This is a research on whether the buy-one-get-one-free Starbucks campaign raised more profits for Starbucks.

1. T01704225艾 可 B99701112 駱柏蓁 B99701141羅文吟 B99701150李韻坊 B99701156張宇婷

2. Agenda
• Introduction
• Experiment
• Sensitivity
• Further discussion
• International Strategy
• Conclusion

3. Introduction

5. The coffee market
A business with a high profit margin

6. History

7. Starbucks International
• 17,651 stores in more than 60 countries
• International strategy: ‘Blanket’ an area

8. International Taiwan

9. Experiment

10. Promotion Plan
• Time
• Usage
• Precautions

11. Methodology
• Record real sales data at Starbucks for two periods (Tuesday).
1. Offer Promotion Period:12/4 13:10~15:10
2. Normal Period: 12/11 13:10~15:10
• Information collection is focused on the drinks customers
ordered and whether they used the “buy 1-get 1 for free”
offer.
• Analyze the data by calculating and comparing the total
revenue and profit and the average price and order size.

12. Methodology
Research Question
Is the special offer beneficial for Starbucks?

13. Important Assumption
The offer promotion plan has a beneficial
impact on Starbucks revenue

14. Assumptions
• The two hours we recorded are representative.
• The weather and the temperature don’t affect customers buying
behavior.
• We assume those who used “buy 1 get 1 for free” during the offer
period all used the offer promotion plan; no other promotion
plans.

15. Assumptions
• On a normal Tuesday with no offer
promotion, there is still a promotion to
“buy 1 get 1 for free” by using an I-bon
ticket.
• According to the research on the Internet,
the cost for a Starbucks coffee is 30%.

16. Data Analysis
Offer Promotion period Normal Period
Total Revenue Total Cost Total Profit
11,515.00$ 6,276.00$ 5,239.00$
Amount of Drinks Single Cup 17
Promotion Cup 140
Total 157
Total Revenue Total Cost Total Profit
12,385.00$ 4,818.00$ 7,567.00$
Amount of Drinks Single Cup 71
Promotion Cup 56
Total 127

17. Data Analysis
Average Price(revenue): Total Amount of Drinks
Normal Day 97.52 127
PromotionOffer Day 73.34 157
Price Elasticity
ϵ =
−(157/127)/127
(73.34−97.52)/97.52
= 0.95 close to 1

18. Sensitivity

20. Sensitivity
•Compare the top-5 products
•Compare the average size
•Compare the average price

21. Compare top-5 products
The promotion day The normal day
No.1 Caffè Latte (Venti: $135) No.1 Caffè Latte (Venti: $135)
No.2 Toffee Nut Latte (Venti: $155) No.2 Toffee Nut Latte (Venti: $155)
No.3 Green Tea Latte (Venti: $145) No.3 Java Chip (Venti: $165)
& Cranberry White Chocolate Mocha
(Venti: $155)
No.4 Caramal Macchiato (Venti: $155)
No.5 Cranberry White Chocolate Mocha
(Venti: $155)
No.5 Vanilla Caffè Latte (Venti: $150)

22. Compare the average size
The promotion day The normal day
Promotion Single Total i-bon Single Total
Tall
(12oz)
14(cups) 5 19 4 28 32
Grande
(16oz)
82 9 91 42 42 84
Venti
(20oz)
44 3 47 10 2 12
Average
size
16.71(oz) 15.5(oz)

23. Compare the average size
• Price Sensitivity

24. Compare the average size
• Time Sensitivity

25. Compare the average size
Starbucks’ Strategy

26. Compare the average price
The promotion day The normal day
$73.34/cup $97.52/cup

27. Further discussion

28. Cannibalization
Total Total Revenue Total Total Revenue
157 $11,515 127 $12,385
Promotion Nonpromotion

29. Another phenomenon

30. SWOT Analysis
of Promotion
Strength Weakness
Lower quality of service
-Loss comport and good atmosphere
-Long-time waiting
Opportunity Threat
New source of customer Loss of loyal customer
(college student->loyal customer) Loss of the good brand image
The lowest price compare to other
high-quality coffee shop

31. International Strategy

32. International Strategy
• Pricing strategy
• Localization

33. Price Comparison
• Taiwan v.s. US
Taiwan Tall Grande Venti
CaramalMacchiato 125.00$ 140.00$ 155.00$
Cappuccino 105.00$ 120.00$ 135.00$
Caffè Latte 105.00$ 120.00$ 135.00$
VanillaCaffè Latte 120.00$ 135.00$ 150.00$
Caffè Mocha 120.00$ 135.00$ 150.00$
Caffè Americano 85.00$ 100.00$ 115.00$
US Tall Grande Venti
CaramalMacchiato 137.70$ 155.70$ 161.70$
Cappuccino 104.70$ 119.70$ 131.70$
Caffè Latte 104.70$ 119.70$ 131.70$
VanillaCaffè Latte 113.70$ 134.70$ 146.70$
Caffè Mocha 113.70$ 134.70$ 146.70$
Caffè Americano 83.70$ 89.70$ 98.70$
Difference Tall Grande Venti Average
CaramalMacchiato 12.70$ 15.70$ 6.70$ 11.70$
Cappuccino -0.30$ -0.30$ -3.30$ -1.30$
CaffèLatte -0.30$ -0.30$ -3.30$ -1.30$
VanillaCaffèLatte -6.30$ -0.30$ -3.30$ -3.30$
CaffèMocha -6.30$ -0.30$ -3.30$ -3.30$
CaffèAmericano -1.30$ -10.30$ -16.30$ -9.30$

34. Indian example

35. Price Comparison
• Price still depends on:
- Customer preference
- Input cost, ex: rental
- Other considerations

36. Localization

37. Conclusion

38. Conclusion
• Promotional offer didn’t increase profit
• Marketing purpose
• Building loyal customer base
Future:
• From 2013/01/01, second cup half price
• Attempt to increase profit?