Jacqueline Supman
Merchandise Strategies
Case Study: Starbucks
In an age of brand hyper-saturation, removing the
company name from the company logo, as Starbucks
recently did, is not going to be bad for business.
With over 16,850 stores in 40 countries, the world’s
number one specialty coffeehouse is churning out
coffee drinks, food items, teas and brew accessories
faster than you can say “triple pump white mocca
nonfat extra hot latte.” The coffee powerhouse is
also collecting revenue from Seattle’s Best Coffee as
well as Torrefazonie Italia coffee brands, in addition
to selling the Starbucks brand in grocery stores and
licensing itself to other foodservice companies. And
it doesn’t stop there – in an attempt to dip their toe
in other aspects of the retail business, Starbucks
chain’s sells music, books, various lifestyle products
while also collaborating with food manufacturers
such as Nestlé’s, Beam Global Spirits and PepsiCo.
Gordon Bowker, Jerry Baldwin and Ziv Siegl
launched Starbucks in 1971; by 1982 the brand had
five bricks and mortar stores in addition to selling
coffee to restaurants and local Seattle espresso
stands. In that same year Howard Schultz joined the
company to oversee sales and marketing. During a
trip to Italy Howard saw the potential for great
success with the popularity of coffee bars abroad
and decided to mirror it’s business model at home.
Upon his return, he convinced Bowker, Baldwin and
Siegl to open a downtown coffee bar and then left the
company to open his own coffee bar, Il Giornale, who
1 hoovers.com
of course, served Starbucks coffee. By 1987 Il
Giornale ended up purchasing Starbucks for $4
million while expanding out of Seattle into Chicago
and Vancouver.
Business started off to a rocky start in the 1980’s
when focus on expansion overlooked costs. However
by 1991 Starbucks became the nation’s first privately
owned company to provide stock options to all
employees and in the following years added the likes
of Nordstrom’s department store, Barnes & Noble
bookstore and Sheraton hotels to it’s wide range of
store locations. Global expansion quickly followed:
1996 marked the first Starbucks in Japan and
Singapore, and in 1998 the company opened it’s
doors in the UK, turning their Seattle Coffee into
Starbucks branded coffee houses. Come 2000
Schultz had given up his position as CEO to focus on
international growth, and by 2001 1,100 stores were
opened worldwide. In 2008 Schultz returned as
CEO.
Unfortunately the economic crisis of 2008 took its
toll on the java house – 800 stores were closed in
2008 and 2009 in an effort to cut costs. The focus of
national growth thus took a backseat to
international markets, primarily in Brazil, China,
India and Viet Nam. While business is getting better
(2009 sales weighed in at roughly $390 million,
where 2010 brought in around $945 million, a 9.5%
increase 1 ) competition is getting stiffer. On top of
the obvious competitors such as Pete’s Coffee or
Coffee Bean, fast food channels such as McDonalds
and Dunkin Donut’s are serving gourmet coffee –
cheap, and with on-the-go ease to suit the everyday
working American consumer. In response to the
market expansion in the fast food industry,
Starbucks has incorporated their merchandise into
fast food heavyweights such as Subway and Burger
King to offset the competition.
So now, the million dollar marketing question would
be how does Starbucks balance the happiness of the
customer who comes to enjoy a cup of coffee in their
atmospheric, lounge-mimicking store in addition to
the patron who wants to get in and out at a good
price? First, Starbucks recently announced their
new mobile application for the Blackberry and
iPhone, which enables consumers to pay for their
drinks via their mobile phone. Starbucks also offers
an app specifically for the iPhone where users can
find the closest Starbucks location, build their
custom drink order to share with friends, view
nutritional information and read stories and facts
about the brand. There is no doubt that the mobile
space is lucrative for brands; 82% of American’s own
a cell phone. However, of that 82% only 17% own a
smart phone. 2 An easier way to reach the 65% of
your target audience would be to run simple SMS
campaigns, which can be accessed on all phone
types, as long as the individual has a text plan. SMS
campaigns enable brands to launch virtually the
same type of campaign found on a smart phone with
a greater reach and more instantaneous interaction,
as SMS campaigns require no application download.
Hence, Starbucks could be delivering the same
promotional offerings to a much larger audience
while strengthening their brand resonance with
customers.
In regards to loyalty programs, Starbucks does offer
a Starbucks rewards card, where users can sign up
and earn points towards free drinks and other
branded goodies. However the sign-up process is
tedious and requires a great deal of information such
as credit card, name, address, email, mobile phone
and date of birth. Modern day consumers either are
delighted to provide such details or are turned off by
inadvertently being added to a CRM database. In
order to bridge the gap of folks who want to be a full
blown Starbucks member and those who just want
to be rewarded simply for buying coffee at the same
place, Starbucks should offer an old fashioned punch
card where 10 punches equals a free coffee. In a
digital age it is nice to have the latest technology to
notify consumers of the latest coffee blend, but it’s
also nice to have the option of unfussy simplicity.
Last, adding to Starbucks profits has been the
incorporation of hot and cold food items. Starbucks
should take it upon themselves to research the
regional store locations to better understand the
preferred food options of the particular area. For
example, San Francisco is one of the biggest veganfriendly states in the country, thus local city
Starbucks should carry vegan products to attract a
populated niche consumer. By going above and
beyond their initial offering, Starbucks could grow
their customer base by showing consumers that
their specific needs are catered to at the local
coffeehouse. Starbucks could also help out local
vegan bakeries by adding them as contacts to their
wholesaler list, thus driving regional market sales in
the vegan industry.
Without a doubt, Starbucks is the industry leader in
technological marketing. In comparison to
competitors Peet’s Coffee and Coffee Bean,
Starbuck’s is superior in the following ways:
Starbucks offers free, unlimited internet, with no
login / password required. Peet’s offers free internet
with purchase for one hour; Coffee Bean offers free
unlimited internet after entering a required
password. Second, neither Peet’s nor Coffee Bean
offer mobile applications or have implemented the
option of mobile purchase. Last, Starbucks is
making a killing in social media with over 19 million
Facebook fans, where Peet’s and Coffee Bean are
ranging at 55,000 and 146,000 fans respectively.
New logo or old logo, it is evident that Starbucks
pulls rank in specialty coffee.
Works Cited
• Hoovers.com
• http://articles.cnn.com/2010-09-30/tech/
gahran.smartphone.ownership_1_feature-phonescell-phone-smartphones?_s=PM:TECH
2 http://articles.cnn.com/2010-09-30/tech/gahran.smartphone.ownership_1_feature-phones-cell-phone-smartphones?_s=PM:TECH