Marketing presentation on Starbucks

1. TROUBLE BREWS AT
STARBUCKS
Jules Boletis
Gera Lenssen
Joost Verbakel
Lotte Huisingh
Ann-Kathrin Beiderwellen

2. 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

3. Marketing strategy
 The 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.

4. Growth Strategy Ansoff
 Until 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 New products
products
Excisting markets Market penetration Product development
New market Market development Diversification

5. Means-end chain New Old
End Value
“Third Enjoymen
Place” t
Italian Social Convenienc
coffee meeting e
bar place
Consequenc Drive Home
es through
Affordabl High
Relax Interact Fair trade
e luxury price
Food
Store Quality
Attributes design coffee

6. Means-end chain
 Old
 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.

7. Core brand values
 Customer 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.

8. Brand extension strategy
 Extending 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.

9. Discrepency between results
 Results 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.

10. Main marketing strategic
issues
 More 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.

11. Marketing strategic options to solve the
issues
 Starbucks 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

12. SWOT Analysis
Strengths Weaknesses Opportunities Threats
Brand name Competition Target Competition
segmentation
Location Product Operational Espresso main
variation excellence stream
Partners Price Product Economical
specialization climate
Distribution Marketing
Concluding statement
Current 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.

13. Solving marketing strategy
 Target 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“.

14. Questions?