Marketing Plan: Starbucks
Marketing Plan: Starbucks Revitalizing Teas Abstract A marketing plan for Starbucks Coffee Company for the introduction of a new line of tea to the beverage menu includes a multi faceted approach. Beginning with an organizational overview, and following with the new product description, SWOTT analysis, marketing research, segmentation, differentiation and positioning, product life cycle, the marketing mix, budget, and finally, control mechanisms, the marketing plan comes to life.
Organizational Overview Founded in 1971, Starbucks Coffee Company’s first location was in Seattle’s Pike Place Market and after 35 years, Starbucks has grown to over 11,500 outlets worldwide serving approximately 40 million customers every week (Starbucks. com). Starbuck’s mission statement is “to establish Starbucks as the Premier purveyor of the finest coffee in the world while maintaining our uncompromising principles as we grow. (Starbucks, 2005) Currently, the marketing strategy involves positioning a local Starbucks outlet as a “third place” (besides home and work) to spend time in, and the stores are designed to make this easy and comfortable (Wikipedia, 2006). It is not uncommon to see customers in stores for hours at a time. This strategy has proven very successful, but to stay ahead of the competition the Company plans to selectively pursue other opportunities to leverage the Starbucks brand through the introduction of new products. What is Starbucks?
This may seem like a funny question, but the truth is, Starbuck’s is a well-known name. Major cities across the North America have at least one Starbuck’s location. This organization understands the importance of marketing. Starbucks created a product that has in turn delivered more and caused more products and services to be created. The rapid growth and expansion of the company can be heavily attributed to organization’s use of the marketing mix. Kotler and Keller in Marketing Management’s twelfth edition have also documented the success of the firm and the firm’s effective use of marketing.
The organization strives to continue marketing to all consumers by introducing products that raise consumer interest from all types of people. Starbuck’s does not use a major commercial advertising campaign to drive its sales. Instead Starbuck’s can be seen everywhere. The Starbuck’s cup is the most effective marketing and advertising tool the company has to this day. One can find a Starbuck’s cup in movies and in television series. Additionally, sales are driven because someone in most companies across America is tasked with making the classic “Starbuck’s stop” in the morning.
Each year the company has seen phenomenal gains. Last year alone net revenues increased 20 percent to $6. 4 billion. The company feels that by staying aggressive it can keep growing successfully every year. New Product Description To keep growing the company also needs new product lines, and one that is being considered is a new custom line of hot and cold beverages for the public. Starbucks’ customers have been asking for specialized teas and now is the time to start the research and preliminary marketing to see if a new market really does exist.
The tea line is not to take away from the company’s coffee sales but rather to increase its’ customer counts and sales numbers. A new tea line may encourage those who normally would not visit Starbucks stores to now have a reason to come in. Before just ‘throwing’ a new product to the public, Starbucks wants to make sure it will indeed be a profitable investment. Starbucks will need to do extensive research into the product line and also its customer base. Starbucks is the most familiar name in the world when it comes to coffee, can it continue their success into the world of teas?
The research will be a good indicator of what Starbucks can expect. Starbucks prides itself on having a variety of beverages available to the public, and services customers’ needs culturally and globally. This is why Starbucks has decided to come out with a new line of iced or just chilled flavored tea for our customers. These teas are multi-flavored teas and can easily be purchased in retail stores or at any of our Starbucks stores globally. These teas consist of five main flavors, and can be added if successful or as time goes by. The flavors are as follows: •Twisted Lime Tea •Rockin’ Raspberry Tea Lemon Surprise Tea •Cool Blueberry Tea •Invigorating Green Tea The name that has been chosen as a marketable idea is “Starbucks Revitalizing Teas”. In addition to brewed coffee and espresso beverages, Starbucks shops also serve hot or cold Green Tea and Tazo beverages. These new beverages of different flavored teas should add more value to the company and fulfill the consumers’ need for a variety of flavored teas. Today, there are many critics of Starbuck’s and a lot of people are saying the globe needs to reduce caffeine consumption or that most budgets are not working because of addictions to Starbuck’s.
The firm now has the opportunity to offer many other drinks that are healthy and tasty without getting away from what made the organization great. First it was the coffee, CD’s, and hot spots – now it is time for a new product that will incorporate another favorite drink. Tea – Flavored Tea! The organization has the ability to continue marketing through it existent strategies, while adding new strategies that will strengthen the brand and increase sales. SWOTT Analysis A SWOTT, (Strengths, Weaknesses, Opportunities, Threats, and Trends) analysis on the new tea line will also be conducted.
For our research a SWOTT analysis will be necessary to evaluate strengths to be utilized and what kind of obstacles may be in the way. Strengths •Starbucks Corporation is a very profitable organization, generating more the $6 billion dollars in 2005. •The new line of teas will capitalize on a globally recognized name. •The teas can be served in store or sold retail, similar to the coffee drinks Weaknesses •The new line of teas may not sell well in colder climate stores. •The teas will be higher priced than other flavored teas sold retail. •The five flavors may not appeal to all consumers
Opportunities •This new line of teas will allow Starbucks one more way to produce profits. •This new line of teas will bring in new consumers, those who don’t usually frequent Starbucks. •This line of teas will allow Starbucks to expand their retail drink selection Threats •The competitive market for tea drinks sold either in a store or retail location. •Competitors that market flavored teas (e. g. Pepsi Cola, Coke) with a larger distribution market. •Who knows if the market for flavored teas will continue to stay in favor with consumers? Trends Obviously, the trend these days is leaning toward upscale coffee houses. •Starbucks is synonymous with hot and cold beverages; the natural course to take is to add a specialized line of tea. Marketing Research To develop the marketing strategy Starbucks needs a thorough consumer analysis. What are the demographics of the Starbucks customer? This could be determined by primary research of internal data from our customer database. Who is their target consumer? Secondary research into tea drinking consumers would be needed to define the target market.
What are the psychographics? What stimulates the desire for iced tea? Starbucks will need human behavior research that also includes the geographical considerations of its customers. Since iced tea is consumed much more in the summertime and in warmer climates, Starbucks will need to know what kind impact its marketing efforts will have and what strategies they want to pursue. Marketing research includes “defining the problem and research objectives, developing the research plan, implementing the research plan, and interpreting and reporting the findings. (Armstrong, G and Kotler, P, 2005) Marketing research for the new iced tea product line at Starbucks will require information about iced tea drinking consumers. This will require descriptive research, to understand things like the market potential for the iced tea line, demographics, and attitudes of consumers who buy ice tea. Most of this information can be gathered from secondary sources like Simmons Market Research Bureau (www. smrb. com), LEXIS-NEXIS (www. lexis-nexis. com), and/ or CompuServe (www. ompuserve. com). These databases provide information on consumer patterns, marketing publications, trends, promotional techniques, consumer demographics and research reports. The marketing research needs information on the demographic, economic, and lifestyle of current iced tea consumers, their usage patterns, packaging preferences, and forecasts of the impact the new line of products will have on store sales. In addition to the secondary sources, primary data from the company will provide research information.
Other considerations for the marketing research include the geographical area to be introduced to our new product. Iced tea is a summertime and warm weather beverage, and unlike coffee, iced tea is expected to be more seasonal with regard to consumption habits. Survey research at different Starbucks locations will provide the descriptive information needed to explore the Starbucks consumer’s attitudes and preferences toward the new product line. With this information in hand the interpretation and reporting of findings can be done. Segmentation
Market segmentation is the segmentation of markets into homogenous groups of customers, each of them reacting differently to promotion, communication, pricing and other variables of the marketing mix. Market segments should be formed in way that differences between buyers within each segment are as small as possible. Thus, every segment can be addressed with an individually targeted marketing mix (Decision Analysis, Inc. , 2006). At Starbucks, the concern is with segmentation criteria and being able to target a segment of the market, which will lead to greater sales of a new line of teas.
This is going to be the concentration of a marketing effort to dominate a market niche. For Starbucks, market segmentation is the process of identifying and targeting groups of individuals who are similar to one another. Markets can be segmented in many different ways: by product or service needs, by sensitivity to price, by geographic area, by demographic segment, or by psychographics and lifestyles. Successful segmentation will depend upon understanding what consumers want, how different locations of consumers differ from one another, and how these different types of consumers decide among products.
In Starbuck’s case these analytic techniques will be used to organize customers into groups with these similar attitudes, needs, and desires, (Starbucks, 2006). Criteria There are a huge number of variables that could be used for market segmentation. They comprise easy to determine demographic factors as well as variables on user behavior or customer preferences. The following table shows the most important traditional variables for segmentation that will be used in the study: Consumer Markets Geographic: •Land or region •Rural or metropolitan area Demographic: Age, sex, marital status •Income, occupation, education •Religion, nationality, ethnical group Psychographic: •Social status •Lifestyle-type Behavioral: •Intensity of product use •Brand loyalty •User behaviors Since customer orientation of organizations is growing, segmentation as the basis for establishing customer relationships and customer loyalty gains importance. In this context, the elements of the loyalty ladder model could be used as segmentation variables: Marketers have to choose those variables that are relevant for segmenting the market for a particular product.
The basic rule is to focus on a limited number of important variables. To segment the market into too many small, slightly distinct segments would require splitting up the marketing budget into too many ineffective chunks. As already stated, segmentation is the basis for developing targeted and effective marketing plans. Furthermore, analysis of market segments enables decisions about intensity of marketing activities in particular segments. A segment-orientated marketing approach generally offers a range of advantages for both, businesses and customers.
Organizational Buyers and Consumers When purchasing products organizational customers are particularly concerned about quality, service, and price. To achieve an exact level of quality, organizations often buy products on the basis of a set of expressed characteristics, called specifications. Because services have such a direct influence on a firm’s costs, sales, and profits, matters as market information, on-time delivery, and availability of parts are crucial to an organizational buyer. Although organizational customers do not depend solely n price to decide which products to buy, price is of prime concern because it directly influences profitability. Organizational buyers use several purchasing methods, including description, inspection, sampling, and negotiation (Perreault & McCarthy, 2004). Consumers are mainly concerned with price and the value that the product will bring to them. In terms of the new line of teas for Starbucks there are numerous buyers. Starbucks should focus on organizations that already currently carry their coffee drinks. These organizations would be grocery stores (e. . Ralph’s), gas stations (e. g. Mobil) and club stores (e. g. Costco). In terms of consumers, Starbucks can focus on their regular consumers and draw more health conscious consumers with this line of teas. Starbucks can focus on commuters, stay- at-home mothers, college aged children and elderly. Differentiation and Positioning “The aim of marketing is to affect how customers think about and behave toward the organization and its marketing offers. To affect the what, when, and how of buying behavior, marketers must first understand the why. (Armstrong, G, and Kotler, P, 2005) One consumer behavior expert notes that 95% of the thought, emotion and learning that drive buying decisions occur in the unconscious mind. Some of these factors are cultural, social, personal, and psychological. Armstrong and Kotler continue, “Culture is the most basic cause of a person’s wants and behavior. Every group or society has a culture, and cultural influences on buying behavior may vary greatly from country to country. ” Of particular note the recent cultural shifts toward health and fitness may impact the way Starbucks will market its new tea.
Culture can be broken down into subcultures like ethnic groups and social class, which can also impact behavior. Social factors like membership groups directly influence behavior and reference groups by way of comparison indirectly impact buying decisions. “Family members have a strong influence buyer behavior” as well as a person’s role and status in a family, club or organization. Personal factors such as age, life-cycle stage, occupation, economic situation, lifestyle, personality and self-concept are also factors that influence buying behavior.
Four major psychological factors like motivation, perception, learning, beliefs and attitudes, further influence buying choices. Motivation is driven sequentially by different needs as priority needs are met. For example, a person is motivated to satisfy hunger and thirst as basic needs. But as these needs are met a person becomes motivated to meet safety, social and other needs. Perception is the process by which people select, organize, and interpret information to form a meaningful picture of the world. These perceptions influence consumer purchase decisions.
Learning impacts buyers’ behavior based on prior experience with products or brands. This leads to beliefs and attitudes toward products and influence purchase decisions. These factors all combine to impact consumer behavior. The decision process is made up of five stages starting with need recognition, and progressing through an information search, an evaluation of alternatives, lead to a purchase decision, which is followed by post purchase behavior. Marketers are well advised to focus on this entire buying process, as opposed to just the purchase decision.
When the purchase decision involves a new product a process defined as adoption applies. This starts with making the consumer aware of the new product. Leading to interest in the product, followed by an evaluation of whether the product makes sense for the purchaser. If the purchase is made the next step is the trial. If the product is accepted it becomes adopted and the consumer will make full and regular use of the new product. The rate of adoption of new products is influenced by five characteristics: relative advantage, compatibility, complexity, divisibility, and communicability.
Other influencers can be initial and ongoing costs, risk and uncertainty, and social approval. “The new-product marketer has to research all these factors when developing the new product and its marketing. ” (Armstrong and Kotler, 2005) Product Life Cycle The Product Life Cycle (PLC) is based upon the biological life cycle. For example, a seed is planted (introduction), it begins to sprout (growth), t shoots out leaves and puts down roots as it becomes an adult (maturity), after a long period as an adult the plant begins to shrink and die out (decline).
In theory it’s the same for our new tea line. After our period of marketing research and development, the tea line will be introduced or launched into the market. It then gains more and more customers as it grows; eventually the market will stabilize and our tea line becomes mature; then after a period of time the product may be overtaken by the development and the introduction of other competitors brands, it goes into decline and maybe even is withdrawn. However, we don’t anticipate our competition to take away tea drinkers, when in fact we are the ones who will be taking customers away.
Strategies for the Product Life Cycle In our case the need for immediate profit is not a pressure. The strength of our business is coffee and we can afford the time to market and carry our new teas longer while introducing them into our market place. The tea line is to be promoted in order to create consumer awareness that Starbucks now carries a terrific line of teas. There are competitors around every corner, but we feel that a classy advertising campaign will bring in new customer to sample these teas. Growth
Advertising spending is going to be high to begin with, which will focus upon building brand name recognition. The bell curve for this can be anticipated as a slow curve upward only because tea is available in all stores and we are anticipating slow sales in the beginning. What we offer though is an atmosphere that other tea and coffee houses don’t offer at this time. Maturity Coffee is our core business; we know that sales will take time to mature. A slow growth upward then gaining a leveling off period in year three of the program is what we anticipate.
Coffee is our main emphasis and the tea line again is geared at bringing in the friend or customer that normally wouldn’t come in to our stores. Decline Tea will never be the strong seller that coffee is for us. Overall, if the new tea line brings in 3 cents for every dollar we make, we’ll consider this a success. Our advertising dollars are 5 cents per dollar for the tea line, but customer count more than makes up for slower sales and the two-cent difference. Problems with Product Life Cycle In our past though, very few products follow such a prescriptive cycle.
The length of each stage varies enormously. The decisions of marketers can change the stage, for example from maturity to decline by price-cutting. This new tea line may never go through each stage. It could go from introduction to decline and it is not always easy to tell which stage the product is in. Remember that PLC is another marketing tool. Marketing Mix Product Starbuck’s prides itself on putting out only the finest products to sustain its market share in today’s consumer on-the-go quick serve coffee and tea beverage industry.
With the five flavors that introduced in the product line, the following attributes are essential to successful launch of this product line of flavored teas. •The company will be able to capitalize on the existing strength of the Starbuck name in today’s marketplace. •Starbucks commitment to only produce quality products to its consumers. •These exciting flavors will entice customers to expand their drink selection when visiting a Starbucks. •The company will be able to take advantage of their established distribution channels. The company is in a strong financial position to make this a successful campaign. •These new five flavored teas are not only recognized in the United States, but globally as well. The above attributes lend themselves to a successful launch of this new line for Starbucks. Discover the entire new tea selection at Starbucks stores nationwide and hopefully in retail stores as well. Teas have been a part of Starbucks lineup since 1999, and the new products aim to tantalize the consumer with a new experience with five more flavors of freshly brewed teas. Price
Starbucks has many things to consider when deciding on a price for their new iced tea line. There are several influences that will affect the final price of the product line. Starbucks will have to consider several factors pertaining specifically to the actual market. Some things that will influence the price in regard to the market are competition (and their prices), consumer anticipation, the goal of Starbucks and their brand, and the flex in demand for their product. Other factors that influence Starbucks include the cost of manufacturing, selling, advertising, and profit goals (Williams, 2005).
Currently Starbucks finds their prices moving with the price Starbucks pays for its coffee, in addition to their brand name; they have been successful at marketing and selling their coffee drinks above the competitions’ prices, and will continue doing so for as long as possible. Starbucks will sell the iced tea line in bottles in retail stores, next to their coffee drinks, even in the coolers. The pricing of the coffee drinks range from $1. 79 to $3. 79. The pricing strategy for the iced tea blends will range from $1. 39 to $1. 79 for consumers, and the price could be higher depending on the location.
For example, in resort or vacation areas, the iced tea blends could be sold at prices higher than $1. 79. The pricing strategy is due in part to the competition, and the advertising costs for the product just being introduced into the market. The iced tea blends will also be served fresh at the counter of almost every Starbucks outlet. The price for the iced tea blends at the counter will be slightly higher than the iced tea in the bottles within retail stores. The presentation of the iced tea at the counter increases the price, utilizing the same concept as Starbucks’ bottled Frappuccinos. The price will begin at $2. 5 at the counter. Starbucks has the distinct opportunity of being able to hold the largest majority of the market when it comes to retail coffee and variety drinks. The Starbucks brand comes with a level of admiration from others. This will allow the product to be introduced with the appropriate pricing that will maximize profits and build interests. Starbucks will consciously set prices with defined objectives to increase interest from the consumer in order to gain a repetitive customer base for the new line of teas. The feeling of the organization as a whole is one that has set all Starbucks products a part from the competition.
Recently, there has been an emergence of new coffeehouses, but the firm feels that continuing to sell a high-quality product and fair premium price will continue to increase profits. The pricing strategy will not seek to meet any status quo objectives, because the new line of teas is just that…a new line of teas. This is a new product that will be solely introduced by Starbucks. There is no need to meet or beat competitors. The pricing strategy will reflect more of a one-price policy that is focused and properly timed. The teas will need an introductory price and regular price.
Use these two pricing strategies will both gain customer interest and maximize profits. Both pricing policies will far exceed the transportation and other built-in cost to get the teas to the customer. Introductory price dealing will attract customers. This attraction will help the organization to monitor how popular the drinks will be and to get customers interested in another product line at Starbucks. One set introductory price that does not include coupon, and special pricing for different customers initially will gain more confidence from a broader base.
Skimming price policy will be the final destination for the product line. As with all Starbucks products this pricing policy has proven to be effective and this product line will not be an exception to the rule. The introductory price will run for an indefinite period of time in which the firm feels total interest has been gained, which may be a period of one year leading to the next Summer when the final price will be introduced. Place Starbucks specific plan of distribution for their new line of iced teas will focus on retail distribution through their currently established distributors.
Starbucks will also sell the new iced teas in their outlets in bottled form and personalized fresh brewed form at the counter, which could draw even more customers into outlets. Starbucks will be using brighter colors in the packaging of their new iced tea line while promoting a refreshing and relaxing experience. Starbucks has been very successful in their distribution of Starbucks coffee items in grocery stores, even opening outlets within stores, such as Safeway. Their decision to focus on maintaining and using existing vendors is based upon the growth of current sales, and the anticipation of future sales predictions (Kim, 1998).
Starbucks has an agreement with Sysco Corporation to distribute products to “non-contracted customers (2003). ” The contract between Sysco and Starbucks does not expire until 2008; therefore Starbucks will be able to distribute their new line of iced teas in the same way as their other products, in the same shelf area as current coffee drinks. Within the Starbucks outlets, they will also be incorporating the help of their employees to promote the new product by making a suggestion of the new iced tea to all customers, to make the product stand out and promoted.
The goal is to introduce the iced tea line in bottled form in grocery stores with current distributors very quickly after it has been introduced at the counter within the outlets, if not the same time. Starbucks may consider introducing their iced tea line into international markets, but will monitor the success rate of the line prior. One of our strategies will be to service the existing customers; however, retailing is not out of the question. It is easier and less expensive to promote our new product line of teas to our existing customers who are already accustomed to going to Starbucks.
In fact, it is estimated that acquiring a new customer costs five to eight times as much as keeping an existing one. Our goal is to keep building relationships between our existing customers and make new ones as well. The key here is retaining the current customers, make them try our new product line, and expand demand into the retail stores as well. Promotion To achieve the stated objective Starbucks plans to publish brochures introducing the new flavor of teas along with all drinks offered. The brochures will be left on the tables for customers to read.
There will also be a brochure display right up front where the customer orders their coffee drinks. While they wait they can view the brochure or take it with them. Starbucks would not be adding too much additional costs in their advertising budget, they will just add on an additional informational tidbit in the publishing of the new flavors of teas information in the brochures and posters that they print up to promote their stores. Personal Selling At Starbucks there would be the greeter at the counter when taking the customers order.
Greeting them, asking what they would like to drink and stating “by the way, are you aware of our new flavors of Tazo teas? ” The greeter could then hand them a brochure and then get their order. By having the consumer walk out of the store with a brochure or having read the brochure while in the store will cause a chain reaction of the consumer telling another consumer of what they recently found out about the new flavors being offered. By starting the personal selling while a current customer visits Starbucks and the consumer leaves with new beneficial knowledge they pass it on to others and this would create a new customer.
Sales Promotion Discount sales coupons in local newspapers with the slogan “A cup of Tazo tea will Keep You on Your Feet”. These coupons would be worth a 10% discount on a cup of coffee or specialty drink. This would bring new customers in to try Starbucks. Everyone likes to save money on merchandise or food items. Direct Communication Starbucks has a website; www. starbucks. com, where they can promote a piece to highlight the new flavors of Tazo teas, much like they do now with the coffee of the month (www. starbucks. com).
Starbucks promotes their stores within the community with the feel of part of the neighborhood that they establish in a new store and the fact they have the best cup of coffee around. The new flavors of Tazo teas are just additional sales pitch to add to their information to fit in with the communities where they have established store locations. Advertising Advertising, personal (face-to-face) or direct selling, sales promotion, and relationship building are the primary methods companies use to promote their products (Armstrong, G, and Kotler, P, 2005).
At Starbucks these methods will all be utilized in promoting the new iced tea line of products. Tactics Advertising is often used to make consumers aware of a product’s special low price or its benefits. But, at Starbucks an even more important function of advertising is to create an image that consumers associate with our product like existing product lines or in retail stores, known as the brand image (Microsoft Encarta 2006). The brand image goes far beyond the functional characteristics of the product. For example, a Cappuccino drink may have a particular taste that is one of its benefits.
But when consumers think of it, they not only think of its taste, but they may also associate it with high energy, extreme action, unconventional behavior, and youth. All those meanings have been added to our new line of Teas by means of advertising along with the existing beverages at Starbucks. Consumers frequently buy the product not only for its functional characteristics but also because they want to be identified with the image associated with the brand. By adding meaning to a product, like our five sensational new Teas, advertising also adds value. Budget
One of the most difficult financial decisions facing businesses is how much to spend on marketing and promotion. Since Starbucks does not do much traditional advertising, it is quite difficult to determine the necessary amounts at this time to spend on marketing the new flavors of teas. For the new flavors of teas, the marketing budget is primarily comprised of marketing communications and marketing research. Marketing Communications activities include: •Brochures, Newspaper Advertisements •Public relations, charitable contributions Marketing Research expenditures include: •Market size Market opportunity studies Control Mechanisms As Starbucks implements this marketing plan feedback and control mechanisms need to be in place. The need to track results and monitor new developments is constant. The marketplace will change; and when it does the company will need to review and revise the marketing plan, including programs, strategies and objectives. After the introductory period, the company will perform an evaluation of the performance of the new line of teas. This evaluation will include the profit margin, market share, promotional effectiveness, and market penetration of the Revitalizing Teas.
The actual performance of the tea to the objectives defined will be considered as indicators to be used to define areas of success and opportunity. Conclusion In order to stay ahead of the competition, a business needs to either keep refining itself so that its products are better and or expand into new markets. Starbucks is the world’s most familiar name when it comes to coffee and they feel that they became the greatest name because they roast and brew the best coffee available. After careful research Starbucks decided to increase its customer base by adding a new product line.
The research showed that a new line of teas will bring more customers into Starbucks stores throughout the world and more customers will allow them to keep growing and expanding. At this time Starbucks feels that the sky’s the limit. By introducing this specialized tea line Starbucks will find out how much it will grow and what they can expect in the future with new products. Blindingly offering a product to the public would be foolishness. Researching the market and customers is the first step in introducing a new product to the public.