Starbucks

GROUP MEMBERS:
Charish C. Semilla
Ivy F. Rosalejos
Jayward Legal
Jaymark B. Salazar
Jessa Mae D. Navita
Aivegen A. Parilla
Analane I. Sobrecary
Jonel C. Quiño
Lovely M. Samillano
Zyrah Mae B. Conception
 Starbucks has been described as the main representative of “second wave
coffee,” a retrospectively termed movement that popularized artisanal coffee,
particularly darkly roasted coffee. Since the 2000s, third wave coffee makers have
targeted quality-minded coffee drinkers with hand-made coffee based on lighter roasts,
while Starbucks nowadays uses automated espresso machines for efficiency and safety
reasons.

Starbucks locations serve hot and cold drinks, whole-bean coffee, micro ground
instant coffee known as VIA, espresso, caffe latte, full- and loose-leaf teas including
Teavana tea products, Evolution Fresh juices, Frappuccino beverages, La Boulange
pastries, and snacks including items such as chips and crackers; some offerings
(including their annual fall launch of the Pumpkin Spice Latte) are seasonal or specific to
the locality of the store. Many stores sell pre-packaged food items, hot and cold
sandwiches, and drink ware including mugs and tumblers; select “Starbucks Evenings”
locations offer beer, wine, and appetizers. Starbucks-brand coffee, ice cream, and
bottled cold coffee drinks are also sold at grocery stores.

KEY QUESTIONS TO GOOD MARKETING

1. Who are the target market of Starbucks?

Starbucks’ primary target market is men and women aged 25 to 40. They
account for almost half (49 percent) of its total business. Starbucks’ appeal to this
consumer age group through hip, contemporary design that is consistent in its
advertising and decor. And working to keep its products current as status symbols.
Customers tend to be urbanites with relatively high income, professional careers and a
focus on social welfare. This target audience grows at a rate of 3 percent annually.
Young adults aged 18 to 24, total 40 percent of Starbucks’ sales. Starbucks positions
itself as a place college students can hang out, study, write term papers and meet
people. A Starbucks appeal to this consumer directly through introducing technology as
soon as it comes available, focusing on social networking and actively cultivating a “cool”
image. The young adult audience grows 4.6 percent each year. Kids and teens are also a
large part of Starbucks’ target audience. Together, customers aged 13 to 17 accounts for just 2
percent of Starbucks’ sales, but most items for kids are purchased by the parents. Whether the
focus is on the steamed milk that Starbucks’ baristas refer to as “babyccinos” or the sugary,
caffeinated, whipped cream topped coffee drinks that are so popular with teenagers, kids and
teens form a large part of Starbucks business.
2. What are the needs, wants and expectation of the target market?

At the heart of what any consumer wants is value from their product or service.
Therefore marketing-orientated companies attempt to create customer value in order to
attract and retain customers. As trends emerge though, the needs and expectations of
the consumer in order to ascertain this value changes. In any service you try and deliver
the basic expected service and not irritate them whilst you’re doing it. It’s dependent on
how the customer perceives the benefits of an offering and the sacrifice that is
associated with its purchase. In the coffee industry, the consumer may determine the
cost of buying a coffee as the price of the item and the time taken to get the coffee, and
if the perceived benefits of taste, effect, look etc. don’t match up then the consumer
won’t purchase the coffee. The target market of Starbucks demand greater
transparency along supply chains and are willing to pay higher prices for ethically
and environmentally sourced food and drink products. This means that the firms have to
be socially responsible in their practices and mindful of the environmental impact of their
company. Starbucks recognize the changing nature of their customer. As customers
have begun to expect this major coffee shop have adjusted their practices to align with
expectations.

3. How can they be satisfied continuously?

Starbucks is a stellar example of, What can we do next to dazzle the customer?
Blackiston says. Starbucks understands that a great brand experience is all about
understanding customer needs, attitudes, and behaviors, and then continually finding
innovative ways to meet and surpass those needs. When we think of customer service,
the company pops in our mind might be Starbucks. Starbucks does a great job by
making their customer feel that they are important. This is crucial to fostering success.
Starbucks does this by knowing their names and their orders to which customers react
well to. They continuously satisfied their target market through their values. Starbucks
does not stop there, and neither should you. Starbucks continuously is implementing
customer feedback to create new products. By listening to customer wants and ideas,
they are able to both satisfy demand and capitalize on previously unrealized
opportunities. Starbucks always believe that never stop thinking about your customer.
They should be influencing your next steps and new ideas. The more they are cared for,
the better you are doing your job. At one time or another we have all heard the idea that
the customer is always right.
4. Who are their direct and indirect competitors?

Starbucks competitors are bound to be many. In the recent past, Starbucks has
had a fierce battle with a number of market giants for top position in the world retail
coffee industry. Its strategy is designed to focus on customer desire and preference,
expansion of menu options and physical store locations. With this strategy, Starbucks
aims to improve their customer service, expand their customer base and snatch
consumers from their competitors. Starbucks’ competitors list can be long. It is
dominated by major players with reputable capability to influence for a good competitive
position in the industry. Some of them are direct competitors while others are indirect
competitors. The direct competitors of Starbucks are Costa Coffee, McDonalds McCafe,
Dunkin Donuts, and Café Coffee Day. While their indirect competitors are Independent
Fast food chains and Bakeries, McDonalds, Kentucky Fried Chicken (KFC), Tazo,
Twinings, Tetley, Dilmah, The Republic of Tea, Peet’s Coffee, Tim Hortons and The
Coffee Bean.

5. How can they be superior to competition?

Starbucks seeks to provide a connected customer experience to build and

maintain a long term relationship. More than just offering fine coffee, the coffee giant
provides the “Starbucks Experience” which makes customers feel at home, forming a
strong emotional attachment. Starbucks stores are designed with great ambiance in
mind in accessible locations. According to Michael Porter, three general types of
strategies can be used to achieve a sustained competitive advantage. They are cost
leadership, differentiation and focus. Porter describes the strategy of differentiation as
the delivery of quality products or services that are perceived to be unique and valued
by consumers. Product differentiation is the core of Starbuck’s strategy to gain a
sustained competitive advantage. Starbucks offers such differentiation through an
excellent customer experience and quality coffee The “Starbucks Experience” is achieved
through its well-designed stores with good ambiance and well trained staff. According to
a study conducted by Daily Mail, Starbucks stores provided a more welcoming décor with
friendlier baristas compared to independent coffee houses. The differentiation strategy of
being a premium and unique coffee drinking provider has allowed Starbucks to achieve a
sustained competitive advantage.

6. How can the organization maximize its profitability without alienating its customer’s
needs, wants and expectations?

Maximizing customer satisfaction makes an important contribution to maximizing

profitability, although other factors such as cost control, productivity and marketing
strategy also impact the bottom line. By maximizing customer satisfaction, you can
increase the opportunity for repeat sales to customers, while reducing the cost of sales
and marketing. Customer satisfaction helps to increase customer loyalty, reducing the
need to allocate marketing budget to acquire new customers. Satisfied customers may
also recommend your products or services to other potential customers, increasing the
potential for additional revenue and profit. Starbucks is a master of employing value
based pricing to maximize profits, and they use research and customer analysis to
formulate targeted price increases that capture the greatest amount consumers are
willing to pay without driving them off. Starbucks coffee maintains a fairly inelastic
demand curve, and a small price increase can have a huge positive impact on their
margins without decreasing demand for beverages. Starbucks also expertly
communicates their price increases to manipulate consumer perception. The price hike
might be based on an analysis of the customer’s willingness to pay, but they associate
the increase with what appears to be a fair reason. They also apply price increases to
specific drinks and sizes rather than the whole lot. By raising the price of the tall size
brewed coffee exclusively, Starbucks is able to capture consumer surplus from the
customers who find more value in upgrading to grande after witnessing the price of a
small drip with tax climb over the $2 mark. By versioning the product in this way, the
company can enjoy a slightly higher margin from these customers who were persuaded
by the price hike to purchase larger sizes.

7. What metrics do we use to measure success?

Anyone who has seen Shark Tank knows that there are plenty of ways to
measure business success. It can be hard to take a step back and look at your own
business like a “shark” would, but it helps ensure you’re doing everything you can to
make your company a success, and lets you take action if there are areas that need
improvement. Every business has a culture, whether you know it or not. Culture doesn't
come from an email or a mission statement, culture is something you live. Staying
connected with employees in dozens of stores would be tough enough. Each employee
knew that someone in management knew them, their family, and their goals. When the
employee knows that the company cares about them, then the employee can freely care
about the customer. Starbucks six metrics are the revenue growth, global comparable-
store sales growth, U.S. comparable-store sales, active rewards members, new store
openings and comparable-store sales guidance.

Revenue Growth

Starbucks revenue for its first quarter or fiscal 2019 rose 9% year over year. This
growth is down from its 11% year over year revenue growth in its fourth quarter of fiscal
2018. However, when both quarters are adjusted to exclude non-recurring items and 9%

year over year.

Its good to see Starbucks maintain its adjusted revenue growth rate from Quarter
4, as that quarters revenue growth represented a meaningful acceleration from the 7%
year over year adjusted revenue growth in its third quarter of fiscal 2018.

Global Comparable-Store Sales Growth

Starbucks global comparable rose 4% in the first quarter, extending the metrics
streak of accelerating growth global comparable increased 1% in quarter 3 of 2018 and
3% in quarter 4 of 2018.

“We are particularly pleased with the sequential improvement in quarterly

comparable store transactions in the U.S., “CEO Ken quarter 3 of Vin Johnson said in the
company’s fiscal first quarter earnings release, underpinned by the organization digital
initiatives and improved execution of our in-store experience.

U.S Comparable-Store Sales

Helping Starbucks strong comparable growth was a robust performance in the

U.S., where comparable increased 4% year over year.

Active Rewards Members

The company’s active Starbucks rewards members rose 14% year over year to
16.3 million. This is nearly in the line with the company’s strong 15% year over year
growth in active rewards members in quarter 4.

By definition, active rewards members or a customer loyalty program is a

marketing approach that recognizes and rewards customers who purchase or engage
with a brand on a recurring basis. A company may dole out points or perks, and
graduate customers to higher levels of loyalty the more they buy. These incentives and
specific benefits often result in the customer becoming a more regular consumer or the
ideal — a brand promoter. Benefits may involve free merchandise, rewards, coupons, or
insider perks like early access to new products.

New Store Openings

Starbucks continues to open new stores at a rapid rate. During its fiscal first
quarter, it opened 541 stores, bringing its total store count to 29,865, up 7% from the
year-ago quarter.
 Highlighting the company’s bullish view for China, the store count in that country
was up 18% versus the year-ago quarter.

Comparable Store Sales Guidance

“With the solid start to the fiscal year, we are on track to deliver on out full-year
commitments,” Johnson said in the earnings release. This is important because the
company has made a habit of reducing its outlook for key metrics in recent years.

Management was previously guiding for 3% to 4% growth in comparable for fiscal

2019, and it continues to expect growth to be in this range. In addition, the company
expects to open 2,100 new stores globally during the fiscal year.

- If we are going to site Starbucks in the Philippines, will its still be the
same metrics?

As we search from the internet, we couldn’t find any same metrics between U.S
and Philippines. Maybe it will never be the same metrics anymore. Yes, it will be
profitable growth, if the business is doing good or not and also if the business is worth it
to be improved. We saw some metrics that has been used by the Starbucks Philippines
to measure success and it is rating towards the direct and indirect competitors. There
are lots of best Coffee Shops here in the Philippines like, The Coffee Project, Manila’s
Best Coffee, Dreamland Café, The Coffee Bean and Tea Leaf, Bo’s Coffee, Tim Hortons
Café and Bakeshop, St. Marc Café, Krispy Kreme and Dunkin Donuts but in the ratings,
Starbucks mark itself as the highest one for having a good rating. They use this metrics
so that the organization will know how well or not their skillful techniques and strategies
applied to its target markets compared to its competitors.

They also have this metrics that is also used by the Starbucks Philippines to
measure success. It is what they called Sensor Tower which we found its definition that
this Sensor Tower helps mobile companies acquire more users organically. Our tools help
developers track their App’s search rankings within App Stores. We provide data on what
keywords they should be using by giving them traffic and competitiveness estimates. We
show them their competitor’s keywords. We alert them when their rankings change.
Sensor Tower is the leading solution for mobile marketers, app developers, and industry
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