Starbucks Coffee Company: An Integrated Marketing Communications Plan April 2006

Prepared for: Starbucks Coffee Company W. H. Evans Prepared by: Sophie van der Vecht Neni Pogarcic Hidde van der Dussen Tim Ensing Dan Mackinnon Lucia Suchankova Executive Summary ............................................................... ..................................................3 Introduction .................................................................... ...........................................................4 Mission ......................................................................... .............................................................4 Product ......................................................................... .............................................................5 Price............................................................................ ...............................................................7 Place ........................................................................... ...............................................................7 Promotion ....................................................................... ...........................................................9 Competitive Analysis ............................................................ ...................................................9 Customer Profile ................................................................ .................................................... 17 SWOT Analysis ................................................................... .................................................. 18 Segmentation .................................................................... ..................................................... 22 Targeting ....................................................................... ......................................................... 23 Positioning ..................................................................... ........................................................ 23 Financial Analysis .............................................................. ................................................... 23 Advertising Plan ................................................................ .................................................... 26 Definition of the Problem/Challenge ............................................. .................................. 26 Research results ................................................................ ................................................. 27 Advertising Objectives .......................................................... ................................................ 29 Strategy: Media Plan ............................................................ ................................................. 30 Mix .............................................................................

........................................................ 30 Frequency........................................................................ ................................................... 31 Cost insertion .................................................................. ................................................... 32 Flighting ....................................................................... ...................................................... 32 Strategy: Creative .............................................................. .................................................... 32 Creative platform................................................................ ............................................... 32 Big Idea ........................................................................ ...................................................... 33 Appendix A:Price of a Starbucks tall latte....................................... .................................... 34 Appendix B: Map of Downtown Amsterdam............................................ .......................... 35 Appendix C:Marketing to Youth exerpt............................................... ............................. 36 Appendix D: Average Statement of Earnings ....................................... .............................. 37 Appendix E: Amsterdam Pro Forma Statement of Earnings ........................... ................... 38 Appendix F: Pro Forma Balance Sheet ............................................. ................................... 39 Appendix G: Amsterdam high and low forecast Statement of Earnings ............... ............ 40 Appendix H: Advertising Pyramid ................................................. ...................................... 41 Appendix I: Creative Series 1 ................................................... ............................................ 42 Appendix J: Creative Series 2.................................................... ........................................... 44

Sophie van der Vecht, Neni Pogarcic, Hidde van der Dussen, Tim Ensing, Dan Mackinnon, Lucia Suchankova Executive Summary We have investigated the possible launch of the Starbucks Coffee Company in the Netherlands, where we tried to combine the Starbucks way of doing with the local Dutch market. Our mission therefore is to successfully introduce while paying attention to the Dutch needs and expectations. The standardized Starbucks products will be used such as coffee, tea, and merchandise, except for the pastries, where we strive to localize to better integrate with the local market. The products will be premium priced, according to the Starbucks strategy. As a result, Starbucks will be established as a premium brand. The first store will be opened in Amsterdam in a promising and popular area under the local community. After this we want to expand in Amsterdam and other major cities in the Netherlands. Although Starbucks will have to compete with several other coffee companies, our research shows that Starbucks has a strong affection with the potential customers, even though the competition scores better in some aspects. Through our premium name, we want to secure this preferred position. The target market, and therefore the customers that will visit Starbucks

Amsterdam, fit the profile of traditional Starbucks customers in other cities. The Netherlands are very diversified as are the Starbucks customers and therefore we expect a quick acceptance in the Dutch market, even from potential customers who still do not know Starbucks. Starbucks should segment the market in the future through demographic and behavioral segmentation, and apply differing strategies to appeal to each segment. The financial expectations are positive, Starbucks Amsterdam expects a profit in its second year, and it should take around 4 years to pay off the investments and losses which will be generated in the first year. In terms of an advertising plan, the main initial goal is to gain awareness throughout the primary and secondary target markets. This will be achieved through a variety of mediums, including posters and billboards, newspaper ads and the internet. The creative strategy aims to create awareness through excitement and pride about living in Amsterdam, a city on the map.

Sophie van der Vecht, Neni Pogarcic, Hidde van der Dussen, Tim Ensing, Dan Mackinnon, Lucia Suchankova This marketing plan is going to investigate the possible launch of Starbucks Coffee Company in the Netherlands. We will focus primarily on marketing and advertising, in which we want to develop a possible plan and try to forecast the success of this store. We want to state clearly that this plan will be based on existing Starbucks information, combined with our observations and knowledge of the Netherlands. We think that the Starbucks strategy, mission and action plan are very good. Otherwise there is no way that a coffee company would be this well-known and this popular. That is why we will change small aspects of the whole existing strategy and adapt this to the Dutch market. The Dutch market has some special characteristics which will not accept the American way of Starbucks. Although somewhat exaggerated, the following can give a clearer understanding of the Dutch culture:

April 2006 Introduction

The Dutch care very much about the environment and see social responsibility as an important factor. The Dutch do not have a coffee-house culture, even though they like coffee a lot. This is translated in our opening hours of bars and coffee places, that go from late in the morning, until late in the evening. The Dutch do not usually spend money very easily on food and beverages. The Dutch respect good service, and they love special discounts even if its just for a specific group (the students for instance), and they do not see as a negative aspect. Mission Our mission is to introduce Starbucks to the Netherlands by opening a test store in Amsterdam. We will focus on making our Amsterdam store successful by adapting to the needs of the local customers while keeping the core Starbucks strengths intact. This store will set a positive example of corporate social responsibility by adhering to our high environmental standards and create a positive experience for customers to create repeat

business. Objectives To To To To To To Sophie van der Vecht, Neni Pogarcic, Hidde van der Dussen, Tim Ensing, Dan Mackinnon, Lucia Suchankova Product The Starbucks product can be divided into actual tangible products (which can be further divided into direct consumption products and merchandise products) and an intangible service part. The products will be described first, later on the service aspects of Starbucks will be explained. Evidently, the main product of Starbucks is coffee. That is what the chain is known for. All different coffee variations are part of their product portfolio. Other drinks, like tea and soft drinks, are also direct consumption products. When launching the Starbucks location in Amsterdam, this group of Starbucks products should remain the same as they (especially the coffees) carry the absolute essence of Starbucks. Another important group of products that are directly consumed within Starbucks are small snacks. Starbucks chains in the United States for instance are known for the fact that they also serve donuts, muffins, cake and other snacks that are alike. These products are quite popular and frequently ordered by customers to go with a cup of Starbucks coffee. One of the reasons for the success of these side snacks is the American culture of having breakfast and lunch outdoors. Moreover, these snacks are for some American Starbucks customers actual breakfast products. However, the situation in Amsterdam, the Netherlands is quite different than in the United States due to cultural and behavioural differences. For instance, Dutch people are known to be a bit closed and breakfast and lunch moments are seen as private moments of quality time, also for business people. When launching Starbucks in Amsterdam, without adapting anything, the side, snack products could become a bottleneck as sales could be disappointing. In other words, this product category poses a challenge as the objective is to launch Starbucks in the Netherlands and serious decreases in any of the product categories could seriously harm this ambitious goal. Needless to say, an adaptation within this snack product category should be made to fit Dutch quality standards, behaviour and culture. Donuts and muffins could easily stay in the product portfolio, but they should not be characterized as breakfast or lunch products. They should be seen and promoted as side snacks. Different sorts of cakes could also be added, as they are very popular in the Netherlands to go with a cup of coffee or tea. Products that could be served as lunch could be healthy sandwiches and salads. Sweet products should never be promoted as lunch products as they are normally seen in the Netherlands as snacks as opposed to lunch food. On the other hand, one April 2006 have first year average invoice of 5 have a first year market share of 15% have an average occupancy rate of 75% in the first year earn a profit in the second operational year keep first year operating expenses below 300,000 have first year revenues of 450,000

should never change a winning formula. It is wise to slightly adapt the Starbucks formula to fit the Dutch market, but this should not be overdone, because then Starbucks would run the risk of becoming like others. In other words Starbucks should keep its identity and make slight adjustments to serve the Dutch market best. Sophie van der Vecht, Neni Pogarcic, Hidde van der Dussen, April 2006 Tim Ensing, Dan Mackinnon, Lucia Suchankova Another product category consists of the products that are not immediately consumed at the spot. Starbucks merchandise, like coffee mugs, and coffee in packages are important products here. A regular Starbucks customer can purchase his or her own coffee mug or buy the real Starbucks coffee to create the same kind of coffee at home to get a consumption experience that matches the one at Starbucks. Fair trade products are quite popular in the Netherlands and one of the most consumed fair trade products is coffee. Maybe there lies an opportunity (an alliance with for instance Max Havelaar or other well-known fair trade coffee producers) within this area for Starbucks. Another opportunity within this product category is formed by a link with the other, direct consumption, products. This link is given shape by the possibility of launching a saving and bonus system. Almost every popular Dutch chain uses a saving and bonus system. Starbucks could, for instance, give customers that frequently order coffee at Starbucks the opportunity to save certain saving units (for instance Bucks) in order to get free merchandise (for instance a free coffee mug). Also, to fit the notion of servitization: the adding of services to make a product a more complete one, one could be given to opportunity to customize his/her own coffee mug. Evidently, this service should be launched later on and only if the coffee mugs prove to be a commercial success. Another aspect of the Starbucks product is the service part. Maybe the biggest part of the Starbucks service is the creation of a very cosy, home-like atmosphere that invokes social interaction (which is beautifully characterized by the American hit television series Friends). This intangible atmosphere is supported by certain tangibles like comfortable couches and big lounging chairs. This creation of tangibles is very important as it makes the intangible atmosphere tangible. This relaxed and friendly atmosphere is also enhanced by the way customers are treated by Starbucks personnel. The ordering system does not look extremely streamlined and therefore sends out a comfortable and relaxed atmosphere. Ironically, all customization of the coffee and tea is done by the customers themselves at specially designed corners with sugar, milk and other products. This customer freedom contributes to the relaxed and cosy atmosphere while it also helps Starbucks to reduce personnel tasks and handle/serve more customers than otherwise would be possible. A possibility when launching Starbucks in Amsterdam could be providing a free WiFi wireless internet connection. This service would also enhance consumption at Starbucks within certain targeted segments (mainly young to middle-aged people and business people) and it could gently help keeping other customer groups out of the Starbucks location (youth hanging on the streets). Therefore it could help Starbucks create more of a sophisticated image as WiFi wireless internet connections are not yet a common service at lunch places and chains in the Netherlands as opposed to other countries. This possible service thus provides Starbucks

Sophie van der Vecht, Neni Pogarcic, Hidde van der Dussen, Tim Ensing, Dan Mackinnon, Lucia Suchankova Amsterdam with a valuable opportunity. Details with regard to this service opportunity aspects will be clarified in the SWOT analysis part.

April 2006

According to the Economist and CNN/Money a Tall Latte in Starbucks (one of the most ordered coffees) costs in Europe around $3,72, or 3,10 (Please see Appendix A). Our suggestion is to use this price. We have several reasons for this. First of all, this is a Tall latte, a coffee what is not going to be popular in Holland because of the size. It is too big. So a smaller coffee would be a fraction cheaper, what could result in a price round 2,75. This is a reasonable price for a such a location in Amsterdam. It is still premium pricing, compared to the competition. Weve chosen to pursue a premium pricing strategy because that is in line with the Starbucks ideology. We can illustrate this best with the next anecdote: Whats more, Starbucks already has a reputation for having the most expensive coffee in the marketplace. When I left Moneyboxs New York headquarters to conduct research at the closest Starbucks (a block away), I passed a half-dozen other coffee vendors. Theres the guy with the cart who sells the little Greek diner cups for 50 cents; the deli with the scalding 75-cent generic joe and the thin paper cup; the convenience store with $1.00 faux gourmet stuff; and Cosi, where a latte costs $3.59. Only after running this gantlet could I enter Starbucks, where a java chip Frappuccino runs $4.75. D. Gross, Oct. 5, This New-York based story is exactly what we want to achieve in Amsterdam. Premium pricing combined with a premium name. We already mentioned a high rate of potential customers who already know Starbucks and want a Starbucks in the Netherlands. This rather high price will be approved by the customers through our clear statement of corporate social responsibility.

The first Starbucks in the Netherlands will be opened in Amsterdam, the capital city. (Please see Appendix B for a city centre map.) This choice is rather obvious for several reasons. We quote the Starbucks Marketing policy:1 Starbucks customers are people of diverse ethnic, income and age groups with varying tastes and interests. 11 http://www.starbucks.com/aboutus/marketingPolicy.asp Sophie van der Vecht, Neni Pogarcic, Hidde van der Dussen, Tim Ensing, Dan Mackinnon, Lucia Suchankova Amsterdam is a very diverse, dynamic and busy city. The city where history and future meet each other, the city with approximately 60.000 students, 100 ethnicities, lots of global firms, thousands of small firms, ten million tourists per year, and a city without Starbucks. We see Amsterdam as a opportunity for Starbucks, because of the striking similarity between the marketing policy of Starbucks, and the characteristics of Amsterdam. Where not a first which as the decision of first city in the Netherlands to launch Starbucks was problem, it is a lot harder to decide where in the city we can place the Starbucks. As you already may know, Amsterdam is a segregated city in different customer groups are divided throughout the city. On the last

Apr

page, you will find a map of Amsterdam so, this part of the story can me made clearer. The large amount of the tourists can of course be found in the center of Amsterdam. Where the two big shopping streets, Leidsestraat and Kalverstraat, with the four big squares around, the Damsquare, the Leidseplein, Museumplein, and Rembrandtplein.. At first sight, this looks the best area to place the first Starbucks. It is the most popular area, with a large amount of people, and therefore a large amount of potential customers. But it is also an area with a lot of problems. Small (sometimes even criminal) groups create a lot of trouble here, and this could create a negative image for Starbucks. These groups are well-known and last thing a shop wants is such a group inside. This is especially important for coffee places such as Starbucks, because there is a strong chance these groups will tend to go inside. This also explains why there are a few coffee places like Starbucks in the center. Of course this low penetration offers a lot of possibilities and potentials, but this will be discussed in the SWOT analysis. The east and far west side have a rather negative image in Amsterdam. That is why Starbucks should not open their first coffee place in this area. As in the center, this area has a lot of potential, but for the introduction of a new brand, we need something different. There are three potential places left. Java island is at this moment the hippest place in Amsterdam. The place to be, so Starbucks could have a very strong appeal if it would locate it self at the island. The problem with this island is that it is too far from the center of Amsterdam, and therefore it is not appealing for a great part of potential Starbucks customers. Another possibility is the business area, like said before, due the strong segregation there are areas with specific customers. This is a very nice part of the town, with also a big potential customer group. The last potential area is called the nine streets. The nine streets are nine small streets with cozy shops, lunch cafs, and lots of people. The public here is very diverse, students, tourists, ethnic groups, businessmen. The last two locations are both very good and promising. We think that the nine streets have the most similarities with the Starbucks marketing policy. Therefore, our first location in Amsterdam should be in the nine streets. We expect to have a large diverse potential customer base, and to develop a strong customer base because of our location. Sophie van der Vecht, Neni Pogarcic, Hidde van der Dussen, Tim Ensing, Dan Mackinnon, Lucia Suchankova The next locations can be located throughout the Netherlands. The expansion in Amsterdam could of course continue with some of the locations already mentioned above such as the Business area at the Beethovenstraat and at Java Island. Other locations in the Netherlands would be of course in the big cities, as is clear in the Starbucks strategy. The highly developed area in the Netherlands is called de Randstad. De Randstad is the political, academical and economical heart of the Netherlands. This is the area with the four biggest cities of the Netherlands: Amsterdam, Utrecht, Rotterdam and the Hague. These four cities should be the main focus of Starbucks in the first period. Like Amsterdam, the other three cities are very diverse with an own local culture. These cities possess like Amsterdam all the necessary characteristics for a successful launch of Starbucks. Promotion Please see Advertising Plan. Competitive Analysis

April 200

Big cities like Amsterdam will always be crowded with diverse people. Students, tourists, ethnic groups and businessmen are examples of the diversity that one can notice in the city as a whole. This diversity will always attract a lot of businesses that will compete to serve all the different kinds of people. Restaurants, small bars, cafs and pubs can be defined as places where all the different kind of people will go to, so they can drink coffee, eat snacks, have a break and sometimes have breakfast/dinner. The public places that have been mentioned here are very abstract and include a lot of different companies. Two companies will be describe in further detail, because they are considered as big coffee chains that will be strong competitors of Starbucks.

Sophie van der Vecht, Neni Pogarcic, Hidde van der Dussen, Tim Ensing, Dan Mackinnon, Lucia Suchankova Coffee Company

April 200

The Coffee Company is a chain of fast-drink coffee houses in Amsterdam, this one is expanding "slowly but surely". Much like the world famous Starbucks Family. They serve fresh coffee of all sorts, flavours and sizes all day, accompanied by "irresistible sweet things" and rather less remarkable sandwiches. The Coffee Company serves every corner of town. The branch on the Beethovenstraat is the most recent addition to the family, situated in the lobby of Hotel Beethoven. It offers a modern concept with bright shades, a cool dcor and nice atmospheric music. A strong ristretto is the best start to a hectic day. The different outlets barristas (bar operators) have a different way of working the espresso machine, despite the fact theyve been trained the same way.

Bagels & Beans

The Bagels & Beans company started in Amsterdam in 1995. Bagels & Beans key features are a place of rest and harmony, where the customers can easy read their newspapers. According to the Bagels & Beans website the quality of the service is more important than the quantity. The Bagels & Beans company is located in fifteen places in the Netherlands and in Amsterdam there are nine locations. The quality of the coffee is very good at the Bagels Sophie van der Vecht, Neni Pogarcic, Hidde van der Dussen, April 2006 Tim Ensing, Dan Mackinnon, Lucia Suchankova & Beans company, however they do not offer a very wide product line of different kinds of coffee. The product line of Starbucks is much more developed. Like Starbucks, the Bagels & Beans company do offer a wireless internet facility. The customers are therefore able to use the internet at their laptops, while drinking their cup of coffee in a very nice environment. Analysis

Starbucks is a well known chain in the Netherlands although it does not exist in the Netherlands. Studies, in the form of questionnaires, actually have shown that possible Dutch customers have a positive stance when it comes to the possible launch of a Starbucks establishment in the Netherlands. Therefore, the idea of launching Starbucks in the Netherlands has potential. The places that have been mentioned above offer the primary product of Starbucks. That is, as we concluded in the product analysis, the coffee that will be consumed at Starbucks. Although, those several restaurants, little bars, cafs and pubs try to serve the same customers, there are differences between those public places. In this paper will try to map out which companies are the strongest competitors that has to be dealt with. That will be done by comparing the features of the several companies. The most important feature that has to be compared will be the product and the service that will be offered. The secondary product, as we defined in the product analysis, are the small snacks that are offered at Starbucks. Those products are defined as secondary products, because those are most of the time bought in combination with coffee. Some providers of small snacks, like bakeries, do not offer this combination of products. That is why they do not have to be defined as competitors. The last Starbucks categories of product are Starbucks merchandise, like coffee mugs, and coffee in packages. The analysis of this product category will make clear the reason this additional product category is offered by the providers of the primary product. We will also consider what the combination effect is of the primary product and this additional product. First we will compare the quality of the product of Starbucks with the quality of the product offered by the other public places that have been mentioned before. At the website of Starbucks there is a lot of information available that refers to the quality and taste of the coffees one can buy. At the website regions and tastes are defined, so one can choose the coffee he or she likes the most. Regions that have been defined are Latin America, Africa Arabia, Asia Pacific, dark roast blends, multi-region blends.

Sophie van der Vecht, Neni Pogarcic, Hidde van der Dussen, Tim Ensing, Dan Mackinnon, Lucia Suchankova In comparison with the other competitors of Starbucks, one can conclude there is no company that describes its coffee as detailed. The width of the product line points out that the quality of the product defined by Starbucks is very important. Starbucks purchases and roasts high-quality whole bean coffees and sells them along with fresh, rich-brewed, Italian style espresso beverages, a variety of pastries and confections, and coffee-related accessories and equipment -- primarily through its company-operated retail stores. The sentence above is a quotation that can be found at the website of Starbucks. High-quality whole bean coffees is an other example of being a more high quality provider than the competitors. At Starbucks, the coffee is served is big carton cups. Although the carton cups are rather good, it is being perceived by customers as being qualitatively less than the normal cups being used in restaurants and bars. The two quality aspects of the product has been combined in the graph below. Quality coffee

April 2006

From this grap

that the produ seen as a high whole. considered Sta provider of co Company should Bars/ restaurants

also. At the C

possible to ch width range of Quality cups Coffee Company the coffee in cups of bet Starbucks. The coffee is served in regular mugs in stead of carton cups. Bagels & Beans do not offer a width range of coffee products. Compared to the Starbucks, the product line of Bagels & Beans is rather limited. However, they do serve the coffee in cups of good quality like the Coffee Company does. An other aspect of the primary product is the service that is offered by Starbucks. As already pointed out in the product and service analyses, Starbucks customers are served in a friendly atmosphere and one can make use of the wireless internet connection, while sitting in comfortable couches and big lounging chairs. Although, there are relatively less comfortable chairs, it has to be considered as a very differentiated way of serving the customers.

Sophie van der Vecht, Neni Pogarcic, Hidde van der Dussen, April 2006 Tim Ensing, Dan Mackinnon, Lucia Suchankova Customers that are served in Starbucks will always notice the availability of the chair, however they might not be able to use them due to the fact that they are in use by other customers. The facilities offered by Starbucks are qualitatively better than the facilities offered by most restaurants, little bars , cafs and pubs. The friendly environment, wireless internet connation and comfortable chairs are the most important aspects for this conclusion. The staff in Starbucks is not considered as being customer centered. It is not possible to order anything by a waiter. Customers have to order additional cups of coffee at the pay-desk. They have to pay there and afterwards they can get there coffee. This is not considered as a really goods service to generate additional orders from customers. On the contrary, bars and restaurant provide better service to do so. Most of the times people can order extra drinks at the waiters ones can find there. The availability of waiters in Starbucks is not considered as important by Starbucks. Customers get a rather big cup of coffee and therefore most of the times reordering is not necessary. Most of the customers leave after have drunk their coffee. This is not considered as a problem, because it provides the possibility to serve new customers that enter the Starbucks. The Coffee Company does not see the absence of the waiter as a problem also. This is the feature that Starbucks and the Coffee Company have in common. Still there are some differences between the Coffee Company and

Starbucks. In Starbucks ones can use the wireless internet connection and comfortable chairs. Those facilities are not offered at the Coffee Company and therefore the quality of the environment of Starbucks is considered better than of the Coffee Company. Bagels & Beans do offer a wireless internet connection and the quality of the environment is considered as very important to compete with competitors. The comfortable chairs one can find in Starbucks will not be available at Bagels & Beans, but the quality of the environment is improved by creating a very relaxing environment as one can see at the pictures available above at the introduction of the Bagels & Beans company. In conclusion ones can say that the quality of the staff and of the environment are both qualified as good. Quality Staff

One can defi

service by e Bars/ restaurants

the staff an

staff includ and the envi additional s that increas for the cust Quality environment Sophie van der Vecht, Neni Pogarcic, Hidde van der Dussen, Tim Ensing, Dan Mackinnon, Lucia Suchankova aspects of the service has been combined in the graph left. The last Starbucks categories of product that we have defined are Starbucks merchandise, like coffee mugs, and coffee in packages. The analysis of this product category will make clear the reason this additional product category is offered by the providers of the primary product. Starbucks can be defined as a coffee restaurant with a high quality coffee and a friendly atmosphere. The comfortable chairs give the customer the feeling of being in their home environment and not being in a public place. The mugs provide the feeling of being one of them and therefore create some kind of a Starbucks community. The combination effect of the primary product and this additional product is that the coffee must be drunk in a comfortable and homelike environment. The mugs are a useful tool for creating this environment. Quality coffee

April 2

Qualit

CC

Bars/ restaurants

Quality cups The two graphs that where created during the analysis are shown above again. We can conclude that the coffee company does not provide a good quality of cups and staff. Nonetheless, they are product leader when it comes to the quality of coffee and the environment. This combination is the key to success for Starbucks as a whole and should be considered a unique selling point.

Sophie van der Vecht, Neni Pogarcic, Hidde van der Dussen, Tim Ensing, Dan Mackinnon, Lucia Suchankova Five forces model

A very suitable model to explore the competition in a market is the five forces model of Porter. This model is visualized in figure 1. The main essence of the model is that competition does not only come from one side, but from several directions. It can be separated in several kinds of threats and risks. First of all there is a market with direct competitors that a specific player is influenced by. Besides those direct competitors, a company should be aware of substitutes, suppliers, buyers and potential entrants. Coffee market competitors Intensity of rivalry The main competitors have been pointed out in last chapter competitors. It has been concluded that there are two strong competitors in the market: Bagels & Beans and Coffee Company. Both do have several stores located in Amsterdam and already have a loyal customer group. Nonetheless, it has also been concluded that Bagels and Beans does not offer a wide product line of coffee and therefore in the coffee market the Coffee Company should be considered as the main competitor. Bagels and Beans should be defined as main substitute. Suppliers The suppliers of Starbucks can be found in many part of the world. Our connection with coffee farmers Purveying quality coffees means much more than selecting the finest beans on the market. Starbucks strongly believes in the importance of building mutually-beneficial relationships with coffee farmers and coffee communities with which we work. The success of the farmers with whom we do business is a critical component of Sophie van der Vecht, Neni Pogarcic, Hidde van der Dussen, April 2006

Tim Ensing, Dan Mackinnon, Lucia Suchankova our own success. We are taking an integrated approach to building relationships with coffee communities The sentence above is a quotation that can be found at the website of Starbucks. One can conclude from this sentence that Starbucks put a lot of effort in retaining a good relationship with its suppliers. The quality of the coffee is very important to Starbucks and therefore the bargaining power of good and big suppliers is rather big. However, sometimes it is rather easy to switch between suppliers within a region, but a good quality and supply of coffee can only be provided by a selected number of trusted suppliers. Buyers Customers that buy from Starbucks do have little influence on the profitability, at least as an individual. When they group together, their bargain power will increase. However, this is not something that will happen very quickly. Starbucks wants to generate loyal customers by providing a lot of advantages for the environment. As an example Starbucks has launched the Starbucks Foundation. The sentence below is a quotation that can be found at the website of Starbucks and will provide some insight in the activities of the foundation: Introducing soccer and sonnets America SCORES was founded ten years ago by a Starbucks barista in Washington, D.C. who loved soccer and poetry. Today, America SCORES serves nearly 4,000 poetry-performing soccer players in 13 Starbucks cities, and growing. What makes this nonprofit a national phenomenon is that it gets to the heart of what motivates kids: teamwork, sportsmanship, creativity, and performance. America SCORES continues to provide partners with rich and meaningful opportunities to help youth in their neighborhoods Threat of new entrants It is necessary to have a good network of suppliers if one wants to participate in the coffee market. It will take special skills to build a network of suppliers like Starbucks. All the suppliers have to be carefully selected in all the different parts of the world. Suppliers of Starbucks come from regions like Latin America, Africa, Arabia, Asia and the Pacific. It will take years to build a network like this and therefore one can say that there is a big entrance barrier. In conclusion one can say that the treat of entrance of new competitors rather small is. Substitutes Although the treat of entrance of new competitors is rather small, the number of substitutes is rather big. Bagels and Beans has already been defined as the main substitute, but there are a lot of companies that offer Sophie van der Vecht, Neni Pogarcic, Hidde van der Dussen, Tim Ensing, Dan Mackinnon, Lucia Suchankova products that are a substitutes for the width coffee product line of Starbucks. The normal coffee that one can order in restaurants, without all the special tastes and options are the biggest substitute for the special coffee of Starbucks. The availability of other drinks, like tea, chocolate milk or soft drinks are substitutes for the coffee that Starbucks provides. Restaurants, little bars, cafs and pubs offer these kinds of products and that is why those organizations can be seen as the main substitute for Starbucks. April 2006

Customer Profile Starbucks customers constitute mainly of customers that consume Starbucks coffee and side products within the Starbucks establishment, customers that take Starbucks coffee and other products to go and customers that come to Starbucks for the special Starbucks merchandise. However, it is assumed that customers in this last group are also part of one or two of the first two groups. Various combinations are therefore also possible. Evidently, just like every competitor, Starbucks should focus on customers within a wide variety of segments. Every customer that drinks coffee at Starbucks, takes coffee-to-go and spends money on Starbucks merchandise (mugs and coffee packages) is a valuable one. It is thus important to keep the area to focus on wide, without excluding valuable customer segments. A statement directly copied from the Starbucks marketing policy clarifies this notion, and can be seen in Appendix C. Introducing a bonus saving system (allowing customers to safe for free coffee mugs and Starbucks coffee), which is very common in Holland, is an applicable tool when trying to fit the Starbucks concept with the Dutch customers and habits. This will be appealing to frequent customers across all customer groups and therefore strengthen the overall Starbucks position in the Dutch market. Although remaining a wide focus is crucial in order to establish share of mind within all kinds of different customer segments, another parallel narrowed marketing effort to appeal to a certain particularly important group of customers can also be useful. Although direct actions in this area are of more importance for the marketing and advertising department, certain aspects are closely linked to the desired target segment and therefore worth mentioning in this customer section. Youth (including so called young urban professionals and double income, no kids-households) has always been a very important customer group for Starbucks. Having a considerable market share in youthful customer segments holds the key to future growth and Starbucks has always been Sophie van der Vecht, Neni Pogarcic, Hidde van der Dussen, April 2006 Tim Ensing, Dan Mackinnon, Lucia Suchankova very keen on stimulating certain activities in this particular area. This has been done by sponsoring certain youth events worldwide, public relations and contracting celebrities that are appealing to youthful Starbucks customers. A Dutch Starbucks location in Amsterdam should adopt the same strategy. Examples of tools to facilitate this tendency could be the sponsoring of certain Dutch youth events (there are lots of them in Amsterdam), as mentioned before offering a (free) WiFi Internet connection service to appeal to young mobile customers, and maybe introducing special reduced student pricing systems that are also very common in Holland. All these tools could be helpful when trying to gain ground in the important young customer segments in the Dutch market rapidly. Concluding, remaining a wide focus when it comes to customer segments is of great importance, because Starbucks should not rule out certain customer groups, as every customer is a valuable and potentially profitable one. But bearing in mind that certain customer groups and segments are of extra importance (youth) and adopting parallel marketing strategies and accompanying tools, fuelled by an extra marketing effort within these customer segments, to expand market share among these customer

segments may be a wise corporate customer strategy for Starbucks. The Dutch market is no exception here. SWOT Analysis This part is devoted to the analysis of the internal and external environment of Starbucks, when launched in Amsterdam, in the form of a SWOT analysis. Although there are some drawbacks of a simple SWOT analysis that are generally agreed upon, for instance the lack of financial implications and clear future scenario recommendations based on the analyzed environment, it always is a helpful tool in making the first step to explore the environment of an organization. Especially when trying to enter a foreign and thus new market. Strengths One of the most important strengths of Starbucks, and this counts for every Starbucks location, is its worldwide image. All across the world, people are familiar with the American Starbucks concept. People also know that celebrities like Britney Spears even fly back to the States to get a cup of real Starbucks coffee during their busy schedules. The Dutch market is no exception in that matter and people even have a positive stance with regard to a potential launch of Starbucks in Holland. There has even been some research with the possibilities of Starbucks survival in Holland (see Appendix). Share of mind among potential Dutch customers is already achieved. Share of heart is the next step.

Sophie van der Vecht, Neni Pogarcic, Hidde van der Dussen, Tim Ensing, Dan Mackinnon, Lucia Suchankova Another strength of Starbucks is the fact that it combines certain aspects that have not yet been combined by others. A considerable range of different quality coffees has been a major selling point for the Coffee Company, however they do not offer a comfortable and cosy environment like Starbucks does. Offering a nice atmosphere to consume in has been point of focus for many lunch areas in Amsterdam, but none of them is so specialized and advanced when it comes to quality coffee. One might say that Starbucks holds the key formula and owns best of both (competitive) worlds in Amsterdam which could be considered a sizeable strength. Yet another strength of Starbucks lies in its expanded worldwide network and community along with close relationships with its suppliers. This generates a certain level of know-how with regard to different markets all over the world, consumer behaviour and quality expectations. All of the aforementioned generates a valuable kind of database which could help young Starbucks locations, like the one in Amsterdam, to make a flying start, outperforming competitors and rapidly grasping market share. Being able to customize your own drink (and maybe one day even your own Starbucks coffee mug) fits the recent customization trend and sends out a certain atmosphere of freedom that blends in perfectly with the relaxed and cosy ambience that is supported by the interior of the Starbucks chain. After ordering a drink the customer has the possibility to customize the drink with a whole range of essences, flavours, sugar, cream, powders and other products. This is also an example of prosuming (combination of production and consuming), which is a consumer effort to engage in the production process which in its turn generates a certain bonding with the product/service provider (in this case a bonding between the customer and Starbucks). However, this self service freedom could also be seen as a

April 2006

weakness as it is contrasting with the high prices charged at Starbucks. Weaknesses Starbucks sells moderate to good quality coffee against a premium price. Nevertheless a considerable part of the service a customer receives at Starbucks is actually self service. This self service is not exactly in line with the value proposition Starbucks communicates with its quality coffee and accompanying premium price to potential customers outside and could be seen as an odd aspect, especially in Holland where certain customers groups are seen as cautious and quality demanding when it comes to (relatively high) expenditures. Also, according to the Treacy & Wiersema model (De Vries, Goud & Goud , 2004) of service value ( this combination of product and service quality, high financial fee and self service is something strange and could be seen as being stuck in the middle: Service value = (Service result * Service delivery)/(Financial fee * Consuming effort) Sophie van der Vecht, Neni Pogarcic, Hidde van der Dussen, Tim Ensing, Dan Mackinnon, Lucia Suchankova Self service fits in with an operational excellence strategy accompanied by a low financial fee. However, the high price as charged for Starbucks coffee, goes together with a product leader value position. Starbucks has a rare mix of those two and this could be seen as a weakness since Dutch customers known to be quite critical when it comes to expenses and accompanying service expectations. An additional weakness could be found in the way Starbucks coffee is served: paper cups. Once again, there is a contradiction within the Starbucks modus operandi here, since a high price and premium product do not go together with paper cups (in Holland). Paper cups for coffee-to-go is acceptable, but for consumers who decide to stay and consume their product within the Starbucks location this could prove to become a problem. Paper cups are very common in chains in America and do not have a direct link with inferior quality contents. In Holland however, this link does exist. The Coffee Company, one of the key competitors of Starbucks, has found its way around this problem and serves its drinks in a type of glass cups that is very common in Holland. Starbucks should think about this problem and maybe even choose to serve its drinks in mugs instead of paper cups. Of course then there is the problem of extra tasks like collecting the mugs and cleaning them. Bycoming problem could be the possibility of people stealing original Starbucks coffee mugs, but this problem could be tackled by introducing something very common in Holland: a bonus system, which allows the customer to collect bonus units in order to safe for free gifts. So in a way the possible countermove to bypass a Starbucks weakness holds the key to an actual opportunity. Opportunities The first opportunity comes forth out of the previously described weakness. Serving Starbucks drinks in original Starbucks mugs could be a way to tackle the paper cup-inferior quality problem and communicate a more luxurious feeling together with creating more logo and brand awareness with the eventual goal of creating customers share of heart instead of a mere share of mind and establishing customer bonding. Together with this way of serving Starbucks drinks goes the notion of a bonus system which allows frequent customers to save for free gifts: for instance the original Starbucks coffee mug or Starbucks coffee. This allows the customer to also experience the Starbucks coffee at home and once again creates customer bonding and brand loyalty.

April 200

When visiting locations like Starbucks in countries like the United States and France (business) customers surfing the Internet while drinking a cup of coffee is a common sight. In Holland however, this WiFi connection possibilities are virtually nonexistent, even in Amsterdam. Here lies a substantial opportunity for Starbucks, Amsterdam. Providing customers with Sophie van der Vecht, Neni Pogarcic, Hidde van der Dussen, April 2006 Tim Ensing, Dan Mackinnon, Lucia Suchankova a (free) WiFi Internet connection service. Aside from the fact that active Internet usage within Starbucks has a lot of commercially interesting business possibilities (through cookies and other commercial digital devices, which in its turn fuels business alliance possibilities), it also targets a segment that has not yet been targeted before and it makes Starbucks particularly interesting for all kinds of business people, providing Starbucks with a more mature and contemporary image than a lot of other competitors. Needless to say, this Internet connection possibility is also appealing to other customer segments, especially younger people. Once again, this could have a positive influence on the image of Starbucks. Therefore this WiFi Internet service opportunity is closely interwoven with the desired target customer segments as it lures certain groups into Starbucks and discourages others. Those discouraged groups would mainly be the elderly and groups of youngsters hanging around on the street (a problem in Amsterdam). This opportunity thus serves two closely related purposes. An interesting fact is that ever since 2002 Starbucks head office in Europe is situated in Amsterdam. Business lobbying and politics should therefore be considerably easier when focusing on the aforementioned fact. One could say that the link between Starbucks and Amsterdam already exists and that the Americans had a reason for choosing this head office location in Europe. The launching of a Starbucks location in Amsterdam is therefore a logical next step. Nike, another American company that is at least just as well-known in Holland as the Starbucks chain, also has its head office of Europe situated in Amsterdam. This summer (June 2006) a coffee corner in this Nike building becomes available. One of the candidates is Starbucks (according to website www.kookjij.nl). Once again proof that the international Starbucks community is finally working its way into Amsterdam and has faith in the possibilities of survival there. Threats Ethnic minority groups of youngsters hanging around in Amsterdam have been a problem for a few years now. Having these groups in your store, shop or Starbucks location could seriously harm the experience of other customers and eventually your image. Entrepreneurs in the major streets in Amsterdam (the Kalverstraat the Leidsestraat) have already encountered these problems. Luckily the Starbucks location thought of lies in another area of Amsterdam which is relatively free from this problem. The area can be characterised by a high density of young urban professionals, upper class residents and sophisticated tourists. Customers within these segments will only improve the contemporary image of Starbucks and thereby increase the entry barrier for these so-called ethnic problem groups. Nevertheless, Starbucks should keep track of developments in this area and realize that a possible threat could occur. Sophie van der Vecht, Neni Pogarcic, Hidde van der Dussen, Tim Ensing, Dan Mackinnon, Lucia Suchankova April 2006

Competitors copying the Starbucks concept is another possible threat. Copying behaviour and stealing winning formulas has always been a problem for entrepreneurs. It may be sometimes difficult to endure and differentiate the initial product unless the product has such a big widespread name that it can survive these imitators. Luckily, Starbucks has that kind of name and image and should be able to withstand imitating behaviour by (upcoming) competition. A way to do this is by making a pre-emptive strike and launching Starbucks in such a clear and differentiated way (focusing on the originality of the Starbucks brand and image) that it is hardly possible for others to compete with or copy this whole Starbucks notion. Offence is the best defence here and Starbucks should enter the Dutch market making a lot of noise. Evidently, a substantial task lies here for the promotion, advertising and branding department. Segmentation The segmentation part will be similar to the standard Starbuck segmentation. We will use demographic, psychographic and behavioral segments. First of all, the demographic segmentation will focus on age, income and occupation. We see the 15-40 group as our main customer. This correlates with our own observations in French and Swiss Starbucks. This group can be divided in two other groups. The group 15-25, and the group 25-40. The first group will have a lower income, and probably be students. This is the youngest generation, and for this segment Starbucks has to be hip and modern. The other group is probably working and has a higher income. The difference between the groups is also that the first group will probably use the sitting space whereas the second will most likely be customers who make purchases and consume them outside of the store. In the psychographic segment we have focused primarily on lifestyles segmentation. This is very similar to the demographic segment above. The students will have another lifestyle than the working group. Another lifestyle segment will be the people who drink coffee, and those who do not drink coffee. This is a crucial segment, because Starbucks has to have an image that you dont have to be a coffee drinker to enjoy Starbucks. The behavioral segment is the most interesting one, and also the segment that can be the most influenced. It is strong because we can create new segments. First of all, we will segment customers with respect to benefit and usage. Benefit segmentation is for the customers who go to Starbucks because of the Starbucks products or Starbucks service. So the segmentation here will be (again similar to the demographic and psychographic) the people who prefer to sit down and enjoy their product and the buy & go customers. The usage can be divided into light, medium and heavy users. We Sophie van der Vecht, Neni Pogarcic, Hidde van der Dussen, Tim Ensing, Dan Mackinnon, Lucia Suchankova recommend focusing primarily on the high usage segment. The advantage of this type of segmentation, mentioned before, is that Starbucks can create a new behavioral segment group and through this, new customers. This can be achieved through segmenting customers based on their desired benefits. A very recent example of this, introduced in several Starbucks through the world is wireless internet. This is an extra incentive to go to Starbucks, because of the creation of benefits driven segments, in this example, customers who use wireless internet. It should be clear though that on international basis, the Netherlands are a specific segment, in another bigger segment, Europe. April 2006

Targeting The main targeting activity will be undifferentiated marketing. This is rather logical because, the products are not being differentiated for specific customer groups. This type of marketing will be beneficial to us in that it is less expensive than attempting to market each product to each product segment. We will instead take our market as a whole and market our primary product, coffee, to them. Of course, the non coffee drinker will have a possibility to choose from several non coffee products, and is there also non caffeine products for the youngest customers, but there is not a clear targeting in this because Starbucks is not going to change its product mix specifically for these segments. Positioning When we begin our marketing campaign we will focus primarily on building the Starbucks brand and therefore we will position Starbucks quite generally with respect to our market. The main goal will be to create a generate awareness of the brand so we can attract our customers. As Starbucks becomes more established, however, we will focus more on positioning the products to our different segments. This will focus on two main segments; the young, hip, and trendy segment and also the business segment. Financial Analysis Through the use of several analyses we have made an estimate of the possible revenues and expenses we will incur in the first three years of operation, as well as what a possible balance sheet may look like for Starbucks Amsterdam. These projections have been derived from several different methods to arrive at the final projection. We have analyzed Starbucks most recent financial statements for the company as a whole and Sophie van der Vecht, Neni Pogarcic, Hidde van der Dussen, Tim Ensing, Dan Mackinnon, Lucia Suchankova divided these results by the amount of stores worldwide to get a sense of average store performance. Please refer to Statement of Earnings in Appendix D. This is the data for an average Starbucks. We used this data to predict average sales and costs by exchanging the prices to the Euro. So, if the Amsterdam Starbucks would perform at an average level, this would be the result. Of course this is not realistic because there are many unpredictable factors that will arise. We are opening our store, so, we cannot expect to perform as well as the average store that has been open for several years because revenues are likely to be lower and we will occur several one time costs associated with opening a new store. Another method we have used to calculate expected revenue was by calculating the size of the coffee market in Amsterdam and multiplying by Starbucks expected market share, average sale and average customer frequency in a year. Everyday there are around 800.000 persons in Amsterdam. Of course it is impossible and also not realistic to account all those people as potential customers. The Dutch population has a normal onion-population distribution, April 2006

the tourists that populate Amsterdam will change this population, however, we do not expect significant changes. We can argue that the highest and lowest parts (very old, or very young) in the population distribution fall out of the Starbucks client market. This results in a drop of around 20% in the total population of Amsterdam. Also because of our location and the mentioned segmentation in Amsterdam, 1/3 of the population will not be on a regular basis in the part where our store is located and therefore cannot be accounted as potential customers. This leaves us with approximately 425.000 persons. This population base can be divided in two equal groups in the population distribution. We are dividing our target market into two parts for different reasons. First of all, the younger part will consist of students and other young adults. The other segment will consist mostly of the working population. This has two results. Firstly, students have more free time, and will therefore be able to visit Starbucks more frequently. This also has to do with the fact that Dutch people will tend not to go to a place like Starbucks early in the morning as we have already explained in our customers paragraph. Secondly, Starbucks had a more positive image in the young group then in the older group. This we conclude after a (not representative) research on the biggest internet forum in the Netherlands. Around 40% of the young people say they would like a Starbucks, (just 15% is against), where this percentage is twice as low with the older generations. So if we know that 40% would like a Starbucks, we can expect that around a quarter of these people for certain will use the Starbucks. If we combine this with a part of the 45% of the young people who didnt know Starbucks, or didnt Sophie van der Vecht, Neni Pogarcic, Hidde van der Dussen, Tim Ensing, Dan Mackinnon, Lucia Suchankova have either a positive or negative feeling with Starbucks, we expect to have a realistic expectation if we say that around 20% of the young people will use Starbucks and 5% of the older group. As said, the two groups are almost equal, so this results in 25% of 425.000 persons. 106.000 Persons can be accounted as not only potential customers, but as very likely customers. If this group would spend around 4 euro (a achievable expectation), this would generate a yearly revenue of 425.000 euro. Our team also spent considerable time observing customer behavior within several Starbucks in Paris to get a sense of average length of stay, average sale and occupancy rates. This resulted in the next: On the average, in a Parisian Starbucks, there is an occupancy rate about 80%. Due to the several factors (not known, different culture) we cannot expect this rate in Amsterdam. At least not in the first year. Because of our location, we are not able to have more than 25 places to sit. So a combination of a lower rate and a low number of seats will result in an expected occupancy rate about 75%. In the mornings the Starbucks will be rather empty, and in the afternoon and evening it will be full. So, we expect on a daily basis to occupy around 75% of the seats. The average stay in a Parisian Starbucks was around 45-50 minutes. We expect this to be more in Amsterdam because of the Dutch culture. A Dutchmen has to earn his money back through using the facility, and therefore we can expect an average stay of one hour. We propose opening hours similar to the French, except that we would open it later in the morning and keep it longer open in the evening. So we can better take advantage of the evening rush of customers. This data would result in 187,5 sitting customers everyday. We also observed that the sitting customers spend more than customers who take away their purchases. As said earlier, the price will be lower than in Paris or other European city, but still on a premium level. That is why we expect the sitting customers to spend around 5 euro. For a Starbucks which will be open for 350 days, this has a revenue of almost 330.000 euro. We

April 200

expect around 15 buy & go customers every hour (again, low number in the morning, high in afternoon) who will spend around 3 euro. This will add another 157.500 euro to the revenue. The total revenue will be around 487.500 euro.

Sophie van der Vecht, Neni Pogarcic, Hidde van der Dussen, Tim Ensing, Dan Mackinnon, Lucia Suchankova Our final projections factored these different methods and reduced expected sales to correspond with the opening of a new store. The results can be found in the Statement of Earnings in Appendix E.

April 2006

We are projecting first year sales revenues of 450,000, however as this only an estimate and there are many uncontrollable factors at play that may affect the actual sales revenue we are also providing a high and low estimate for the sake of analysis. Our best case analysis predicts 600,000 and our worst case analysis predicts 300,000. As the company becomes better known in Amsterdam and we develop a positive reputation, sales will rise, this is reflected in the increasing expected sales revenues for the second and third year of operation. We are predicting second year revenues of 550,000 and third year revenues of 650,000. During the first year of operations we will have several one time costs associated with opening the store. This explains the higher than average expected store operating costs of 300,000. In the next two years theses store operating costs will drop down closer to average levels. Our cost of sales are in line with the average Starbucks store as are depreciation expenses. With all considered we are forecasting a first year net loss of approximately 70,000. We expect to make a profit in the second year of just under 6,000 and just over 35,000 in the third. Our worst case scenario predicts a net loss of approximately 360,000 in the first year and a best case scenario of about a 30,000 net profit. Advertising Plan Definition of the Problem/Challenge There are a few challenges in introducing and implementing Starbucks in Amsterdam, the Netherlands. For starters, there are already a few coffee places in Amsterdam like Bagels & Beans and Coffee Company, These coffee places are going to create a competitive atmosphere. People already experienced the services and products of these coffee places, they are familiar with them and they know where to find them. However, we believe a city like Amsterdam, with its diverse crowd of people (tourists, students, visitors, and business people) will like the idea of something new. As a population, they are open to trying new things. Another challenge of implementing Starbucks in Amsterdam is the prices of the coffees of Starbucks; they are not going to be cheaper than the rest of the coffee places around. That is why the focus of Starbucks should be on the good, quality, tailor-made service and the whole Starbucks experience.

Sophie van der Vecht, Neni Pogarcic, Hidde van der Dussen, Tim Ensing, Dan Mackinnon, Lucia Suchankova

April 2006

Starbucks will have the widest selection of coffees around, so the advantage will also be in the fact that customers can customize their drinks to taste. Another possible problem is that some coffee places offer a savings card and when its full, you can get a free coffee / discount on your next coffee or buy. This is a great way to built up relationships with your customers and to make them want to come back in essence, a loyalty program. Starbucks does not offer this sort of service so they really have to make an effort in maintaining their customers and making it attractive for them to keep coming back; for example by offering special coffees everyday, by creating a good atmosphere, friendly personnel etc. We believe Starbucks should provide all the things a student (our primary target group) needs. The first thing that needs to be done is to make sure the services and products of Starbucks appeal to them. They should offer different things than other coffee places, like different tastes or different sizes. The whole experience of getting coffee at Starbucks should be different from the possibilities you have at the other coffee stores. It is foreign, but it can also fit into Dutch culture. We also want to provide them with comfortable chairs, the possibility to use the internet to work on school, adequate light, good music, etc. In this way, we believe Starbucks will be more easily adopted by the target group. Research results We have done some research to find out how people in Amsterdam would think about a Starbucks opening in their city. We focused on students, them being our primary target group, and interviewed a total of 100 people between the ages of 15 and 30 to be able to generalize the results. As it turns out, the 85% of students are really enthusiastic that a Starbucks will be introduced in Amsterdam. Why? That will be the first Starbucks in the Netherlands and they are proud that it is going to be in their city. When we asked them about their current experiences with the coffee places, there were a lot of different answers. Some really liked the coffee places Amsterdam offered now, but still, they were curious about Starbucks and said they would definitely go there to try it out. Others were really happy with Starbucks because they already knew all the places in Amsterdam and would like to try something new. We also researched their opinion on the prices of Starbucks, which are a little bit higher than other coffee places. Most students were ok with this, because it was new, and foreign. Therefore, the general assumption was that the costs were higher. In the long term of course, they wanted to see something Sophie van der Vecht, Neni Pogarcic, Hidde van der Dussen, Tim Ensing, Dan Mackinnon, Lucia Suchankova extra in Starbucks; a reason why it is more expensive than other places, in other words, value for their money. However, some of the respondents, who already knew Starbucks from other cities in other countries, mentioned that Starbucks does have a lot of variety in its products and it offers extra things like ceramic mugs, the iced and blended coffees and the coffee beans. To get a more general idea of when students planned to visit Starbucks, we asked about habits. 40% of students say they like to drink coffee most while studying, 27% while relaxing and 33% as a reason to get together with friends. This indicates that drinking coffee is a part of the Amsterdam students lifestyle. It also gives insight to how to reach each segment of the

April 200

target specifically. Targets The first target group and they will be our main focus, is students. Amsterdam is a real students city. A lot of different sorts of education is offered there, ranging from different schools, to different educational levels (university, practical school, high school) and different directions. Next to this, there are also a lot of student societies based in Amsterdam, so many students are in the city during the day or they travel through the city to go to the station to go somewhere else. We believe this target group should be the main focus. They are social people and like to hang out, chat and have a drink somewhere outside of their primary residence because many of them live in small, cramped apartments, often with roommates and sometimes still with parents. They might need to talk about a presentation for class or they might have a meeting for their students society, which is usually done somewhere in the city. Starbucks would be the perfect place! This target group will use the take-out service from Starbucks right before or after school or on their way somewhere, but most commonly, they will sit down and talk while consuming the coffee and / or snacks. Amsterdam is a social city; people dont live a very fast paced life, and value spending time with other people. The secondary target group is business people. This group will probably really appreciate the take-out service of Starbucks. They can get a quick coffee before they go to work or after their work, before they get into the train and go back home, in addition to lunch breaks. Numerous big companies are established in Amsterdam, so there is a lot of traffic from business people coming into the city everyday. The success of Starbucks with the secondary target group is based on time poverty business people are generally doing what they can to optimize every minute. Therefore, the quick turnaround time at Starbucks fits the Sophie van der Vecht, Neni Pogarcic, Hidde van der Dussen, Tim Ensing, Dan Mackinnon, Lucia Suchankova lifestyle. Whether for breakfast, a lunch break or after work, business people will appreciate the value of the product in that it saves time without compromising quality. The central location can also be of benefit to this market for business meetings, as it is a neutral place with a wide variety of product offerings. Advertising Objectives We have one main advertising objective and that is to create awareness. There is a new store opening in Amsterdam and we want everybody to know that! To accomplish this, we first have to educate our target group about Starbucks. We have to let them now what Starbucks stands for and what they can offer the clients. We want to communicate to the target group where we will be located and what they can expect from the Starbucks concern. We want to do this with an advertising campaign. (See Strategies) In doing so, we have to take into account the consumer perception process, which consists of five steps: April 2006

1. 2. 3. 4. 5.

Physical date Physiological screens (sensory) Physiological screens (emotional) Cognition Perception files

We believe, Starbucks should focus on the last three, because they are the most important in Starbucks objective to be noticed and to be appreciated by the target group. We want to make Starbucks a place where people feel good, where they are treated with respect by friendly personnel and where they can enjoy and relax. We want to make consumers feel good being in Starbucks and experiencing their services and products. Because Starbucks has the advantage of being able to offer a lot of different products, there is something for everyone; tailor-made service / product. (Physiological screens, emotional) To create awareness, we first want to make the people curious of what is going to happen. We will not right away reveal that there is a Starbucks coming in Amsterdam. We want to make the people anxious, curious and interested so that they will follow the whole process of the introduction and implementation of the new store, which will make them more willing to go there when it is actually established there. (Cognition)

Sophie van der Vecht, Neni Pogarcic, Hidde van der Dussen, April 2006 Tim Ensing, Dan Mackinnon, Lucia Suchankova Last but not least, as said before, Starbucks is entering a highly competitive market in Amsterdam. There are many substitutes available there. That is why Starbucks should not be perceived as just another coffee place but as something more than that. It should raise everybodys expectations and it should clearly state that they can offer everything to everybody. Starbucks puts people first and adjusts the products they offer to them. (Perception files) We can also look at the advertising pyramid (please see appendix H) First, we want to make people aware of the new Starbucks store, which is basically the main activity. All the focus should be on that. We want to make awareness process so strong, that the consumers are almost willing to go on to action right away and skip the other three steps in the pyramid. Strategy: Media Plan Mix In accomplishing the advertising objectives stated above, we want to use different sorts of advertising. We will not use the tv ads as a medium. Starbucks has never done this because it is not effective in reaching the market at the right time and place, so we wont use it here either. First, we want to use posters. We will focus on the public transportation system as the vast majority of students has to use this in going to school. We will place big posters in the train stations in Amsterdam (Amsterdam Amstel, Amsterdam Bijlmer, Amsterdam Centraal, Amsterdam Lelylaan, Amsterdam Muiderpoort, Amsterdam Sloterdijk and Schiphol Airport). These stations are used for people coming in to Amsterdam. We will also put posters in the metro stations and at the stops of the trams.

Next to this, we will make use of the possibility to hang up posters in the metro and in the trams. Although these posters are smaller, their position right next to direction signs ensures that they will be seen by everybody. We also want to make use of the internet. We want to approach the companies with internet sites which are popular and frequently used among students. We are thinking about the following opportunities: - Radio 538, which is the most and best, listened to radio station in the Netherlands by students. - Hyves, which is a site to find old friends and to keep in touch with them. It is mostly used by students and research shows that more that 75% of the students use this site. - Hotmail.nl - University websites

Sophie van der Vecht, Neni Pogarcic, Hidde van der Dussen, Tim Ensing, Dan Mackinnon, Lucia Suchankova Last but not least, we want to place advertisements in school papers or in magazines distributed to schools or students. Every university or school in Amsterdam has its own newspaper where we can place ads in. Next to this, we want to approach the biggest students societies (the societies with the biggest and largest reach of students in Amsterdam) and place ads in their magazines. To reach the secondary market, the billboards along the side of the main roadways and highways will be utilized also. The campaigns will be unified throughout Amsterdam to send a stronger message, and to increase retention among the primary and secondary target markets.

April 2006

Frequency Posters We want to start the advertising campaign 4 to 6 weeks before the Starbucks store actually opens. The first 2 weeks, we want to make the target groups curious. We want to draw their attention and we want to make them wonder and think about what is going to happen. We want to involve them in the whole implementing process. This will be internally referred to as Phase 1. The next 2 to 4 weeks, or Phase 2, the ads will be altered slightly to include more information, such as the date of the grand opening and perhaps a general location. In Phase 3, which will take place 2 weeks before the grand opening, we will reveal the opening of the new Starbucks store. We will announce the exact location. We want to make this opening really important so we want to build up curiousity throughout the first part of the campaign, and once they are interested, give away the rest. Internet The internet is a good medium to use because the primary target market has proven to be almost completely computer literate. Hotmail is a popular service with the age group and allows segmentation in terms of marketing. When users sign up, they enter their full address. Therefore, it is possible only to place banners on Amsterdam students sites. This lowers the CPM (cost per thousand), and effectively targets the primary target market. The banner ads used online will follow the same timeline and look as billboards, only in a different format. This ensures the strength of one single message, rather than confusing consumers with varying messages, which individually would be more difficult to remember. Ads

Advertisements placed in school newspapers and other student publications will also be synchronized with the other mediums. The goal is to place an ad in the same part (ideally, the samepage) of the paper, changing the insertion based on the phase of the campaign.

Sophie van der Vecht, Neni Pogarcic, Hidde van der Dussen, Tim Ensing, Dan Mackinnon, Lucia Suchankova Cost insertion The advertising portion of the marketing plan has a budget of $40,000, or about 9% of the total budget. This is to be distributed among the three media that have been selected. Billboards will receive the highest portion of the budget as a result of its wide reach, approximately $25,000. The internet ads will have a budget of $5,000, and the remaining $10,000 will go towards print ads. These two allocations are based on cost of insertion (internet is much cheaper than print ads),but also based on reach. Print ads will be reaching a much more specific, targeted audience. Flighting For all three mediums, posters, internet, and print ads, the flighting will be the same. Due to the nature of the campaigns, whereas they are three phases of the same ads, it is necessary to maintain even flighting throughout the campaign. During the third phase, an additional advertisement will be used with only the relevant information: a logo, address, and an announcement about the grand opening party. These will be placed in the same types of locations as the other ads, but refocuses the audience on the important when and where information. Strategy: Creative The creative is split up into two series within the same campaign. To see the ads, please see Appendix I for Series 1 and Appendix J for Series 2. Phase 1 ads focus on posing a question in the consumers minds, and to get them thinking. The mystery of seeing an ad and not knowing what it is for is what will make it easier to remember. By the time Phase 2 comes around, the consumer will realize it is a series, and continue to look back throughout the second phase to see what the completion of the ad will look like. Phase 3 is meant to create excitement and pride excitement that a well known, successful company is about to open in Amsterdam, and pride because Amsterdam now joins hundreds of other cities around the world in the Starbucks family.

April 2006

Creative platform The artwork selected for the background of the ads was purposely chosen not to focus on a specific continent. The view of the world is unusual, with the cities floating above and around the globe. It is a contemporary look at the world, as cities come closer with globalization, and geography becomes less important in the world of business. The campaign puts Starbucks Amsterdam in the centre of the map, among the worlds greatest cities. This evokes the feeling of pride that is part of the creative strategy. The mysterious structure of the campaign, with its triphasal approach, is what creates the excitement. Sophie van der Vecht, Neni Pogarcic, Hidde van der Dussen, Tim Ensing, Dan Mackinnon, Lucia Suchankova The strategy has been proven in other campaigns to get people talking and eventually produce word of mouth, which can be the strongest way to April 2006

advertise, without costing a penny. The copy works well with the visual to create that mystery, while incorporating Starbucks colours and in Phase 3, important information about the grand opening. Overall, the composition is well harmonized, and reaches the advertising objectives that were defined. Big Idea Starbucks is a cool just run in and out friendly atmosphere the world a world

place to study, meet new friends or talk to old ones, or for coffee the way you like it, with the familiarity of a that students and business people are enjoying around that Amsterdam is now joining.

Sophie van der Vecht, Neni Pogarcic, Hidde van der Dussen, Tim Ensing, Dan Mackinnon, Lucia Suchankova Appendix A:Price of a Starbucks tall latte

April 2006

Sophie van der Vecht, Neni Pogarcic, Hidde van der Dussen, April 2006 Tim Ensing, Dan Mackinnon, Lucia Suchankova Appendix B: Map of Downtown Amsterdam

Sophie van der Vecht, Neni Pogarcic, Hidde van der Dussen, April 2006 Tim Ensing, Dan Mackinnon, Lucia Suchankova Appendix C: Marketing to Youth exerpt

Marketing to Youth Starbucks customers are people of diverse ethnic, income and age groups with varying tastes and interests. We embrace their diversity and strive to provide excellent customer service to those we serve by offering products that are relevant to our customer base and their varying interests and tastes, including some products which may appeal to young people. While the Companys overall marketing, advertising and event sponsorship efforts are not directed at children or youth, Starbucks has a long history of supporting community activities and events important to our customers, including young To help ensure all of our marketing efforts remain consistent with these principles, we have formalized our long-standing practices by implementing new review policies for all our marketing and communications activities. Review and Enforcement Appropriate measures and best efforts are taken so that Starbucks advertising and marketing is not specifically aimed at reaching young consumers. Communication of the policy: Starbucks policy on marketing to youth is shared with all staff within the marketing function. Campaign and Sensitivity Review: Starbucks marketing materials and

promotional campaigns undergo a formal sensitivity review process prior to their approval and distribution. This process, led by Marketing, involves a panel of Starbucks employees from key parts of the organization -- such as Customer Relations, Public Affairs, Corporate Social Responsibility, Diversity, Internal Communications, and Legal -- who review marketing elements and provide input verbally and in writing. The purpose of the panel is to identify in advance and avoid distributing marketing materials that could be inadvertently appealing to youth, racially offensive, widely contentious or culturally insensitive. If consistent feedback is provided from members of the panel about a potential issue, the Marketing team adjusts the materials or campaigns to alleviate the issue. Media Buying: When planning and executing marketing campaigns in which paid advertising media is used, Starbucks has instructed its advertising agency to select media vehicles whose audience composition is closely aligned with Starbucks adult customer base.

Sophie van der Vecht, Neni Pogarcic, Hidde van der Dussen, Tim Ensing, Dan Mackinnon, Lucia Suchankova Appendix D: Average Statement of Earnings

April 2006

Average Starbu STATEMENTS OF EARNINGS DATA Total revenues Cost of sales including occupancy costs $ Store operating expenses Depreciation and amortization expenses $ General and administrative expenses Subtotal operating expenses Operating income Interest and other income net EBIT Income taxes Net earnings $ $ $ $ $ $ 262.400,00 $ 38.400,00 38.400,00 579.200,00 $

640.000,00 218.666 240.000,00

32.

60.800,00 1.500,00 $ 62.30 23.362,50 38.937,50

Sophie van der Vecht, Neni Pogarcic, Hidde van der Dussen, Tim Ensing, Dan Mackinnon, Lucia Suchankova Appendix E: Amsterdam Pro Forma Statement of Earnings STATEMENTS OF EARNINGS DATA Total revenues Cost of sales including occupancy costs $ Store operating expenses Depreciation and amortization expenses $

April 2006

Average Star $ 262.400,00 $ 38.400,00

640.000,00 200.0 240.000,00

General and administrative expenses Subtotal operating expenses Operating income Interest and other income net EBIT Income taxes Net earnings

$ $ $

38.400,00 579.200,00 $ $ $

60.800,00 1.500,00 $ 62.30 23.362,50 38.937,50

Sophie van der Vecht, Neni Pogarcic, Hidde van der Dussen, Tim Ensing, Dan Mackinnon, Lucia Suchankova Appendix F: Pro Forma Balance Sheet ASSETS Current assets: Cash and cash equivalents Accounts receivable, net of allowances Inventories Total current assets Long-term investments Equity and other investments Property, plant and equipment Other assets Other intangible assets TOTAL ASSETS LIABILITIES AND SHAREHOLDERS EQUITY Current liabilities: Accounts payable Short-term borrowings Total current liabilities Long-term debt Other long-term liabilities Shareholders equity: Retained earnings Other additional paid-in-capital Total shareholders equity TOTAL LIABILITIES AND SHAREHOLDERS EQUITY

April 2006

7.348,00

10.

59.5

33

3.232,0

152.419,00

Sophie van der Vecht, Neni Pogarcic, Hidde van der Dussen, Tim Ensing, Dan Mackinnon, Lucia Suchankova Appendix G: Amsterdam high and low forecast Statement of Earnings Amsterdam Expectation STATEMENTS OF EARNINGS 2 DATA Total net revenues Cost of sales & occupancy costs Store operating expenses Depreciation amortization expenses General and expenses 550.000,00 650.000,00 225.500,00 250.000,00 and 33.000,00 administrat. 33.000,00 Subtotal operating expenses 541.500,00 594.500,00 Operating income Interest and other income net EBIT Income taxes Net earnings 1.041,67 8.500,00 868,06 9.541,67 3.578,13 5.963,54 35.230,03 21.138,02 55.500,00 554.000,00 39.000,00 3

April 2006

Amsterdam yrExpectation yr 600.000,00 266.500,00 300.000,00 39.000,00

250.000,00

35

32.00

3 664.000

46.000,0 723,38

56.368,06

17.5

29.2

Sophie van der Vecht, Neni Pogarcic, Hidde van der Dussen, Tim Ensing, Dan Mackinnon, Lucia Suchankova Appendix H: Advertising Pyramid

April 2006

Sophie van der Vecht, Neni Pogarcic, Hidde van der Dussen, April 2006 Tim Ensing, Dan Mackinnon, Lucia Suchankova Appendix I: Creative Series 1 Phase 1

Phase 2

Sophie van der Vecht, Neni Pogarcic, Hidde van der Dussen, Tim Ensing, Dan Mackinnon, Lucia Suchankova

April 2006 Phase 3

Sophie van der Vecht, Neni Pogarcic, Hidde van der Dussen, April 2006 Tim Ensing, Dan Mackinnon, Lucia Suchankova Appendix J: Creative Series 2 Phase 1

Phase 2

Sophie van der Vecht, Neni Pogarcic, Hidde van der Dussen, Tim Ensing, Dan Mackinnon, Lucia Suchankova

April 2006 Phase 3

Sophie van der Vecht, Neni Pogarcic, Hidde van der Dussen, Tim Ensing, Dan Mackinnon, Lucia Suchankova

April 2006