Starbucks

Week 3  Starbucks 

Reading: “Trouble brews at Starbucks” case.

Douglas Holt, “Branding in the Age of Social Media,” Harvard Business Review March (2016).

Mark Bonchek and Cara France, “The Best Digital Strategists Don’t Think in Terms of Either/Or,” Harvard Business Review June (2015).

When Howard Schultz launched Starbucks, who was the target market, how was Starbucks positioned and what decisions about product, price, distribution and promotion supported this positioning?

 Starbucks’ target market is those middle-classed commuters with high education who want to gather, relax with a cup of drinks and interact with one another in a ‘Third Place’.

Products: Starbucks first is so enthusiastic about the quality of the production process and aim to provide superior coffee. Then Starbucks develop new products (like nonfat milk, Frappuccino) to fully satisfy different customers’ appeal.

Price: ‘the affordable luxury’. It means that the drinks are expensive but customers are still affordable.

Distribution: How their stores distributed is based on how to best leverage operational infrastructure as teams of professionals. Also Starbucks will choose highly visible location instead of grassroots places and place the stores nearby to increase the awareness.

        Promotion: Artworks base on different cities’ personality; and different markets have at least one big community event for Starbucks’ arrival and then it turns to a local charity.

It’s clear that, in general, the company’s growth initiatives were sound in terms of generating the growth expected by Wall Street. But which of Starbucks’ initiatives, in retrospect, were sound decisions for the brand and which were inconsistent with brand positioning?

        Sound decisions for the brand:

        a/ Value the direct-to-customer serves. Starbucks provide 24-hour training to instill the requisite coffee knowledge in recruits and provide health insurance for customers.

        b/ Bean Stocks. This make staff ‘stock holders’, which can improve employees’ loyalty and can absorb new-oriented advice for stores.

        c/ provide new products, which is really important to fully satisfy customers’ need.

        Inconsistent with brand positioning:

        a/ Accelerate the pace of expansion. It means that Starbucks focus too much on opening new stores but they also ignore their ‘be the Third Place’ goal.  It changed Starbucks’ consumers’ perceptions.  And the customer behavior changed with 80 per cent of orders being consumed outside the store