Starbucks - Video Case 15 ’ Global Marketing Case in...

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Unformatted text preview: Video Case 15 ’ Global Marketing Case in Point: Starbucks lf you have a passion for something, you should go for it. Even if lots of people tell you you’re crazy. Starbucks: what a goofball concept. Let’s recap. Forty-five years ago, coffee beans go up in price. At first, higher prices are passed along to the consumer, then coffee roasters start cutting back and using cheaper beans. The result: worse coffee at higher prices. This does not sound like a great value proposition for the consumer. Coffee never went away, but consumption definitely declined. Then what? Ta da! Starbucks says, “Let’s sell coffee! No, not the same old coffee—really good coffee. And yes, very expensive coffee. We’ll even have a shop devoted to it. We’ll convert the American lifestyle, make it more European.” It worked: 5,400 stores in 27 countries, fast growth (700 stores opening in the past 2 years), and revenues at almost $3 billion. When a Brand Is More than the Product The Starbucks vision is to serve people who care about coffee. More than that, though, it’s to serve as a touchstonewto offer a coffeehouse where a consumer can make daily connections with other people. More than that, Starbucks wants to be seen as a socially responsible corporation that cares about community. How do you keep that neighborhood coffee shop feeling as you grow to be nearly omnipresent? Starbucks knows that rela- tionships are forged between its employees (its “partners”) and its customers, so it treats them well, reasoning that a happy employee will help make a happy customer. Employees who like their jobs will come to work with a better attitude and will stay with the company longer. As a result, they’ll know more about the products and be better able to serve customers. Customers are happier with the better service, and a positive, reinforcing cycle between the customer and the employee develops. Taking the Company Global This formula can work in any country. Whether people drink coffee or not (for example, Europeans do, but Asians don’t drink much), people are always interested in other people. The inter- personal touch speaks to the fact that Starbucks grows through word of mouth, a really tricky “marketing” phenomenon. It’s tricky because, although it’s very powerful (for example, Starbucks doesn’t have to spend money on a national advertis- ing campaign), the company doesn’t control it. In the United States, word of mouth is sufficient enough that when the company announces its plans to open a shop in a par- ticular location, people are primed and ready. Customers begin to patronize the store as soon as it opens. How do you grow like this in other countries? In Europe, cof- fee consumption is big, and even the behavior of going to a cof- fee shop is familiar and appealing. The question is whether or not it will be as attractive to go to a—gasp— “US. export chain”? In Asia, the issues are more fundamental. Coffee consump~ tion isn’t as prevalent, so Starbucks isn’t just a choice among other options, as in Europe. Rather, Starbucks has to take on the challenge of pioneering the category and stimulating primary demand. That is, Starbucks first has to get the Asian consumer to think “I’d like to go get a coffee.” When Starbucks is the only coffee shop in town, it’ll clean up and get all the business. Test Case: China China is steeped in some 5,000 years of tea drinking, so the mar- keting savvy of Starbucks is really going to be put to the test if it is to achieve its goal of opening hundreds (l) of cafés in greater China in the next few years. It wants to tap into China’s emerg- ing middle class and help them develop a taste for coffee and going to coffee shops. Starbucks’s managers know their success is not just about the coffee per se, so they’re trying to choose great locations for their stores—and doing it the old-fashioned way: observational marketing research techniques. They go to a potential store site, and with handheld counting devices, they click every time they see a target customer walk by. In addition to cultural resistance, Starbucks might encounter other problems. Even for the so—called middle-class Chinese cit- izen, Starbucks is going to be seen as expensive. At the price of 22 renminbi ($2.65), even a medium latte costs a lot. The monthly disposable: income of the average three-person house— hold in China is $150. Starbucks has no immediate plans to cut prices. It would be seen as a luxury and that might have some appeal. However, compare that to Starbucks’ positioning in the United States: Is it an item you have to save up for and can indulge in only occasionally? In Japan, Starbucks is experimenting with offering alcohol, trying to revive the marketing buzz to counter the falling sales it’s seen there. Yet in the end, this tactic might not be consistent with Starbucks. The alcohol might dilute the character of the store because it attracts a more boisterous crowd, which in turn spoils one of the chain’s main benefits: the quiet and peaceful refuge the traditional Starbucks offers to the busy urban Japanese consumer. The Social Environment Coffee shops, and Starbucks in particular, have long served as the focal point for business people whose jobs are independent of an office, for example, consultants and writers: Have laptop, will travel to Starbucks. Even if you think five bucks is a lot for a cappuccino, it’s still a smaller per diem than office rental in most cities. In a weird twist, business analysts observed an upswing at Starbucks as the US. economy was in a downswing. Apparently, unemployed white-collar workers were going to the cafes as if they were job—search centers. They were going every day to get some coffee and network, which provided a routine similar to going to an office. Other Happenings To answer the outcry of political activists, and to speak to their concern for community, Starbucks offers “fair trade cof— fee,” which involves explicitly using fair business practices when selecting beans from farmers. Starbucks listens to its customers. Over the years, consumers have suggested extending the Starbucks product line to include sandwiches, gum, chocolate, wireless Internet access, iced and blended coffees and teas, and other items. Much of Starbucks’s R&D originates not from the company but from these customer suggestions. Starbucks is entering the grocery store venue, disentangling the coffee offering from the coffee shop. It also has devel- oped partnerships with United Airlines and Marriott Hotels. Starbucks has introduced its own “Frequent Java” card, with which your purchases accrue credits to apply to subsequent Starbucks purchases. It offers a prepaid card plan, which benefits the company by storing your purchase history. Expect to see an ordering device soon where you’re asked “Your usual?" Starbucks is sponsoring the Toronto International Film Festival because the demographics of these cinema viewers are consistent with their target market. In response to a segment of consumers demanding indul- gence foods, Starbucks is selling more cream—based coffees. Questions for Discussion 1. 2. How do you apply the adage “Think globally, act locally” to brands? In the video, the manager says, “A company owns a brand legally, but the consumer owns the brand in the market.” What do you think that means? Do you agree? Do you go to Starbucks or to a coffee shop like it? Do you go for the coffee or for the social buzz? How can a company market a product (the coffee)? How can it market an experi- ence (the shop)? ...
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This note was uploaded on 11/15/2010 for the course MKTG 380 taught by Professor Robbins,j during the Spring '08 term at Winthrop.

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Starbucks - Video Case 15 ’ Global Marketing Case in...

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