Starbucks Marketing Strategy

Starbucks marketing strategy begins with their mission statement - 'our mission is to inspire and nurture human spirit - one person, one cup and one neighborhood at a time'. With strength in specialty coffee, Starbucks has also been innovating based on consumer requirements.

Key components of their marketing strategy were from innovating on products and services for consumers to ensuring that the store placements are in catchment areas, and ahead of others. Starbucks also ensured that they have brand presence in other retail outlets like grocery stores, airplanes and airports etc. through strategic tie ups - also called 'specialty sales'.

Fig 1: Movement of retail sales of Coffee in US

The above graphical representation of growth in various segments in coffee market clearly shows that specialty, whole bean and RTD (Ready to drink) were the growing segments. Though Starbucks had a major market share in the first two growing segments, RTD was still not a success story in terms of business for the company. The tie up with Pepsi and the placement in grocery outlets were yet to yield results.

STARBUCKS AND THE 7PS OF MARKETING

Starbucks ensured that the 7Ps of marketing were well covered through its overall marketing initiatives.

1. Product

At Starbucks quality was never compromised, and even coffee once opened in a store for use had an expiry of 7 days. The shelf life of the same was around 3 months, even though the actual expiry was 26 weeks because of ingenious packaging. Premium coffee was their forte, and they also invested heavily in getting new varieties (blends) using their own R&D and roasting curves.

2. Pricing

Starbucks pricing strategy was built around 'high value at moderate pricing' at a time when others would have chosen to offer the same at a lower pricing or diluted the quality. This strategy helped Starbucks get customers from all segments - people who are looking for high quality, people who are looking for high quality at moderate pricing and also people who are only looking at moderate pricing. Starbucks uses 'relative pricing' - offering premium products like Frappucino or whole bean coffee sold in grocery stores alongside lower cost items.

3. Promotions

Promotions run by Starbucks attract both new customers (especially in new outlets) and old customers by way of loyalty rewards. Whenever new stores are opened, there are promotions run for the neighborhood to attract customers.

4. Placement - The Third Place

This is one of the very important part of Starbucks marketing strategy - to get the right place before anyone else can get in. They have been able to roll out faster than competition. While Starbucks did not wait for the best location to fall into their lap, it ensured through their team of design workers that it could fit a location in many retail spaces. This was a key differentiator. Their retail outlets were designed to give coffee drinkers and their partners excellent atmosphere - ambience, people, music, mood and sound advice on brewing coffee. Getting co-located near work areas was one of their key focus.

5. Packaging