Starbucks Coffee Product Case Study

Starbucks Product.(Question 1 a,b,c)

When you think of Starbucks and what their product is, coffee always is the first thing that comes to mind. Starbuck's core product would ultimately be coffee or coffee beans. There are also many "auxiliary features" and benefits that are offered to consumers at a Starbucks coffeehouse. These features include cold blended drinks, non coffee drinks such as smoothies and frappaccino, pastries, coffee grinders, coffee brewers, and espresso machines. Music that is played overhead in the store is sold on CD at the register. Other auxiliary features include the atmosphere of the store such as the comfortable chairs, relaxing atmosphere, free WI-FI for customers, and the overall experience of being a part of the coffee culture that has become so popular in recent times.

The "unique selling proposition" of Starbucks is focused on quality and creating an experience for the customer. The assumption that proved successful was that a customer would be willing to pay more money for a premium cup of coffee if it were served in a special atmosphere. This atmosphere was equipped with pleasing aromas, comfortable chairs, music, and similar coffee lovers. The experience created for the customer by Starbucks was unlike going to any restaurant for a cup of coffee and it had become a social phenomenon.

Up until 2008, this experience was popular, and the opening of a Starbucks coffee house in a particular area was exciting and always generated interest. Now, Starbucks coffeehouses seemed to be everywhere. The experience in the eyes of the customer no longer seemed as unique or special. Growth, which had proved to be successful for the company may have also caused the excitement to dwindle among consumers due to the oversaturation. Other new features such as drive-thru windows and the offering of other food items similar to competitors may have contributed to the decline in popularity. At this time the experience and the coffee itself began to be viewed as an everyday commodity.

The Competition (Question 2 a,b).

The case states that Starbucks stock prices declined dramatically in early 2008 due to oversaturation and other factors, one of them being competition from other restaurants offering a similar product. McDonalds is one of Starbucks direct competitors and now offers gourmet coffee. Although the two businesses may seem very different, recently McDonalds has entered the game by focusing on the quality of their coffee. At present McDonalds is offering what they call the McCafe menu, featuring coffee drinks such as mochas and frappuccinos. They are selling these specialty drinks at a lower price than competitor Starbucks and may have many advantages over them for generating coffee sales. One major advantage of course is the lower price for a similar beverage. Even if the quality