000 will be spent on the website development and the rest will be used for buying the customers information from different companies and advertising the campaign through different means.
The follow up can be conducted once the campaign is launched. The follow up should be done quarterly and for the first quarter, the sales can be compared with the time when this campaign was not launched yet.
The success of the process can be measured on the basis of two basic factors one is the rate of flow of traffic on the website and second is the conversion rate achieved. The rate of flow of traffic proves that the campaign was effective and left an impact on the customers. Secondly, the important measure of success is the number of customers who placed orders through theinternet and the number of customers who visited the website. This will help the company to analyze the impact of the web-page and the services being offered by the company.
The interactive tools like awebsite and the mobile apps will take almost 5 months to get finalized and uploaded to the internet server. Meanwhile, the record of customers will be gathered and the system of theauto-email generator will be installed. As the website gets uploaded the promotional emails and other campaigns will be launched to encourage people to visit the forums and interact with the company.
The suggestion made in the paper can be very useful for the company and it can be launched in a specific area initially. This will only cost $20,000 and will help the company not only earn more capital than before but also to make sure that the company has apositive and interactive relationship with the customers.
This will help the company in providing best quality services to the customers at optimized prices and will enable them to record their responses conveniently. This approach will help the company cover the areas of operations more effectively.
One of the main strengths of the company is its easy accessibility to the customers and the strength will get more power with this initiative as with this feature the company will be able to be accessible for literally everyone with an internet connection.
This approach will help the company to access the people who are not social and are introvert by nature. This approach is not being used by most of the mainstream brands and this can give Starbucks a competitive advantage.