Thesis: While Starbucks has been an industry leader in the specialty coffee market, rapid overexpansion and current economic conditions have caused it to lose its market dominance. Is the company strong enough to recover?
(3a): What trade-offs has Starbucks made? What different activity choices has it made from its rivals?
Evolving customer base: Starbucks’ newer customers tended to be younger, less well-educated, and in a lower income bracket than Starbucks’ more established customers.
Starbucks has been a brand that consumers have been able to identify with for quiet some time. By doing so, Starbucks would be able to ensure that their clientele is satisfied and forget about the barriers in which the company has had to face but still manage to continuously expand in the marketplace. With that being said, all customers are valuable, but those customers that meet specific criteria within an organization; such as, placing large orders and or buying products that are at a high profit margin, these are the customers that are not only profitable but are also the ones that are the highly satisfied with the product and its brand recognition. If
When Howard Schultz launched Starbucks, its main targets were the competitors and the customers. Schultz’s brand aimed at gaining dominance in the coffee industry in addition creating a Italian coffee shop feel in the United States (Buchanan & Simmons, 2009). The strategy of Starbucks was based on new products, listening to customers wants and ensure future expansion (Buchanan & Simmons, 2009). In creating convenience for customers, Starbucks created stores almost on top of eachother. They hinged on the idea that, they did not want to lose out on a sale if a line was too long. This action, of placing stores in heavy populated areas, basing need on projected growth of an area caused some decline in sales during economic trouble with the economy. The 2007 recession, failure of subprime mortgages, increased competition from McDonald 's McCafe brand, and Dunkin Doughnuts all led to a decline in sales for Starbucks in the fourth quarter of 2007 (Buchanan & Simmons, 2009). To attempt to regain market share and recover after the
ticket size) X (4.4 customer life years)] $921.78. Calculating sales amount for the highly satisfied customer using the same method shows an amount of [(7.2 visits/mo) X (12 months) X ($4.42 avg. ticket size) X (8.3 customer life years)] $3,169.67. The sales figure for the highly satisfied customer is nearly three and a half times as much as the satisfied customer. This is why it is very important for Starbucks to figure out how to provide more customer satisfaction. The company needs to do research to find out if quality of service has actually declined. There is always the societal perception that a large mega brand is incapable of delivering customer intimacy. This perception is not necessarily a foregone conclusion. It’s just a matter of Starbucks collecting accurate information regarding both quality and quantity of its customer service. The company needs to take a look at itself and determine if its customer service strategy had changed from 1992 to 2002. This is an era indicative of the massive growth. Starbucks needs to answer the question, “Did we lose our focus on customer service quality by concentrating too much on opening more stores?”.
Starbucks’ lead in the specialty coffee industry exemplifies the result of deftly executing a well-planned business strategy. Moreover, Starbucks is well positioned for what is expected to be a continuing rise in the popularity of specialty coffee products. The question before Starbucks’ leadership, however, is what avenues will lead to Starbucks’ goal of remaining true to its core, the highest quality coffee products while providing a “total coffee experience” for its customers?
As a well-established coffee retailer and over 35 years of success, Starbucks is at the maturity stage in the product life cycle. It is in this stage that Starbucks needs to shift gears and focus on marketing program modifications by increasing the number of customers and customer visits (Kotler, 2009, pg. 185). While improving service will attract first-time customers and retain current ones, further marketing modifications will need to be made if it wants to continue to grow. More advertising, distribution, sales promotions, and personal selling are a few of the ways to modify the marketing program.
Customers: The demographics of a usual Starbucks consumer have altered extremely in the new years. In the Starbucks case documents innovative consumers of Starbucks are younger, a smaller amount knowledgeable, low pay, less frequent visited to the coffeehouse and had very dissimilar insights. The general outlook of Starbucks is very short on 25% by novel consumers while the consistent consumers stood in 44%.Although numerous features subjective customer satisfaction, generally service and quickness of service were recognized as the greatest significant; a rapid glimpse at Starbucks 's fresh customer satisfaction reveals that consumers did in
Starbucks is a successful premium coffee retailer. Its target market sets as well-educated, white- color patrons between the ages of 25 and 44. There are three components of the brand, live coffee, service, and atmosphere. However, its brand image is losing while they focus on retail expansion.
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.
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.
Their marketing research shed light on the fact that their focus had shifted from the consumer towards store growth and product expansion. The research also highlighted the fact that they were lacking in customer service. Through these studies, Starbucks was able to identify what their customers wanted in terms of satisfaction. Consumers wanted Starbucks to make improvements to their service and also start offering better prices and incentive programs.
The CEO (Chief Executive Officer), Howard Schultz pointed that the main reason from the decline of “Starbucks Experience” was that the number of Starbucks shops increased sharply from only 1,000 to 13,000 within ten years. Other people considered their brand has been commercialized, and the customers hadn’t had enough enthusiasms to appreciate every moment of their coffee any longer. He suggested that Starbucks should re-find its origin. Nevertheless, his advice apparently was opposite to the