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October 30Marketing

Principles2013

UK College of

Author name: Gabriel Novac Business and

ComputingHND Level 5Contents

Background on Starbucks............................................................................1

Task 1.1.......................................................................................................2

Task 2.2.......................................................................................................3

Task 2.1.......................................................................................................4



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9

Task 2.2.......................................................................................................7

Task 2.3.......................................................................................................

Task 2.4.......................................................................................................9

Task 2.!.....................................................................................................10

Task 3.1.....................................................................................................11

Task 3.2.....................................................................................................12

Task 3.3.....................................................................................................12

Task 3.4.....................................................................................................13

Task 3.!.....................................................................................................14

Task 4.1.....................................................................................................1!

Task 4.2.....................................................................................................1"

Task 4.3.....................................................................................................17

#onclusions...............................................................................................1

$e%erences................................................................................................19

Background on Starbucks



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Starbucks is a large international chain of coffee shops that does business in more than 60

countries and serves its customers in approximately 18,000 retail stores. he mission of

Starbucks is to inspire the human spirit ! one person, one cup and one neighborhood at a time

"Starbucks, #01$%. he products that Starbucks sells are coffee products, handcrafter

beverages, merchandise, fresh food and consumer products. &ccording to Starbucks "#01#%,

the brand portfolio includes the Starbucks 'offee, Seattle(s Best 'offee, a)o ea, *volution

+resh, la Boulange and orrefa)ione talia 'offee.

ask 1.1

Marketing process

-arketing is defined by otler "#01#% as the process of meeting customer needs profitably.

he marketing process is the process by /hich the company analyses the needs and

reuirement of its target customers and brings to market products and services that fulfillthese needs. &ccording to otler "#01#%, the marketing process contains four different parts

situation analysis, marketing strategy, marketing mix decisions and implementation and

control.

2ithin the situational analysis stage, Starbucks thoroughly analyses the internal and external

environment of the company in order to assess the factors of influence that could affect its

long term plans. he internal environment includes the employees, management and

shareholders of Starbucks. he external environment is composed of the microenvironment

"competitors, customers and suppliers% and the macroenvironment "political, economic,

social3cultural, environmental technological and legal factors% "-anki/, #01#%. -anagementtools that are commonly used for studying the internal environment are the S24 analysis,

5orter(s "187% +ive +orces -odel and stakeholder analysis.

he tools that managers use for analysing the external environment are the S24 analysis

and the 5*S* analysis. n Starbucks case, one of the most important steps /hen

performing the situational analysis stage is to assess the needs of the customers. he company

does that via customer uestionnaires, focus groups, complaint forms and social media

messages "Starbucks, #01$%. 'ustomer feedback is an essential part of the continuous

development of the company and its product line. &dditionally, Starbucks( marketing team

performs the stakeholder mapping and human resource strategy analysis "Starbucks, #010%.

he second step in the marketing process is to develop the marketing strategy. &s the best

opportunities to serve the customer needs are found, it is time for the company to create a

strategic plan that should include the strategic resources, the constraints and the strategic

goals of the company. &t Starbucks, the marketing strategy is developed in three stages

marketing segmentation, targeting and positioning. Segmentation refers to the process of

splitting the existing and potential customer base into groups that have similar characteristics

and reuirements. +or example, in Starbucks( case, the target market for flat /hat coffees is

busy professionals /ho do not have time to serve a large coffee and that /ant a uick

refresher "Starbucks, #01#%.



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SWOT Analysis

he S24 analysis is a method to analyse the strengths, /eaknesses, opportunities and

threats that a company faces "otler, #01#%. S24 analysis is freuently used to summari)e

and illustrate the most important internal and external factors of influence that are found

during the situational analysis. he internal factors are summarised by using the strengths and

opportunities /hile the external factors are summari)ed in the opportunities and threatssection. he S24 analysis of Starbucks /as performed by summari)ing collected

information from the &nnual 9eports for the years #011 and #01# and by using the State of

the Snack ndustry 9eport from 2isconsin School of Business "#010%.

Strengths

:reat customer service policy and employeetraining

;aluable brand portfolio

+inancially po/erful and /ith lo/ debt

5resent in more than 60 countries

2eaknesses

he business is in a lo/ gro/th stage on the product life cycle

ack of gro/th in main markets

<o disruptive innovations in the last $ years

that could generate high gro/th

4pportunities

*xpand to high gro/th countries

=evelop the brand portfolio

Stimulate the existing demand via clever

marketing

hreats

ncreased competition on the existing markets

o/ gro/th and price /ars in markets in/hich the company operates

'offee culture could decline in popularity

+ollo/ing the S24 analysis, Starbucks should expand the markets in /hich it is currently

operating by looking in high gro/th countries such as 9omania, Bulgaria or high gro/th

&sian countries. &dditionally, the company should fight competitors by means of product

innovation, product differentiation and promotional activities. +urthermore, as the tastes of its

customers change or become more sophisticated, Starbucks should receive feedback and

develop products that cater for the needs of its customers.

ask #.#

Marketing Objectives

he marketing ob>ectives of Starbucks are to increase the a/areness and the value of its

brand portfolio via promotional activities, to increase the market share on its establishedmarkets, to capture market share from its competitors, to enter ne/ markets via geographical



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expansion and product launches and to increase the product portfolio of the company

"Starbucks, #01$%. o each marketing ob>ective Starbucks assigns a uantifiable target and a

time scale to achieve the target. +or example, capture at least 10? of the coffee shop market

share in 9omania by =ecember #01$. @o/ever, these targets are internal and are not

published by the company as it is proprietary information.

Setting clear marketing ob>ectives and defining marketing ob>ectives is an important step of the marketing strategy as is give the company the opportunity to develop targets and time

frames, it aids in the creation of budgets, it gives performance criteria for different

departments, managers and employees and it creates a common company3/ide strategy. he

marketing ob>ectives that Starbucks has should also include targets that are related to

customer service, relationship marketing, uality assurance and service and customer care

"Smith, 16%. Setting marketing costs normally involves defining uantitative and

ualitative targets in the follo/ing areas customer satisfaction, uality of products or

services, relationship marketing and financial return on the marketing campaign. n regards to

Starbucks, the company has a number of uality standards that, as part of the marketing

strategy, are to be maintained and improved. &s an example, the shop floor should al/ays beclean and smell nice, the tables should be cleaned after each customer leaves the coffee shop,

the Agrande cappuccino should /eigh exactly $#0 grams and the Agrande &mericano

should /eigh C00 grams. &n emphasis on maintaining and improving these standards /ithin

the marketing plan /ill help on the operational level. *ven though this imposes some costs

associated /ith measuring, monitoring and imposing discipline, it is >ustified on the long term

because it may bring competitive advantages.

&ccording to otler and eller "#010% there are a number of marketing philosophies that can

be identified. his marketing philosophies or concepts refer to the emphasis, focus and

/eight assigned to the organisation, the business units of the organisation, its customers, its

stakeholders and the society. he competing concepts recognised in the modern marketing

literature include the production concept, the product concept, the selling concept, the

marketing concept and the holistic marketing concept. he production concept holds that

customers /ill prefer products that are /idely available and cheap "otler and eller, #010%.

he product concept suggests that customer /ill prefer the products /ith the highest uality,

performance or most innovative features. he selling concept considers that customers have

to be approached by using an aggressive marketing campaign in order to achieve high sales

gro/th. he marketing concept is a modern philosophy focused on identifying and satisfying

customer needs. +inally, the holistic marketing concept takes into account the needs of the

customers, but also goes on to address the needs of the society. n this respect, Starbucks(

focus is on holistic marketing because it tackles complex issues such as relationship

marketing, integrated marketing and social responsibility marketing.

ask #.1

otabe and @elsen "18% consider the micro3environmental factors as the factors of

influence of a company that can be directly managed and changed by the organisation. he

organisation can shape and defend from the micro3environmental factors. hese factors are



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internal "such as the human resources, the management and the corporate culture% or external

such as the customers, suppliers, partners and other stakeholders. he microenvironmental

factors are audited and analysed using the stakeholder mapping, 5orter(s +ive +orces,

-arketing 9esearch, S24 analysis, internal audits, management revie/s and uality circles

"otabe and @elsen, 18%. he macroenvironmental factors are the external factors that

affect the business activities of an organisatioSn, but cannot be influenced by the

organisation. hese factors of influence are analysed by using the 5*S analysis /hichincorporates political, economic, social and technological factors.

Microenvironment Factors

1. Shareholders ! &s the holders of capital in the business, Starbuck(s shareholders are an

important factor of influence. he shareholders that hold stock /ith voting rights are allo/ed

to dra/ votes in the :eneral Shareholders -eetings and propose a ne/ board of directors

composition, pay packages, strategic directions and other issues. +or example, a large

institutional shareholder that takes active involvement in the management of organisations

such as 'arl cahn(s investment vehicle, could acuire an important stake in the company andadvocate for a different senior management "that /ould implement other strategic plans%,

higher dividends or a greener policy. &dditionally, besides the po/er to influence Starbucks

at a strategic level, the shareholders are also entitled to the residual profits of the company

and to the dividends. herefore, Starbucks( management should make financial decisions that

are to the long term benefit of its shareholders, and also take into account the needs of other

stakeholders.

#. Competitive Forces ! &ccording to 5orter(s +ive +orces -odel, the main factors that shape

the competitive environment are the bargaining po/er of suppliers, the bargaining po/er of

buyers, the existing competition on the market, the threat of substitutes and the threat of ne/

entrants "5orter, 11%. &rguably, the threat of ne/ entrants on the coffee shop market is

high, because the barriers to entry on the market are generally lo/. +rom a financial,

technological and intellectual capital point of vie/ it is relatively cheap and straightfor/ard

to open a coffee shop. @o/ever, due to its si)e, brand and other competitive advantages,

Starbucks has the tools to impose premium prices and achieve lo/er costs than its

competition. Secondly, the threat of substitutes is lo/ in the short term, but high in the long

term. he coffee3drinking social3cultural trend is currently very popular and is unlikely to

change in the short term. @o/ever, in years, people may develop taste for other beverages

such as shakes or tea and other methods of sociali)ing. hirdly, the existing competition on

the market is usually high in the markets in /hich Starbucks activates. +or example, in

ondon, there are a large number of small independent coffee shops that charge value prices

and offer good uality coffee and a number of large coffee shop chains that charge premium

prices and offer decent uality coffee such as Starbucks, 'osta 'offee, 'afD <ero and *&.

Starbucks( main competitors are the large coffee shop chains and any marketing decision that

it makes needs to take into account the competitive position and moves of its rivals. +or

example, if a ne/ type of beverage such as the -atcha atte proved popular /ith customers

in the Barbican &rea, Starbucks /as uick to introduce the Starbucks -atcha atte in the

same area "Starbucks, #01$%. he drink proved popular /ith a certain market segment and the

company decided to offer the drink in the ma>ority of its shops.



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$. Suppliers ! he suppliers of Starbucks influence the business dealings of the company in the

follo/ing /ays they affect the costs of goods sold, they can influence the uality of the

products and services supplied by Starbucks and they can support or vilify the image of the

company. +or Starbucks, an important aspect of its brand is that the company purchases

coffee from approved ethically sourced, responsibly gro/n +air rade suppliers "Starbucks,

#01$%. &ccording to Starbucks "#01$%, all the coffee that it purchases is +air rade and almost

$? of the coffee purchased /as ethically sourced. o sho/ ho/ important the sourcing of coffee is to Starbucks, the company has developed the 'offee and +armer *uity 5ractice

/hich outlines the organisational approach to sourcing high3uality coffee /hile promoting

social, environmental and economic standards "Starbucks :lobal 9esponsibility 9eport,

#01#%.

Macroenvironment Factors – !ST Analys

1. olitical3 he political factors that may affect Starbucks are the government policies to/ard

foreign investments, fiscal policies, labor la/s, health and safety regulation, environmental

legislation and others. Starbucks, in the E /as put under considerable political pressure/hen it /as revealed that the company has not paid enough taxes on its E revenues due to a

fiscal loophole. he company booked its profits in reland /here the profits are taxed at a

very lo/ rate. &ccording to the :uardian "#01#%, Starbucks has paid only F87 million in tax

over 1C years of operation in the E, despite having revenues of more than F$ billion in the

same period. =ue to public outcry, follo/ed by political pressure, the company offered to pay

F#0 million extra in tax by not claiming some deductions "BB', #01#%. @o/ever, the E

government is discussing /ays in /hich to revie/ the fiscal code so as to limit the

deductions that international companies can make to countries /ith lo/ tax regimes and this

may reduce the after tax profits of Starbucks.

#. !conomic ! the economic factors that are most likely to affect the economic gro/th, the

inflation rates, the currency exchange rates, the unemployment rates, the disposable income

and the interest rates in the countries in /hich it has a presence. Some of the economic

factors /ill affect the demand side of company "the amount of money its customers are

/illing and able to spend on Starbuck(s products and services% /hile the rest /ill affect the

supply side of the company "the capacity of Starbucks to serve its customers%. +or example,

the disposable incomes of the population affect the /illingness and ability of Starbucks

customers to purchase coffee and other products by limiting or expanding the amount of

money they have for such purchases. =ue to the economic crisis, the incomes of 9omanians

have decreased in real terms and therefore the amount of money set aside for coffee

consumption lo/ered. his is also due to the fact that Starbucks( coffee is a non3essential

product and has high price elasticity "/hen the price increases, the demand decreases more%.

he interest rate that financial institutions charge for loans have influenced the ability of

Starbucks to serve its customers by increasing or decreasing the company(s expenses /ith

investments, research and development, supply chain and other capital intensive business

areas. he lo/er the interest rates in a country, the more economically feasible /ill be for

Starbucks to invest in ne/ stores and put more money into research and development.

&dditionally, the lo/ interest rates generally make dividends more attractive and therefore

the company /ould be able to offer lo/er dividend rates and keep more of the profits toreinvest in its operations.



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$. Technologic ! 9ecent technological developments that have influenced the marketing

decision of Starbucks are the easier communication /ith customers via social net/orks and

instant messaging services, the expansion of mobile platform marketing channels and the

increased use of internet for marketing purposes. n this respect, Starbucks has allocated more

and more of its advertising and promotions budget for the internet platforms, including its

o/n /ebsite. n regards to the mobile platforms, Starbucks has invested in three main mobile

applications that its customers can use to stay in touch /ith the company Starbucks for &ndroid /hich allo/s its users to bro/se the offers of Starbucks, Suare 2allet /hich makes

payments /ith mobiles in Starbucks possible and a special application for i5hone users

entitled Starbucks for i5hone "Starbucks 2ebsite, #01$%.

ask #.#

t is more sensible and profitable for companies to use market segmentation as part of the

marketing activities because it allo/s them to extract more value from different categories of customers ")an, #00G%. his is because by segmenting, Starbucks is able to address the

needs of certain segments of the market in a more effective /ay and therefore creating more

customer satisfaction. -arket segmentation entails the separation of customer groups in

segments based on geographic, demographic or psychographic characteristics "otler and

eller, #010%. he geographic characteristics offer the possibility of creating market segments

for customers in a country, region, city or even neighborhood. +or example, customers of

Starbucks in 9omania are more likely to purchase lattes and less likely to purchase matcha

lattes than customers in the E "Bock and Encles, #00#%. herefore it is more sensible for

Starbucks to put marketing focus on lattes rather than on matcha lattes in 9omania. he

demographic characteristics include the income, family si)e, age, social status, >ob

characteristics, family composition, gender, religion, ethnicity and nationality "otler and

eller, #010%. +inally, the psychographic characteristics are the personality traits, values,

beliefs and attitudes of individuals. +or example, Starbucks positions its products as ethically

sourced and obtained from fair trade suppliers to appeal to the individuals that value

corporate social responsibility and environmental protection.

o expand on the previous example, take the markets for hot beverages served in coffee

shops, in /hich Starbucks is an important presence. &n appropriate segmentation criterion is

the geographic criteria. +or example, t/o different market segments are the customers of

Starbucks in Bucharest, 9omania and the customers of Starbucks in ondon, Enited

ingdom. he geographic segmentation makes sense not because of the distance bet/een the

t/o locations, but because it underpins different economic, social3cultural, behavioral and

personal characteristics of customers. +irstly, customers in Bucharest are less used to have

coffee for takea/ay and more used to consume the coffee in store as a social event. Besides

en>oying a coffee as a social event, ondon customers also take coffee on the go rather

freuently. Secondly, the average ondoner has more purchasing po/er /ith hisHher income

than the average individual from Bucharest and therefore can afford to purchase more coffees

from Starbucks. Starbucks in Bucharest has to compensate for the lo/er individual demand

and appeal to a larger number of people. 4n the other hand, Starbucks in ondon can affordto build lengthy relationships and loyalise its customers via promotions, loyalty points and



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ask #.C

By analysing the buyer(s behaviour, Starbucks can find methods to deliver more value by

addressing the needs of its customers in a more efficient and profitable manner. he decision

making process of buyers is composed of five main steps problem recognition, information

search, evaluation of alternatives, purchase decision, and post3purchase behaviour. o takeStarbucks( case, let(s say that a group of individual need to meet over a cup of coffee and

have a uick snack.

he first step in the buyer behaviour process is that the individuals recognise the need for

coffee and snacks. he second step is to search for information on companies that offer coffee

and snacks. hey might search online, they might search on the street for appealing coffee

shops or one of the group individuals might persuade the other to choose a particular coffee

shop. hirdly, the most promising alternative is chosen by the group based on a number of

criteria such as proximity to the current location, mix of products, price range, customer

service, cleanliness or other criteria. <ext, the decision to visit Starbucks is taken as it is theclosest coffee shop, /ith coffee and sand/iches that suit the tastes of all the group members

"or most of them% and /ith affordable price ranges for the persons /ith smaller budgets. *ach

member decides /hat to purchase. +inally, the post purchase behaviour includes the time

spend in the coffee shop, any complaints or regrets for going to Starbucks or positive

feedback. +or other goods or services the post3purchase behaviour includes servicing,

guarantees and help /ith using the product.

&ccording to otler and eller "#010%, the behaviour of customers is influenced by

individual factors such as social3cultural factors, demographic factors and personal factors



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and environmental influences such as economic, technologic and legal influences. he

demographic factors include the age, income, generation, social status, family, ethnicity,

nationality and others. & /oman /ith children that enters a Starbucks could be interested in

offering healthy drinks and snacks for her children. 4n the other hand, her children might

pressure the mother into buying high3calorie chocolate bars and fi))y drinks. & more senior

person /ould possibly en>oy more traditional snacks such as an *nglish Breakfast ea /ith

biscuits. @o/ever, it is not /ise to generali)e these /ithout proper research.

/o basic models that try to explain the psychological influences of individuals during the

buyer(s decision making process are -aslo/(s @ierarchy of <eeds "17C% and @er)berg(s

/o +actor -odel "166%. &ccording to -aslo/ "17C%, the underlying motivation behind

human decisions is linked to the different needs of the individual. hese needs can be

classified into lo/er order needs such as the need for food, /ater, shelter and security and

higher order needs such as the need for belonging, love, friendship, status and

selfdevelopment. he model implies that individuals /ill look to satisfy their lo/er order

needs first and then their higher order needs. +or example, busy office people /ith little time

to spare and hungry for a uick snack /ould first look to satisfy their hunger and thirst before

thinking about the need for sociali)ing. @o/ever, as there are a large number of coffee shops,

the need for food and drinks is not that urgent and they might place great importance on the

ambient and customer service of Starbucks. Secondly, @er)berg(s "166% /o +actor -odel

implies that there are t/o categories of influences on the buyer(s behaviour the Asatisfiers

and the Adissatisfies. 'ompanies should first address the potential dissatisfaction factors and

then /ork to enhance the satisfying factors. +or example, according to this model, it is more

important for Starbucks to insure that the shop floor is clean and that the products are not

expired and then to address issues such as customer service and the ambient in the coffeeshop.

ask #.7

he positioning of a product or service is the final step of the marketing planning process.

&fter Starbucks has researched and analysed the market, segmented the market and

developed targeting strategies, it needs to implement a positioning strategy for its products or

services. he product that is to go through a ne/ positioning strategy is the *spresso coffee of Starbucks. he product /ill be re3positioned to address the needs of busy professionals

bet/een 18 and 6C years that need an extra shot of energy. he ne/ strategy is outlined in the

follo/ing table

5roduct he main different bet/een this type of *spresso and the regular one /ill be

the si)e. Starbucks /ill add t/o extra shots of *spresso in the double

*spresso to make a total of four shots. his /ill provide the euivalent

caffeine content of a 700 ml can of energy drink and is safe for healthy

individuals /ith high energy consumption. he ne/ product /ill be called

*spresso ! he Big 4ne and /ill be offered in store in a special red cup /ith

a thunder bolt in it and for takea/ay in a red cup /ith Ahe Big 4ne



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/ritten on it and struck by a thunderbolt. he drink /ill be made >ust as the

regular *spresso drinks are made.

5rice he price of Ahe Big 4ne /ill be slightly lo/er than t/ice the price of a

double *spresso. 'urrently, the price of a double espresso in 9omania is 8

ei and therefore the price of Ahe Big 4ne /ill be around 17 ei. his

/ill reinforce the idea that the drink has double the caffeine content and /ill

create the impression that the company offers a bit of value /hen purchasing

larger si)es.

5romotion he ne/ product should follo/ the general promotion techniues of

Starbucks. he company does not regularly engage in advertising and

promotion through mass channels such as television or radio "Starbucks,

#010%. @o/ever, the company could promote this ne/ product via some 59

stunts such as sho/ing in the ne/spaper some stars sipping from Ahe Big

4ne. &dditionally, the ne/ drinks could be promoted in store via signs,

banners, a special placement in the drink list and through coupons and

offers. +urthermore, Starbucks should also go for /ord of mouth promotion

and encourage people to talk about Ahe Big 4ne on social media

platforms and on discussion forums.

5lacement he placement of the product /ill be similar to the placement of other

drinks offered by Starbucks. @o/ever, as mentioned before, in the first

months, the drinks should occupy a special place in the drinks list and it

should be clearly visible that this is a completely ne/ offering.

ask $.1

&s sho/n by Barney "#00G%, competitive advantage is created by achieving points3of3parity

and points3of3difference /ith the competitors and by creating sustainable barriers to entry for

potential ne/ entrants on the market. he points3of3parity are the individual characteristics of

the marketing mix that are considered as standard on the specific market. +or example,

Starbucks should take into account that it is considered as normal for a coffee shop to offer a

range of different types of coffee such as latte, cappuccino, &mericano, espresso and flat

2hite and a coffee shop that does not offer this range could lose many customers. 4n the

other hand, to achieve points of difference, Starbucks should create difference /ithin the

marketing mix elements. 'ompete by creating different or innovative products, by having a

different pricing strategy, by having a more efficient distribution chain or by appealing more

to customers via effective promotional campaigns.

he first step in developing products /ith sustainable competitive advantages is to engage in

market research. his helps Starbucks analyse the needs of its potential customers,

preferences regarding the marketing mix and segmentation criteria. he second step is to find

a consumer segment that can offer value and gro/th for the company. his could be the

healthy food consumer segment or people that en>oy ndian cuisine or young students. he



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next step /ould be to use the researched differences and apply them on a product range. n

this respect, Starbucks can create a 'hicken eriyaki sand/ich for the customer segment that

en>oys ndian cuisine. he competitive advantages /ould be in this case from having a

product range that addresses a /ider array of tastes and therefore attracting more customers.

4ther sources of competitive advantages can be created by having a more efficient

distribution chain. &s opposed to a small coffee shop such as -ario(s 'offee Shop near

:range @ill Station, Starbucks achieves lo/er costs per kilogram of coffee due to its

advantages of scale and sources its coffee only from responsibly and ethically produced fair

trade coffee. n this /ay, Starbucks has higher profits and its brand is boosted by the

corporate social responsibility.

ask $.#

=istribution is one of the elements of the marketing mix and it refers to the processes and

methods of putting the end product on the market and displaying it. &ccording to otler and

eller, distribution of products and services should be arranged so as to create customer

convenience and availability. 'ustomer convenience means that the customer should spend as

little resources as possible in obtaining, using and disposing of the product or service.

'ustomer availability is achieved by making the product available to as many customers as

possible. n this respect, Starbucks aims to position its coffee shops as close as possible from

its most lucrative customers. his entails for Starbucks the positioning of its coffee shops near

large shopping centers and near business areas and districts. n ondon, Starbucks can mainly

be found on high streets, in shopping malls and near the business areas of ondon "such as

the Suare -ile% "Starbucks, #01#%.

&ccording to otler and eller "#010%, companies can choose from number of distribution

channels direct selling, distributors, /holesalers, retailers and agents. & distribution channel

is a uniue method of transferring the end product or service from the producer to the user. n

Starbucks( case, the company uses a number of distributors and /holesalers for some of the

products that it retails and direct selling for the products that it makes. +or example,

Starbucks might purchase the chocolate bars that it sells from a producer, a distributor or a

/holesaler. 4n the other hand, Starbucks makes and sells its coffees directly, in store.

ask $.$

5rice is another important element of the marketing mix and is the element that mostly

influences the demand for a product or service. he prices of products and services ultimately

determine the end revenues of the company. he price of a product is the total economic

value that a buyer is /illing to part /ith in order to buy, use and dispose of a product. +or a

customer of Starbucks, the price of a coffee includes the monetary value of the coffee "the



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actual money spent to buy the coffee%, the time spent to buy the coffee and the opportunity

costs of buying the coffee.

&ccording to otler and eller "#010%, in generally, the higher the price of a product or

service, the lo/er the demand for the product or service is. @o/ever, there are some goods

such as status goods "such high end cars or >e/elry% /here the inverse relationship does not

hold. 2ith this in mind, as Starbucks coffee is seen as a cool and fashionable place to drink

coffee, the company can afford to charge premium prices /ithout having to /orry much

about declining demand "@arrison et al, #007%. his is the premium pricing strategy. 4ther

pricing strategies include psychological pricing, predatory pricing, value pricing, perceived

value pricing, optional product pricing, cost3plus pricing, promotional pricing and niche

pricing "Best, #01$%. 4ne example of psychological pricing for Starbucks products is the

price of cappuccino F1.. here is a psychological bias that makes individuals perceive

F1. as closer to F1 than F# and companies are using this bias to make the products look

more affordable. 5erceived value pricing is /hen companies take the customers( perceptions

on the value of a product and use them in setting a price. +or example, the variable cost of

producing a cappuccino is normally no more than 17 ! #0 pennies per drink. @o/ever, as

customers are /illing to spend as much as F$ per one drink, it is better for Starbucks to take

advantage of this. +urthermore, the company needs to recover fixed costs as /ell and

therefore the total cost per coffee might be considerably more than 17 pennies.

he price of a product is a very complex decision and is made by senior managers. hey take

into account information from the marketing department "perceived value, competitive

situation, prices of competitors, promotional strategies and macroenvironmental issues%, from

the operational department "cost of production, cost of distribution, end product price,reuirements from the suppliers%, from the financial department "breakeven price, forecasted

revenues and costs, analysis of economic feasibility% and from the shop floor "customer

feedback, complaints, suggestions and empirical evidence%. @o/ever, even having a large

amount of complex information, taking a pricing decision involves some measure of intuition

"otler and eller, #010%.

ask $.C

&ccording to otler and &rmstrong "#01#%, marketing communication includes the means by

/hich firms attempt to inform, persuade and remind customers ! directly or indirectly ! about

the products and services they /ish to sell. -arketing communication tends to increase the

brand euity by shaping a distinct product image and by establishing the image in the

memory of its customers. he marketing communication mix consists of six ma>or categories

of communication methods advertising, sales promotion, events and experiences, public

relations and publicity, direct marketing and personal selling "otler and eller, #010%. 4f all

the promotional mix elements, the company uses advertising in print, events and experiences,

public relations and /ord3of3mouth marketing. he ads of Starbucks are mostly in

ne/spapers that have as main audience /ell3off intellectual people. &s a complement to the



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ads, the company sometimes does public relations activities and sponsors ne/spaper articles.

+urthermore, Starbucks is also involved in many corporate social responsibility events such

as supporting 'hildren(s S4S ;illages in :reece "Starbucks% and this brings the company

considerable brand euity. 4n the other hand, Starbucks has also suffered from negative

publicity from the exposure that the company is using legal loopholes to pay less tax in the

E "BB', #011%.

&ccording to Starbucks "#010%, the vision of the company is to create a Athird place besides

home and /ork, /here people can spend uality time and sociali)e. &ccording to +ellner

"#011% this strategic ob>ective of Starbucks is so successful because it appeals to a large

number of customer segments and therefore can address the needs of many potential

customers. &dditionally, due to the proximity of Starbucks coffee shops to shopping areas,

business districts and educational establishments, the company has created availability and

convenience for its main customer segments. &nother successful marketing strategy of

Starbucks is to develop strong brands and distribute them through ma>or retailers. +or example, the company has been successful at creating and penetrating the instant coffee

market /ith the ;4 brand "Starbucks, #01#%. +inally, as part of its promotional efforts,

Starbucks has been successful at developing relationships /ith its customers via the

Starbucks oyalty 'ard.

ask $.7

n addition to the initial four elements of the marketing mix, marketing managers also take in

to account three additional dimensions the process, the people and the physical evidence"-c:rath, 186%. hey are especially relevant to the companies that activate in the services

sector. Starbucks could be thought of a company that activates in the services sector because

it offers experiences rather than actual products "the products offered have little value in

themselves%.

he process marketing dimension is concerned /ith the procedures, standards and methods of

/ork. he processes that are used at Starbucks are very /ell documented as part of the S4

001#008 uality assurance standard. +or example, the company has a standard procedure

for dealing /ith customer complaints that involves dealing /ith the complaint at different

levels of the company. f an employee or a team at a lo/er level fails to offer a satisfactoryresolution to the customer, only then the issue is escalated to a superior. &nother example of

clearly documented process is the one of making coffees. he employees need to follo/ the

procedure exactly and take into account the standards of the coffee. +or example, the latte

milk needs to be creamy and be /eightier that the cappuccino milk /hich needs to be frothy.

he people of Starbucks include the back office personnel from the account and finance

department, the operations and logistics department, the strategic management department,

the human resources department and senior management and the front office personnel such

as the shop managers, supervisors, customer hosts and baristas. +or the company, the most

essential to the customer experience are the front office personnel because they are the ones



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that come into contact /ith the customers most often. t is in their po/er to offer a great

experience to their customers or a lousy one. &s such, Starbucks ackno/ledges the

importance of customer facing employees and offers them training and development

programs that are aimed to increase the kno/ledge, skills and experience "Starbucks, #01#%.

+urthermore, the company offers them clear career paths and perks for /orking at Starbucks

such as daily allo/ances and bonuses for achieving targets. his improves the morale and the

motivation of the employees.

&s it is essentially a service company, the surrounding physical evidence /ithin store is an

important factor in building the customer experience. his includes elements such as music,

dDcor, chairs and tables, shop floor layout, in3store signs and directions, layout of the display,

product information, uniforms of the employees and other physical elements that may

contribute to the experience of customers. he ma>ority of the aforementioned elements are

documented and standardised at Starbucks. +or example, the uniform at Starbucks is provided

by the company daily, is professionally cleaned and ironed and it is consistent /ith the

corporate design "Starbucks, #010%. he uniform that is used depends on the function of the

employee managers, baristas and customer hosts have different types of uniforms "Starbucks,

#010%.

ask C.1

he product range that is used for the purpose of this exercise is the espresso. he espresso is

simply the regular coffee /ith no added /ater, milk or other elements. he t/o segments of

the market are the university students in an area and the caffeine intolerant people. +ollo/ing

are t/o customised marketing mixes for each of the t/o segments

-arketing mix for the university students

• 5roduct he characteristics of the espresso for university students are the same /ith the

regular espresso it is served for takea/ay in small cups that are Starbucks branded. t comes

in t/o different si)es single and double. t is served /ith no added milk and /ater. 4n

reuest, the barista can add one extra shot of espresso at the cost of a single espresso.

• 5rice he espresso is the cheapest coffee as it reuires the least number of ingredients and is

the uickest coffee to make. he price of a single espresso in 9omania is 6 ei, /hile the

price of a double espresso is 10 ei. his makes the prices affordable for 9omanian students

and offers them value as opposed to other coffee shops /hich charge higher prices.

• 5romotion he espresso does not receive special promotion as it is the basis for all coffees

produced in the coffee shop. &ll customers /ho enter a coffee shop expect it to have espresso

in the product range. @o/ever, a recent promotional campaign of Starbucks promoted the use

of enyan sourced coffee and sho/ed an espresso cup /ithin the advertisement. he

Starbucks coffee is promoted to students via student publications and coffee shops that are

located in campus. &dditionally, from time to time Starbucks offers special promotions to

students via the loyalty card "Starbucks, #010%.



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• 5lacement he placement of the espresso is similar to the placement of other coffees served

by Starbucks. he coffee beans are sourced from its approved list of importers and

distributors and the coffee is produced and sold in3store.

-arketing mix for the caffeine intolerant people

• 5roduct &s the product is for caffeine intolerant customers /ho /ant to experience the

Acoffee drinking ritual /ithout the possibility of drinking caffeine. &s such, the espresso is

made /ith decaffeinated coffee. 4ther/ise, the same product si)ing is available single and

double. he packaging of the decaffeinated coffee is distinctive, /ith a different colour on the

cup than the regular espresso so that it can be distinguished.

• 5rice he price of the decaff espresso should be slightly higher than the regular espresso. &s

the price of a regular espresso in 9omania is 6 lei and of a double espresso is 10 lei, the price

of a decaff espresso should be G lei and the one of a double decaff espresso should be 11 lei.

• 5romotion he promotion of this niche product should be done /ithin specialty

communication channels such as maga)ines that focus on medicine, healthy living maga)ines

and ; sho/s, in3store advertisements and radio advertisements.

• 5lacement the placements of the decaff coffee should be distinctive. t should occupy a

distinct place in the drink list and it should be clear that the coffee does not have any caffeine

content. 4ther/ise, the decaff coffee is to be sold /ithin store, same as the other types of

coffee. he decaff coffee beans are to be sourced from the same importers and distributors as

the regular coffee beans.

ask C.#

-arketing for individual consumers and marketing for businesses reuire t/o very different

marketing strategies as they have distinct characteristics. he consumer market consists of

individual consumers /ith lo/ purchasing po/er and high heterogeneity /hile the business

market consists of organisations that acuire goods and services used in the production of

other goods and services that are sold, rented or supplied to others "Brennan and 'anning,

#010%. &ccording to otler and eller "#006% the follo/ing ma>or differences bet/een

organisational marketing and consumer marketing exist there are fe/er and larger buyers,

there is a closer supplier3customer relationship, professional purchasing, several buyinginfluences, multiple sales calls, derived demand, inelastic demand, fluctuating demand,

geographically concentrated buyers and direct purchasing.

<ext to Starbucks, the company that markets its products mainly to organisational buyers is

-aven +oods. -aven +oods is a ondon based, catering company that offers its services for

business meetings, receptions, business events, fundraisers, buffets and lunches. Some of the

food options include unch Bags, @ot Buffets, Sand/ich unches and Business unches

"+reeindex.co.uk, #01$%. &s opposed to Starbucks, the company markets its products and

services to fe/er and larger buyers. ts client list includes a small number of companies in the

Suare -ile /hich are regular buyers and a large number of companies that are occasional



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buyers. 4n the other hand, Starbucks has a large number of individual buyers /ith smaller

purchasing po/er and /ith lo/er value orders. Starbucks( customers do not have the

purchasing po/er and the ability to negotiate prices and customised delivery conditions. 4n

the other hand, depending on the contract si)e, the customers of -aven +oods do have the

ability to negotiate contractual terms. +or regular customers of -aven +oods, the relationship

bet/een the catering company and its client is normally closer as there are special procedures

and contracts that take a/ay the need to discuss each time contractual terms. +or example,

t/o businesses may use a contract of delivery template for each time the company supplies

food for an event and have regular discounts for large orders. 4n the other hand, it is less

possible to establish business relationships /ith Starbucks( customers as investing too much

money could prove unprofitable. Starbucks invests in creating customer relationships mainly

via its loyalty card system "Starbucks, #010%.

ask C.$

-arketing in an international context is different because the internal and external business

environment differs. +or example, there are considerable differences in the political,

economic, social3cultural, technologic, environmental and legal environments bet/een the

E and 9omania. Because Starbucks has a large international presence and it operates in

more than 60 countries, the organisation needs to customise its marketing strategy based on

the national and regional characteristics. &ccording to otler and eller "#010%, marketing in

an international environment brings the follo/ing issues the company is exposed to more

competition, the company has access to a /ider, broader and more complex set of customers,the company needs to abide by the environmental conditions of the respective geographical

area, the company has to account for language differences, the company needs to be careful at

business etiuette and that international marketing helps spread business risks.

+or example, in 9omania, Starbucks has adapted its marketing mix to the internal and

external environmental conditions. t uses a local importer and a number of local distributors.

@o/ever, the coffee is sourced from the same producers as the Starbucks in the E. he

supply chain is more complex due to the limitations of 9omanian transport "it is more

effective to transport the coffee to logistic center in ransylvania and thereon distribute the

coffee% "Starbucks &nnual 9eport, #008%. he pricing strategy in 9omania is adapted to the purchasing po/er of 9omanians, the economic conditions in 9omania, the competitive scene

and the value of the initial investment. herefore, the prices of Starbucks coffee in 9omania

are lo/er than the euivalent prices in the E. he products are not adapted to the 9omanian

cultural and social characteristics because this /ould negate the /estern cultural appeal

"9omanians tend to be attracted by the /estern life3style and its values%. 5romotional

strategies tend to focus more on price promotions such as coupons, loyalty card offers and

discounts rather than ne/ products or advertisements. n this respect, similarly to +',

Starbucks has used the standardi)ation strategy and not the adaptation strategy.



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'onclusions

he marketing strategy at Starbucks is very complex and reuires a considerable amount of

information and analysis. his is because the company is very large in si)e and any decision

has a large effect on the bottom line of the company. &s it has been successful in creating

brand a/areness and positive brand images for its brand portfolio /ithout investing large

amounts of money in promotion, the company should continue its formula of success and

adapt it to the changing environmental conditions.

9eferences



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bunn n nnnnnnnnn nnnnnnnnn nnnnnnnnn

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