STARBUCKS
Team 1, Presenter
September 28, 2005
Michele Affalter
Brenda Barrios
Miranda Diggs
Table of Contents
Executive Summary………………………………………………………………………..Page 3
Board of Consultants...... Page 4
SWOT Analysis……………………………………………………………………………Page 9
Works Consulted…………………………………………………………………………Page 10
Statement of the Problem: Should Starbucks continue to expand internationally with coffee houses even though there are already various coffee establishments offering loyal-based products to foreigners?
Background: Starbucks has been offering the United States gourmet coffee since 1971. Their product has brought in loyal U.S. customers with a steady increase in net sales each year, regardless of expansion. Since the company is still growing with U.S. popularity each year there is no reason to use more money to build coffee houses internationally. The increase is most likely due to the large variety of products that Starbucks offers to their customers so they should focus on that aspect of the company. By focusing on U.S. interest, Starbucks can build relationships with their already dedicated customers and expand on the products they would like to see available to them.
Discussion: Free sampling and coupons for beverages and pastries to all our customers is a great way to make each and every Starbucks customer aware of the huge variety of products we have to offer. From cappuccinos, lattes, and frozen coffee to muffins, cakes, and sandwiches, there will be something we can offer everyone coming into our store or shopping with us through the internet. With our internet stores, customers can come into a store near them and sample any product for free before they order it so they know if they even like it. By doing this, customers will gain trust and loyalty with us and our product.
Starbucks would advertise more in high school and college areas to make sure we target each and every age group, not just adults in the work force. Starbucks is not just black coffee, it’s an experience. We want to make sure everyone has a fair representation of the Starbucks Company by keeping our target market very general and open to all ages. Our product is too good to keep it a secret with just one age group.
Recommendations:
· Free sampling/coupons of beverages and pastries to get the customers aware of every product Starbucks has to offer by store and internet.
· Advertise more in high school and college areas to make sure all age groups are targeted.
Starbucks has been offering the United States gourmet coffee since 1971. Their product has brought in loyal U.S. customers with a steady increase in net sales each year, regardless of expansion. Since the company is still growing with U.S. popularity each year there is no reason to use more money to build coffee houses internationally. The increase is most likely due to the large variety of products that Starbucks offers to their customers so they should focus on that aspect of the company. By focusing on U.S. interest, Starbucks can build relationships with their already dedicated customers and expand on the products they would like to see available to them.
Ten million Starbucks coffee lovers’ average over roughly three dollars and sixty cents weekly on coffee consumptions. An astonishing amount of the users visited roughly twice a week. A few years prior, a cup of generic brand of coffee cost forty cents, while Gerald Baldwin, Gordon Bowker and Zer Sigel believed they could charge one dollar and fifty cents for a cup of starbucks coffee. Their retail value was about 18.5 billion which was a one third increase from 1995 until 2005. Majority of their consumers were occasional drinkers of coffee; who value the taste and quality of their product, and in terms allowed for an increasing boom in the total consumption of the product. As sales increased so did store locations, by 2002, there were 3,400 Starbucks Coffee Houses located on many corners and niches. Starbucks has a unique way of drawing attention to their shop. They build stores that pose as a simple home-like atmosphere, with soft music surrounding many people reading, writing and enjoying a relaxing cup of espresso, cappuccino, lattes, frauppucino, and/or café mocha drinks.
While starbucks focused on loyalty of their customer they slowly introduced a variety of coffee types such as roasted selections, allowing a wider selection of products. Then eventually shortly after that, they offered a selection of cold drinks which surprisingly sold more in the warmer months. With anything less than time on their hands, Starbucks realized their success and decided to implement changes for the company as a whole.
Starbucks decided the best way to maintain their customers is to provide incentives for them to come in more often. Providing them with free sampling and coupons would be a great way to reward their loyal customers, some of which visit twice a day. Those who do not come in as often will get to take advantage of their offers, which may cause them to come in daily instead of just occasionally. It will also be a good opportunity to market to our internet customers. Word of mouth will get out and regulars will tell their friends about their great experience. Coupons and free sampling will also be good for new customers, who will sample their many different products, to see what they prefer.
Starbucks will branch out a little more when it comes to their target market. A big part of the target market is adults in the work force. By choosing areas close to corporations, it has been easier for them to target to the adult market. Starbucks will market to younger adults, giving them the chance to experience what many have learned to love. Building close to high schools will help attract the younger market, especially around lunchtime. It will give them more of a selection, when it comes to choosing a place to eat. Starbucks has partnered up with United Airlines and Barnes & Noble Booksellers, which has helped create a large market. In order to continue the growing of sales and profits Starbucks should concentrate on being partners with large universities. This will help in targeting not only adults working the universities but also the young adult market.
Starbucks has always had a positive customer service attitude by responds to their customers the best they can. When customers made suggestions about having a full menu, Starbucks responded immediately. They made menus which included complete lunches along with dinners. They also started an internet site which made it convenient for customers who wanted coffee supplies such as mugs, brewing machines and even coffee beans, but who did not have the time to run to the actual store to get it. Another reason why Starbucks has been so successful is because of their employees. Starbucks provides their employees with one of the best training programs out there. They are taught many aspects of the customer service area, from how to make a perfect cup of coffee, as well as how to deal with their customers. The environment that Starbucks provides makes it feel like a home-like experience for consumers. Their training programs have given Starbucks an exceptionally professional reputation.
Starbucks has competition in the U.S. from Millstone Coffee and Borders’ Café, both gourmet coffee houses that offer select foods and pastries as well. However, despite the competition, Starbucks still dominates the market with a 30 percent market share. This is most likely due to the experience that is created within Starbucks Coffee Houses and the quality of their products.
Starbucks has about 10,000 employees working worldwide to exactly replicate each product for consumers whether it is purchased in Virginia or California. The atmosphere of Starbucks Coffee Houses is anything but normal. The calm music and comfortable sofas and chairs make it easy for Starbucks to be a place between home, school, and/or work to relax or socialize. This is all made possible because of the time and money Starbucks is able to spend focusing on consumers, since they are not a huge global company.
Expanding internationally would not be in the best interest for Starbucks for several reasons. Starbucks began in the U.S. and has expanded successfully here with all of their products. Americans know what to expect when they go into a Starbucks Coffee House, and they receive the same loyal products and service each and every time. If Starbucks were to open scattered stores internationally, the people there would naturally go with a product they are already familiar with not a newly opened company. For example, in Europe, the abundance of coffee houses is already a huge number, but on top of that they don’t even know what a “frauppucino” is. Therefore, having to introduce a new product and a new establishment would use up a huge amount of time and money.
Another factor that would play into international expansion would be losing business from the already dedicated customers. Some consumers are very particular about the size of the businesses that they purchase from. Meaning, if Starbucks were to develop into other countries, their company would lose personal consumer care and just be another large global company without the excellent customer service they have now. Customer service is something that very few franchise businesses can claim, and that is because of all the global expansion.
An additional problem with international expansion is taste. Think about Starbucks and all of the products they have to offer people who drink coffee and tea. All of those beverages are made for American taste. Beverages are just like food; we don’t always care for the same tastes as Indian, Chinese, or Italian people. “Sweet tea” in America is not the same as tea in India, and coffee in Italy is not the same as a “cup of joe” in America. Starbucks would have to completely start from scratch with their products, marketing research, and partnerships possibilities.
By not expanding Starbucks internationally does not mean we do not want expansion at all. We have recommendations and several ideas to bring in profit in other ways. Free sampling would be a great approach to keeping loyal customers coming into the store and bringing new customers to try popular products. Starbucks wants to make their beverages and pastries well-known to the public, so the best way to do that is through sampling. Also, offering coupons and incentives to regular customers would help spread the word of the business, while rewarding current customers and making them want to come back since they have a coupon for the next visit. Another way to help expand without going global would be by advertising more in high school and college areas. This entire generation isn’t normally targeted with coffee or coffee houses, so if Starbucks is the first to target these age groups, they would gain all of those customers. Chances are, new customers would loyal with the company they experienced first.
By building Starbucks Coffee Houses in foreign countries the outcome is questionable, but most likely no profit gain would come from this decision for all the reasons stated above. It is a well discussed and evaluated decision to keep Starbucks in the U.S. and expand on what has taken 30+ years to build on. The marketing techniques and tactics have been designed to build on Starbucks and their profits, but also keeping it in the U.S. Starbucks would benefit from this decision through sales, customer relations, and reputation because of the time and effort they put into satisfying U.S. customers.
SWOT Analysis:
Strengths· 1/3 increase in 2001 from 1995 in coffee sales
· Increase expansion in late 1900’s from fewer than 500 to more than 8,000 locations
· Offer a variety of products in a home like atmosphere / Weaknesses
· Expand into countries who are known for loyal customers and coffee expertise
· Not expanding target market to younger adults.
· Lack of health conscious pastries
Opportunities
· Partnerships with larger universities
· Offer incentives to promote higher education
· Marketing research for potential new markets / Threats
· Expand internationally, and not making any profits on existing similar products
· Competition
· Dieting fads
Work Consulted
· Mattson Melvin R, Marketing Management: Case Analysis by Teams. McGraw-
Hill Company’s, 2005
Presenter Team, 445-02, Fall 05
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