Buyer Behavior: Starbucks

In our society, we can see many different kinds of social setting and one of the most common settings is coffee shop. Indeed, there is at least one coffee shop on each block. According to Coffee Association of Canada, the market size of coffee industry in Canada is more than 6.2 billion dollars. It shows that how big and important this social setting is. Among a lot of coffee shops, Starbucks, Tim Horton, and Second Cup are the biggest and the most popular franchisers in Canada. If the purpose of visiting coffee shop is only for coffee itself, they might have not been grown like these days.

According to a survey conducted in Shanghai shows that 24% of those aged 41-50 years old and between 20 -30 years old there is 18% people often go to sip a coffee. Therefore, The Coffee Club target market will be people working in offices and university students and faculty.

Sales from restaurants—including Starbucks, Dunkin' Donuts, and McDonald's, which carry premium brews—grew at a compound annual rate of 15.2% from 2001 to 2006, as supermarket sales rose only marginally. Activist investor Nelson Peltz is pressuring Kraft to divest slow-growing Maxwell House. But Kraft vows to stick with the $1 billion-a-year brand. Another worry: Only 37% of 18- to 24-year-olds drink coffee, reports the National Coffee Assn., vs. 60% of those 40 to 59 and 74% of folks over 60. (Crown, 2007)

Starbucks has developed a brand image that has revolutionized coffee drinking experience. It has created an ambiance that is designed to attract customers and keep them coming back to Starbucks stores. It offers wide varieties of services such as comfortable seating areas with unique music and free wireless Internet for their customers while sipping their favorite coffee. This distinctiveness sets Starbucks apart from most of its competitors and has allowed the company to successfully grow and profit while charging premium prices for their products.

However, targeting this segment would mean that they should also not provide alcoholic beverages in their cafe due to the young age of the students. This young age may also mean that they are not as interested in gourmet and coffee-related beverages; therefore, Greig and Peck may need to refocus their menu in order to gear it towards this segment (House, 2013).

Canadians drink coffee every day and with 67% of the adult population coffee drinkers, the demand is there if a business can capitalize on it.

By 2003, the number of retail specialty coffee shops, cafes, kiosks, coffee carts, and roasters in the United States reached over 17,000, equating to nearly $9 billion in sales. According to the Specialty Coffee Association of America, 16 percent of adults in the United States drink coffee from one of these specialty outlets daily. (“Organo Gold”, 2008).

Next, Starbucks is in a direct supply channel. Direct supply channel is in which a producer supplies its goods or services directly to consumer, without a middleman (business dictionary). This practice helps Starbucks to keep a good relationship with the customer. In Malaysia, especially in Kuala Lumpur Starbucks can be found in any place where there is high intense flow of people, you can found it in a mall, gas station, airport, university, bus stop and etc. Starbucks primary goal is to locate its store in a highly visible location, to be the ideal place for the individuals who wants to enjoy music or looking for a break in a busy lifestyle. Getting more

Starbucks positions itself as a place college students can hang out, study, write term papers and meet people. A Starbucks appeal to this consumer directly through introducing technology as soon as it comes available, focusing on social networking and actively cultivating a “cool” image. The young adult audience grows 4.6 percent each year (O’ Farrell).” However, the majority of the advertising is catered to Adults around the ages of 25 to 40. Adults seem to prefer a pick me up first thing in the morning on their way to work. Most Starbucks today have a drive thru to make it faster to grab and go.

Starbucks customers are diverse, well educated, young business people looking for a quick and easy way to grab coffee on their way to work. Starbucks values a strong relationship with their customers so they are

The current one on one market research tool is insufficient to gather the relevant market information needed by the company since it takes a lot of time for a single company representative to interview a single consumer to get relevant feedback (Smith, 2013). Other efficient market research is tools be employed to collect more information in a short span of time. These alternative tools include, focus groups, which will aim at determining effective messages that sent to clients. Additionally, use of surveys such as online questionnaires to collect ideas, opinions. and information from consumers may be effective especially for collection of quantitative and qualitative data (Freeland, 2012).

In general the coffeehouse industry in the United States was experiencing an increase in coffee consumption per capita due to the “Starbucks effect”. At this time Starbucks was operating approximately 20,000 stores in the United States and was living a fast expansion strategy worldwide.

The demand for coffee shops is born from the increased number of individuals seeking coffee brewed outside of the home. This creates a larger market for coffee shops. An increased amount of people are starting their mornings off by purchasing breakfast and a cup of coffee away from home (Tuttle 2014), more people are enjoying gourmet coffee (NCA National Coffee Drinking Trends 2015 Infographic), and younger generations are demanding more coffee and coffee drinks from coffee shops (Tuttle 2014, S&D Coffee and Tea inc. 2014, Statista 2015). Coffee shops must compete with at home coffee, work place coffee, and teas for the caffeinated beverage markets (LN 2015). Demand for coffee within different markets varies, and provides competition for coffee shops. Single cup coffee makers, increasingly qualitative instant coffees, and gourmet beans are all sources of competition that could satisfy the demand for coffee. However, coffee shops are becoming more ingrained in social

Exhibit 8 shows customer retention information. We can find from this data, that established customers and new customers are quite different in respect of education, income and attitudes toward Starbucks. According to the exhibit, customers who first visited Starbucks five years ago have higher degree of education and higher income level. Beside that, new Starbucks customers do not see it as a brand of high value, while established customers believe Starbucks to be brand they trust (50%), offering high quality product (51%). Next exhibit suggests, who customers visiting Starbucks stores often, are more satisfied, than customers who buy coffee from the company average four visits per month.

The consumer market is segmented according to age as well as preferences. People working in offices located close to the coffee bar and on sophisticated teenagers. Younger consumers are often willing to spend more on fancy coffee blends and signature drinks; the health-conscious would be willing to pay extra for “healthier” substitutes such as organic products; My market research shows that these are the customer groups that are most likely to buy coffee products. Since coffee consumption is universal across different income categories and mostly depends on the level of higher education.