ajeeth pingle brand extention plan

8/7/2019 Ajeeth Pingle Brand Extention Plan

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Kaplan UniversityGraduate School of Business and ManagementGB530 Marketing Management: Brand Extension Marketing Plan

GB530-03 Priscilla G. Aaltonen, Ph.D., M.A.I.S.

Ajeeth PingleFebruary 25, 2011Brand Extension Marketing PlanA MARKETING PLAN IS THE FOUNDATION FOR ALL MARKETING EFFORTS1.0 Executive Summary

Starbucks has grown from a little coffee house established in Seattle, Washingtonto a multi-million dollar corporation. Starbucks has over 10,000 stores located all overthe world. Starbucks mission is to become the most recognized and respected brand inthe world. Starbucks has established the brand name in their store locations, but they

have also branched out to include grocery or discount stores. Starbucks marketing mixincludes the pre-bottled frappacino drinks, but they have not gone into the drink mixmarket. The new brand extension will help them to branch into the drink mix market.The drink mix crystals will be called the Tazo Custard Lemonade Crystals (TCLC).These crystals will be easy to use, convenient, and great tasting. TCLC will start with thecustard lemonade flavor but could branch out into other flavors as popularity in the drinkmix grows. The benefits of the drink mix would be that it is easy to use withpremeasured packets. The consumer could just open a packet and pour it into a waterbottle, shake it and go about their business.

TCLC target market would include health conscious people, busy people, and

moms on the run, and consumers who travel a lot. The target market for TCLC is forpeople who want to be able to select healthy choices but something with good taste. TheTCLC is the perfect drink for them because of the crystals. The crystals make it so thatconsumers can easily pour it into their water bottles and take it anywhere. The crystalsare better for you then drinking sugary sodas or artificial juice drinks. It is the perfectdrink mix for busy, fast paced consumers.

The customers needs for the TCLC would include an easy to use packet. Theconsumer would have the convenience of getting the drink mix at the local Starbucksstores. The product may be distributed into grocery stores, if it is deemed popularenough to create a profit. If the product gets distributed into the grocery stores, it couldbecome even more popular. The great tasting Tazo product that is unique. It is not thesame old flavors that are currently in the stores. Customers really appreciate theversatility and unique flavors that Starbucks has to offer.

TCLC value proposition would include the ease of use. This includes the fact thatthe packets are easy to handle and pour into water bottles. TCLC would be offered in thelocal Starbucks store for easy access. TCLC may be offered in grocery stores later down


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the road. TCLC has a great taste and a unique combination of flavors that are notcurrently offered by other drink mixes.

TCLC sales are projected to increase over the next five years. The second year ofdistribution, it is expected to increase by 2%. The fourth year of sales, Starbucks should

expect an increase in sales of 4%. The sales are expected to increase over the next fiveyears, but after the fifth year, there may be a decline in sales because the competitors willstart to produce product similar to Starbucks TCLC. TCLC is expected to break-even inthe third year of distribution. Starbucks would have to produce 565,958 units in order tobreak-even in that year. This is based on the price of the product staying at $4.00wholesale price.

TCLC keys to success would be that Starbucks would continue to develop newflavors of drink mix in order to keep ahead of competitors. Starbucks would need tobranch out and distribute the TCLC into other markets, such as grocery, department orconvenience stores. Starbucks could advertise their product by offering samples at their

stores. This would help customers to develop and interest in their new product.

2.0 SITUATION ANALYSIS

Since the early 1970s, the gourmet coffee industry has been growing in America.Starbucks has been a leader in this industry since 1971. Starbucks has continued to growand open more and more stores. Starbucks are currently in a good place to continue togrow. Starbucks need to continue to develop new products and branch out into otherindustries. With new products and more expansion, Starbucks could develop into aglobally prosperous organization.

2.1 Market Summary

Starbucks has enjoyed major success over the last few years. The customers thatStarbucks target include 45% females and 55% males. The average age are 36 and earnaround $65,000 a year. Starbucks are usually college educated and drink around 15 cupsof coffee a week. This target group is the ones that generally consume the products thatStarbucks sells and enjoy the home town caf feel of their stores.

The coffee shop market is projected to continue to grow over the next few years.The analyst project the industry will continue to grow and will not peak until 2015.Starbucks contribute this to the different types of coffee bean. These beans offer avariety of flavors depending on where it is grown and the climate of the area. Starbucksis in a good position to boost the growth of the coffee business. Starbucks are currentlyenjoying a market share of 22.5% this year. The summertime drink brand extensioncould only increase Starbucks growth. The Tazo Custard Lemonade crystals are arefreshing twist on what Starbucks already offers their customers. This brand extensionwould compete with the grocery store instant drink line. Even though, this is not a coffeeproduct, it was developed to help Starbucks increase their brand. The projected growth


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of the Tazo Custard Lemonade crystals could be a ROI increase of 5% over year 2010 insales by the end of 2011.

2.1.1 Market Demographics

The profile for the typical Starbucks customer includes the followingdemographics, geographic and behavior factors:

Demographics

Starbucks customers include young, intelligent people. The customers includepeople who are into the wireless internet arena. Starbucks are people who are in theworking class and who need a quick coffee break away from the office. The customerswill visit the stores anywhere from five to eighteen times a month. The average agerange is from thirty-five to forty years old. The average gender breakdown includes 45%female and 55% male.

Geographic

Since Starbucks established their stores in 1971 on the west coast, Starbucks havegrown globally to have over 4,000 locations worldwide. Starbucks have stores in overthirty countries. These countries include the United States, Germany, Australia, andEurope. Starbucks currently have stores in every major city in the United States and areplanning to expand to other countries. Starbucks recently worked out a deal withEthiopia to open a Starbucks in that country.

Behavioral Factors (Psychographics and Lifestyle considerations)

Customers enjoy coffee and a friendly atmosphere. The customers spend money oncoffee and enjoy the coffee house style. Starbucks are busy business men and womenwho are do not have a lot of time to spend waiting for service.

2.1.2 Market Needs

Starbucks provides the customers with good specialty coffee and drinks with acoffee house atmosphere. The Starbucks Company wants to combine their specialtycoffee with the busy lifestyle of the customers. Starbucks want the customers to be ableto get in and out quickly, but Starbucks want them to stay in the store, if Starbucks havetime.

The customer needs are as follows:

Good specialty brewed coffee and drinks.

Easy accessibility to their store locations.


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Nice friendly employees, who greet you with a smile and hello.

Fair prices for their products, this includes the products offered in the grocery stores

The customer value proposition is as follows:

Starbucks provides customers with good specialty coffee and other drinks.

Starbucks have stores in every location for easy access.

Their employees are friendly and helpful.

Starbucks prices are competitive with other specialty coffee houses in your area.

2.1.3 Market Trends

Starbucks sells specialty coffee and drinks. The coffee industry has always beenvery popular since it was introduced in the early 17th century. The consumers that drinkcoffee are diehard fans of the brew and, like smoking cigarettes, have trouble giving it up.This is the reason for the long term market trend involving the coffee industry. Thespecialty coffee industry has been around since 1970 and has not fallen in the market.The specialty coffee industry is also a long term trend not likely to diminish anytimesoon.

There is currently a popular trend for drive-thru coffee stores. This has becomepopular among Starbucks as well. Starbucks has over 540 of these locations andStarbucks have become very popular with long lines. Most people enjoy the convenienceof the drive-thru because Starbucks do not have to leave their vehicles. This type ofcoffee house will continue to grow in the long term because consumers want this type ofatmosphere.

The other long term trend for Starbucks includes organic coffee, specialtycrystals, smoothies and other drink variations. Starbucks growers have come up withmany different types of coffee bean to make new flavors of coffee. Starbucks haveinvented many different types of crystals, like chai, chai lemonade and fruit smoothies.Starbucks have decided to market their products through catalogs, in grocery stores andother retail stores to increase their market shares.

2.1.4 Market Growth

The specialty coffee market is growing by leaps and bounds. The statistics showthat over 109 million people drink coffee daily and over 53 million drink it sometimes.Within the next few years, the consumer coffee industry could grow by 9% to 10%.Starbucks analysts estimate their revenue growth to be over 1.4 million in fiscal 2010.Starbucks plans on moving into some more of the international markets like China, Braziland Russia to increase their market share and make them more competitive.


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2.2 SWOT Analysis

The SWOT analysis below shows the key strengths and weaknesses within thecompany and describes the opportunities and threats facing Starbucks.

1. Strengths

Very loyal customer base, Starbucks keeps their customers happy and returning.

Very loyal employee base, Starbucks employees enjoy working there and are happyto be part of the experience.

Starbucks is very committed to social issues. Starbucks have foundations tocontribute to issues like literacy and clean water.

2.2.2 Weaknesses

Starbucks has developed conflicts with other stores in the retail market. The retailmalls, which Starbucks have opened stores in, sometimes open later then Starbucks.Because of this, the other retailers have stated that Starbucks is trying to take advantageof the area culture.

Starbucks does not advertise their products. This could be a majordisadvantage with other companies that do advertise.

Starbucks has grown over the last few years. This could cause them to becometoo overgrown within an area. Too many stores could mean fewer sales in one

store versus another.

2.2.3 Opportunities

Starbucks would need to develop new areas to expand globally. This is theonly way to continue to grow and increase profits. Starbucks could expand to

Asia or Africa.

Starbucks could develop co-brands with other well know food or drinkmanufacturers. This could include making liqueur in conjunction with Jim

Beam.

Starbucks could increase their loyalty brand by issuing loyalty cards.

2.2.4 Threats

The cost of supplies could cause Starbucks to have more expenses than normal.


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Starbucks could face a number of volatile factors that would cause problems. Thiscould include weather, political and economic conditions of the world.

Starbucks has a great number of competitors in the coffee market. Starbucks wouldneed to keep growing and become more innovative in order to stay ahead of the

competition.

2.3 Competition

Starbucks has many competitors in the coffee house market. The currentcompetitors include Dunkin Donuts, McDonalds, Tim Hortons and Krispy KremeDonuts. These competitors are working to get a strong hold on the coffee market.McDonalds has recently introduced the coffee lattes and smoothies. Dunkin Donuts hasalways had coffee, but Starbucks have recently introduced the coffee in the grocerystores. Seattles Best has always been a competitor of Starbucks and Starbucks haverecently opened stores in the same markets. Tim Hortons is a big competitor of

Starbucks in the northeast. Horton has pastries, donuts and specialty coffee just likeStarbucks. Krispy Kreme Donuts has had coffee and recently started offering lattes. So,Starbucks will need to keep innovative with their marketing in order to stay ahead of thecompetition.

Customers prefer to shop at Starbucks because Starbucks purchase high qualityrare coffee bean grown all over the world. This is coffee that is not found in normalcoffee houses. Starbucks offer different versions of the Italian espresso. Starbucks haveintroduced rare drinks such as Frappuccino. Starbucks customers are always greeted witha smile and a Good Morning, afternoon or evening. This friendly atmosphere and theenvironment of the stores is what people want.

Starbucks will compete with the other coffee companies by quickly expandingtheir market. Starbucks can compete by continually introducing new products or productlines to the public. Starbucks can continue to have a welcoming atmosphere thatcustomers want to see. This will help them to grow and continue to profit.

The marketing mix for Tom Hortons looks like the following:

Price Tom Hortons prices are usually 2-4% less then Starbucks.

Place Tom Hortons was started in Canada. Starbucks have over 3000 locations inCanada and over 500 locations in the USA. Most of their revenue is in the CanadianTerritories.

Promotion Sales and promotion are done through their website. Advertising isdone in magazines, newspaper, billboards, television and radio.


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Product Tom Horton has a strong brand image throughout Canada and thenortheastern US. Starbucks reinvent themselves as their customer change. Starbucksoffer products such as pastries, sandwiches and homemade soups.

2.4 Product Offering

Product/features/benefits

Good tasting, flavorful, responsibly priced products. When a customer tastesStarbucks products, Starbucks will return again and again.

Convenient store locations. Locations in every major city and town, friendlyatmosphere and quick service.

Innovative products. Products that are unique and offer great taste.

Products use environmentally friendly materials. The packaging would be made withrecycled cardboard.

Starbucks has established itself as a manufacturer of unique products throughoutthe global market. Starbucks has been a recognizable brand logo that people look forwhen they are out on the town. Starbucks has furthered their brand name by establishingthemselves in grocery stores, retail stores, airports, rest stops and business offices. Thenew product of TCLC will only enhance the Starbucks brand name.

The five different elements of the Brand Equity Valuator Model as Starbucksapply to their brand are as follows:

Differentiation Starbucks continues to differentiate themselves from other stores byreinventing new and unique drink and food products. Competitors are always trying tocome up with drinks that are just as good with little success.

Energy The Starbucks brand is moving with great momentum right now. Starbucksare striving to establish more global markets for their products. Starbucks are looking tomove into Africa at this time.

Relevance There is a great amount of breadth of the brands appeal. The coffeemarket is high right now and Starbucks brand is highly desired.

Esteem The brand hold itself to a high esteem. Starbucks care about theenvironment and offer contributions to several good organizations throughout the world.

Knowledge The customers are very knowledgeable about the brand. The brand iswell known all over the world.


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The figure below shows the brand strength is energized by combiningdifferentiation, energy and relevance. Relevance and esteem combined makes up brandstature. The power grid is developed when you combine the energized brand strengthand the brand stature; this power grid shows the cycle development of a brand. Starbucksenergy is in the leadership area, higher than others. The differentiation is declining, due

to competition increasing. Per the model below, the Starbucks brand could be declining.Starbucks would need to rebuild their brand equity by developing new products thatconsumers would purchase. Starbucks could increase their brand equity by developing anew brand extension, such as new summertime drinks. Starbucks is known for coffee,which is usually associated with winter and the cold, but Starbucks could develop a newsummertime drink that would attract customer anytime of the year. This could increaseStarbucks popularity all year long.

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2.5 Keys to Success

Products that satisfy the needs of the consumers. Starbucks needs to keep reinventingthemselves in order to keep competitive.

The ability and opportunity to open new stores in new markets. Starbucks needs tocontinue to explore the global market for new areas of opportunity.

Continue to be friendly and inviting to consumers. Their stores need to have theinviting atmosphere that attracts consumers.

The ability to stay one step in front of the competition with new and unique products.

2.6 Critical Issues

Starbucks needs to continue to make customers happy by developing improvedcustomer service. Starbucks could help to improve in this area by serving customerquickly. The employees need to be very friendly and attentive. Starbucks could helpemployees be more productive and attentive, by treating their employees with respect andtraining. Starbucks need their employees to be satisfied in order for them to satisfy thecustomers. Starbucks could increase their social standing by getting involved in morecommunity projects. Starbucks could help in under developed countries to increase theirsocial networking.

Currently, Starbucks products follow the fashion life cycle. The product follows asocial trend that cannot be predicted. The products can be compromised if consumersstart looking for new trends to follow. The products are currently entering the end of thegrowth stage. With the introduction of the new summertime brand extension, this couldhelp to boost the product line and slow the decline.


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The points of parity for the Starbucks brand include good coffee, quick serviceand friendly atmosphere. The other points of parity could be the new great tasting drinks.The points of difference are quality, unique coffee bean and other products not usuallyassociated with a coffee store, such as ice cream, chocolate and mints.

3.0 MARKETING STRATEGY

3.1 Mission

Starbucks fundamental goals are to provide the customer with high quality coffeeall the time. Starbucks has developed a high standard for the purchasing, roasting anddelivering the coffee to the customers. Starbucks knows that profitability is important inorder to strive and further grow the business. Starbucks wants to contribute to the goodwill of the community and environment. By establishing these business fundamentalgoals, Starbucks can continue to offer quality coffee products to their customers at alltimes.

Starbucks business is defined as a restaurant, beverage retailer and entertainmentbusiness. They sell coffee and tea beverages to customers. Starbucks sell coffee, hotdrinks, cold drinks, coffee beans, salads, sandwiches, pastries, snacks and tumbler mugs.Starbucks has an entertainment division that will market books, music and films.Starbucks also distributes their coffee and ice cream to local grocery stores for purchase.

Starbucks value proposition for the water crystal brand is to provide thecustomers with special coffee experience that would add value to their lives. Starbuckswants to add an uplifting experience to the customers lives. Starbucks wants to create anexperience surrounded by ambience in conjunction with the human spirit, community,and the need for people to gather together and socialize.

Starbucks fundamental goals for the water crystal brand are to provide thecustomer a good tasting product; that is convenient and easy to use. This brand extensionwill increase the market share for Starbucks by furthering their brand name in grocerystores or retail stores.

3.2 Objectives

The main marketing objectives for the Custard Lemonade Crystals are as follows:

TCLC would increase the total market share over the next 4 years, with an expectedincrease of 5% within the next 2 years.

TCLC will increase the market positioning by expanding the drink division into theretail stores within the first 2 years of operation.


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To continue the Starbucks image for drinks that are good tasting and convenient.Starbucks will conduct surveys to measure this within the first year of distribution andthen every year after.

To increase customer awareness of Starbucks environmental efforts to reduce waste

by developing small drink packets that you can put into your water bottles, thereforereducing environmental waste. The impact of the environmental affects will be measuredby conducting analysis to determine the waste savings within the first 3 years ofdistribution and then continue to analyze this data every year after for 6 years.

The crystal drink mix market size held approximately $300 million sales in 2005.The crystal drink market has increased to 9.71 million units in North American in 2010.This market is expected to increase even more through year 2015. There is a globalmarket for TCLC, the Asia Pacific (in particular China and Japan) market held 38% ofthe global market share for crystal drink mixes. Western Europe held a market share of1000 million in sales, Germany, Italy and the UK follow up the market share. The

Starbucks locations are visible in all these locations, so it would be easy for them toestablish the new crystal drink mix product in these areas.

Starbucks current global market share is approximately 6% over othercoffeehouses. The new product will help Starbucks to build on their product image.Starbucks would increase the brand name and reputation throughout the global market.Starbucks will set a goal for TCLC to help grow their market share to 10% over the next4 years.

3.4 Target Markets

Starbucks specific target market segments include the following:

The customer demographic will include college students, busy working class, sportsenthusiasts, and health conscious.

The geographic segment areas where customers want fast and easy ways to makedrinks on the go.

These target markets are optimal for Starbucks new product because they includecustomers who are willing and able to purchase TCLC. These customers are very busyand are looking for easy ways to make drinks on the go. The customers like the ease ofhaving crystals that they can add to water and then take out with them.

The demographic segment of TCLC can include customers that want an easyproduct to use. The customers are sports oriented, outdoor oriented people who generallydo not like drinking sodas. The customers are health conscious and are looking for goodhealthy alternatives.


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The geographic segment could include areas within the global market. Theseareas will include US markets and International markets. Analysts have determined thatcrystal drink mixes are very popular in the United States and overseas. The main areas ofpopularity are China and Japan. These areas are becoming geared to the young andeducated, so these easy to use products are very popular.

3.5 Positioning

To active, busy health-conscious drink mix consumers, who have little time towait at gourmet health stores, TCLC are the premier crystal drink mix that givesconsumers a better taste with an easy to use packet. TCLC offer benefits over any otherbrands because it has combined unique flavors with easy to use packets. With TCLC,you will be able to get easy to use packets to put in water for the on-the-go activecustomers.

TCLC will be different from other brands by offering a unique flavor drink mix

with easy to use packets. These packets can be distributed with just enough crystal mixto flavor a 16.9 oz water bottle. The consumers can open the packet and put it into thewater when they are on the go and cannot mix a pitcher of drink.

TCLC distinguishing feature would be the easy to use packets. These packets willbe the feature that would entice the customers to purchase this product.

3.7 Marketing Mix

Product

TCLC would be considered a convenience good because the product can be usedwith minimum effort. The Starbucks Tazo custard lemonade could be considered animpulse or emergency good. The reason for this is because the consumer could wantdrink mix to put in their water when they are running out to exercise or go to work. TheTazo custard lemonade crystals will be different from other brands because this producthas a unique flavor and is easy to use. The Starbucks brand name is known for greattasting unique drinks, so this product will continue this brand but with a twist of the easyto use packets.

The TCLC will have more customer value because the packets are small,therefore there is less waste. The crystal packets will be premeasured and will be moreeconomical. The target market segment requires easy to use packets and great tastinghealthy drinks. The TCLC give the customer the easy to use packets with a uniquetasting healthy drink mix.

Price

Starbucks is known for quality, higher priced products. The TCLC will be priced2% above other brands of the same type. The TCLC are convenient, economical and


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unique tasting. The target market is willing to pay premium prices for the gourmetflavors. This is the value proposition in conjunction with the target market, the Tazocustard lemonade crystals price could be adjusted depending on the geographical market.

The price objective for TCLC is to be a product-quality leader because Starbucks

brand is perceived to have great quality, good taste, and status in the drink industry. TheStarbucks brands are considered the leader in quality, luxury and premium price and havea substantial customer loyalty base. The customer demand for the new product will below at first, until customers can taste the product, then the product is expected to increasein popularity within the first year. Starbucks has a number of years experience inproducing, distributing and brewing coffee, but they have very little experience inproducing, distributing and making crystal drink mixes. Starbucks would use targetcosting in order to determine the costs of production. Target costing will be determinedbe based on competitors prices and demographics. Starbucks closest competitor, in thedrink mix industry, will be Crystal Light drink mix. Crystal Lights products vary inprice from $3.49 per box to $4.00 per box. Starbucks will set their price at around $3.50

per box for wholesale to $4.50 per box for retail sales.

Starbucks would use the pricing method of the going rate pricing for this newproduct. The going rate pricing is determined by the major competitors prices. Thegoing rate pricing is the best pricing method because Starbucks is not currently in thecrystal drink mix business. This pricing method would help them to set a price thatwould encourage customer sales and keep Starbucks brand loyalty. The final price willbe based on the impact of price on other parties. Starbucks Tazo custard lemonadecrystal drink mix price will have an effect on the stakeholders, competitors andcustomers. These factors will be what determine if the price is best for the company.This price will need to create profits, as well as increase stakeholder equity. The brandextension price will be adapted using the differentiated pricing method. Thedifferentiated pricing method will be based on location pricing. The selling productlocations will determine the price and the TCLC will be sold at a couple of locations.The urban areas, where Starbucks is very visible, will have higher priced products. Therural areas, where Starbucks is not very well known, will have the lower prices.

Place

TCLC will be very popular among health conscious, young, busy, educatedpeople. The TCLC value proposition will be geographically established in retail stores inorder to accommodate the target market. Starbucks will use the pull strategy in order tomarket the Tazo custard lemonade crystals. The pull strategy uses advertising andpromotions to increase sales of the new product. Starbucks will use promotions such asfree samples, flyers and coupons in order to entice customers to try the new product.

TCLC channel design would be based on lot size. The household channel wouldpurchase a lot size of two or more. The channel objective would be as a perishableproduct since the crystals could go bad over time. This type of product channel wouldneed direct marketing in order to sell the products. Starbucks would need to use samples


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need to conduct market research. Starbucks could analyze the cash receipts, sales anddistribution information in order to determine the affects of the market shares.

Starbucks will use survey research to determine whether the product is successfulor not. Starbucks can ask customers to call a number on their receipts and do the survey.

The survey will be given to a select number of customers. The initial survey will begiven out to 100 customers. This number was chosen because not all the customers aregoing to do the survey. By given the survey to one hundred people, there is a margin oferror in case all the customers do not call to do the survey. This way there will still beenough feedback to determine whether the new product is successful or not. This will bea telephone interview with an automated system. The system will ask specific questionsabout the new product and the system will give each answer a rating, such as 1=mostsatisfied to 5=most dissatisfied.

The survey will be implemented 12 months after the first production of the drinkmix hits store shelves. This will give the customers a chance to try the drink mix out and

determine whether they like the concept or not. Starbucks uses the telephone survey intheir store locations right now to determine how well they are doing among customers.They will first introduce the Tazo custard lemonade crystal drink mix in Starbucks storelocations. By introducing the drink mix at their locations first, they can control thesurvey. Since they currently use this type of survey, Starbucks can evaluate the outcomewith little impact on profits.

4.0 FINANCIALS

4.1 Break-even Analysis

The following section will show that Starbucks Tazo Custard Lemonade Crystalsfinancial overview in conjunction with the related marketing activities. Starbucks willanalyze the break-even, sales, expense forecasts and show how these forecasts link to themarketing of this new product.

Starbucks will estimates first year sales revenue for the Tazo Custard LemonadeCrystals to be $800,000. The sales price would be on average $4.00 per unit. Thevariable costs will be an average of $1.65 per unit. This will calculate to a contributionmargin of $2.35 per unit. Starbucks has determined that the estimated sales volumewould be 200,000 units during the first year. The first years estimated fixed costs wouldbe $1,000,000. If we use the contribution margin method to determine the break-evenpoint, the loss for the first year will be ($430,000).

Total per Unit

Sales (200,000 units) $800,000 $4.00Less Variable expenses $330,000 $1.65

Contribution Margin $470,000 $2.35Less Fixed expenses $900,000


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be considered a low end product which is not consistent with their normal drinkofferings. The price of Starbucks new product is only around $.08 per serving, this ismuch less than the normal drink offerings at Starbucks. This could help Starbucks withprofits, but could confuse the customers about whether the product is really a Starbucksproduct or not. This could cause Starbucks brand equity to diminish.

The most important components of sales performance for Starbucks wouldinclude the target market which include healthy, busy, on the go consumers. This wouldrepresent the best chance for sales performance. Starbucks would need to continue tolower costs, increase brand equity and continue to make customers number one. This isimportant to continue to profit with the new product.

5.0 CONTROLS

Starbucks will monitor expenses and revenue by analyzing financial reports on amonthly basis. These reports will tell Starbucks how the new product is performing and

if it is profiting or not. The reports that would be reviewed are the sales report, cash flowreport, advertising reports and distribution reports. These reports would tell Starbucksabout the efficiency of the new product.

Starbucks will access marketing effectiveness by performing a strategic controlanalysis. The strategic control analysis would include running reports such as marketingeffectiveness rating, marketing excellence reviews and company ethical and socialresponsibility reviews. Analyzing all of these reports will tell Starbucks whether or notthe company is following the best marketing strategy.

Starbucks will assess changes in the market environment by conducting marketaudits. These audits will study the market environment, objectives, strategies andactivities. This analysis will show opportunities and create recommendations forimproving the market strategy to increase sales of the new product.

5.2 Marketing Organization

The person in charge of overseeing the production, marketing and implementingthe brand extension marketing plan would be Clarice Turner, Senior Vice President of theNorth Division. She will be working in conjunction with the Carl Sweat, Senior VicePresident of Global Beverages. There will be special teams set up within the corporationin order to bring all the marketing, distribution, production and marketing plan together.All of the work will be closely monitored by Howard Schultz, Chairman, President andCEO of Starbucks.

5.3 Contingency Planning

Difficulties and Risks:


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Problems entering a new target market. Starbucks is not familiar with the crystaldrink mix market. May cause brand equity issues. Starbucks will monitor these risks byreviewing the sales reports, distribution reports and cash flow reports. Starbucks willadapt to losing sales by decreasing fixed expenses and increasing advertising of the newproduct.

Entering an established competitor market. Starbucks will be entering a marketwhere Crystal Light and other competitors have established their brand names. Thiscould cause some problems with getting customers to switch to Starbucks brand crystals.Starbucks will monitor these risks by analyzing competitor market reports to determinehow well they are doing in the market. Starbucks will adapt to these adversity byincreasing brand awareness by issuing coupons or putting up advertising displays.

The worst case scenario would be that Starbucks will determine that they cannotcompete in the crystal drink mix market. They would end up liquidating the business andtaking a profit loss. Starbucks will monitor these risks by analyzing the monthly reports

including the sales report, distribution report, market share reports, financial reports andmarket audit reports. They will adapt to these changes by cutting back on fixed expenses,slowing distribution, increasing advertising and following the competitors prices.

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Kembell, B., Hawks, M., Kembell, S., Perry, L., & Olsen, L. (2002). Catching theStarbucks Fever. Retrieved on September 7, 2010 fromhttp://www.academicmind.com/unpublishedpapers/business/marketing/2002-04-000aag-catching-the-starbucks-fever.html.

Kotler, P. & Keller, K.L. (2009). Marketing management (13th ed.). Upper Saddle River,NJ: Pearson Prentice Hall.

Lamb, S., Leaverton, J., Morris, R., Wein, L., & Weiser, S. (2006). StarbucksCorporation (SBUX). Retrieved on September 7, 2010 fromhttp://mmoore.ba.ttu.edu/ValuationReports/Fall2006/Starbucks.pdf.

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