TROUBLE BREWS AT STARBUCKS

Jules Boletis

Gera Lenssen

Joost Verbakel

Lotte Huisingh

Ann-Kathrin Beiderwellen

Starbucks Time Line

1971 1982 1987 1992 1971: Starbucks was founded in Seattle by Jerry Baldwin, Gorden Bowker and Sev Siegl. They mainly focused on the product attributes.1982: Howard Schultz joined Starbucks as the marketing director.1987: Howard Schultz took over 6 Starbucks stores and started recreating the Italian coffee bar culture. From this time on Schultz started to focus more on the psychosocial aspects (brand personality). Next to that the growth strategy was diversification until 1992. 1992: Starbucks went public and with a strong balance sheet and double digit growth the company became the darling of Wall Street. A little later Starbucks began its expansion outside North America with a partnership with SAZABY Inc. to open coffeehouses in Japan. From that moment on, due to market penetration Starbucks expended to 43 countries outside the United States within 13 years.

Marketing strategyThe level of association that Starbucks

was going for until 1987 is product attributes.

The vision was to educate consumers about fine coffees in the way a sommelier educates dinner quests about fine wines.

After 1987 Starbucks decided to focus more on the psychosocial aspects (brand personality).

Focus was not on product but on the consumer. Schultz wanted to create the “Third Place”, the place between home and work where people gather, relax and interact with one another.

Growth Strategy AnsoffUntil 1992 the focus of Starbucks was

on diversification. When opening Starbucks the United States was

not used to a market that was not about commodity coffee. So a new market was entered with quality coffee.

After 1992 the focus of Starbucks changed to market penetration.

When going public and later on expending to other countries new markets were penetrated.

Market/product Excisting products

New products

Excisting markets

Market penetration

Product development

New market Market development

Diversification

Means-end chain

Store design

Food

“Third Place”

Enjoyment

End Value

Consequences

Attributes

Italian coffee

bar

Social meeting

placeDrive

through

Relax InteractFair

trade

Home

Convenience

OldNew

High price

Affordable

luxury

Quality

coffee

Means-end chainOld

Starbucks started with quality coffee for at home at high costs. This was worth it and that is why it leads to enjoyment.

New Once extending the product Starbucks introduced

food and a change in store design. This led to convenience and a social meeting place. It now is an enjoying place, a “Third Home”.

Effect on target group and positioning Focus is on a bigger group. Not just focusing on

people that want quality coffee but also positioning the store as a place where people can relax and get connected to others.

Core brand valuesCustomer experience

“Third Place”, a place that feels like home and a convenient location.

Discovering new things People get to know different kinds of

coffee and a different way of enjoying this coffee and all other added values such as food, music etc.

Quality Starbucks offers quality in every single

product, it once started with quality coffee, the mother brand.

Brand extension strategyExtending the brand by not only selling coffee

but also variations on coffee, different snacks and lunches, CDs, books, sponsoring movies etc.

Especially the movie gave Starbucks the opportunity to broaden the use of its in-store Wi-Fi network by running trailers for this movie. Unfortunately the expected return on investments was not achieved.

By doing this they attract more different types of customers and the extension products are more successful.

The result of this is that the mother brand is disappearing to the background. This is not necessarily a bad thing because the all-round customer satisfaction is most important and the core brand Starbucks stays strong.

Discrepency between resultsResults of the next actions taken

were as expected CDs/Music Food Books

Results of the movies were not as expected

Reason for this is that Starbucks used the product attribute strategy again while not paying attention to the consumers (brand personality). This is what they should have done to achieve the expected results.

Main marketing strategic issuesMore competition

There were more competitors because of widening the product range. For example Mc’Donalds.

Economic climate has changed Customers are no longer willing to pay

$3,- for a cup of Starbucks coffee.

Espresso became “Main Stream” The demand for special kinds of coffees

decreased because of the waiting time and too many flavours were available.

Marketing strategic options to solve the issuesStarbucks tried to solve these issues by

Buying faster and better machines Reducing the choice of flavours Reducing store comfort These options were not very efficient because

competitors were still better and Starbucks is losing their offered customer experience.

Other options to solve these issues New store evaluation Go back to product attribute, go back to the roots,

downgrade the customer convenience Cost leadership Target segmentation Operations excellence

SWOT AnalysisStrengths Weaknesses Opportunitie

sThreats

Brand name Competition Target segmentation

Competition

Location Product variation

Operational excellence

Espresso main stream

Partners Price Product specialization

Economical climate

Distribution Marketing

Concluding statementCurrent strengths are not sustainable anymore because of the threats. It is important to solve their weaknesses by focusing on the opportunities that lie ahead of them.

Solving marketing strategyTarget segmentation and

operational excellence Focus on certain customer groups, coffee

as luxurious product. Reducing competition by for example

cutting out the drive-through windows. Reducing the variation of flavours. Making the producing process more

efficient, for example coffee in less than a minute (espresso is ‘‘Main Stream“.

Questions?