Starbucks Coffee Company remains the largest chain of coffee shops in the world and the leader in the second wave of coffee culture that saw the promotion of high-quality coffee beans for mass consumption. A look into its marketing strategy through its marketing mix can help understand better how it operates and why it has become successful.
4Ps and Starbucks: Marketing Mix Analysis
1. Product Strategy
Note that Starbucks is a coffeehouse first and foremost that provides coffee drinks, other beverages, and food items in-store following a fast-food model. However, over the years, it has expanded its product range that includes company-branded merchandise and processed food items available in its stores or third-party distributors.
The entire product strategy of Starbucks consists of three focus points. The first focuses on in-store beverage and food items and while the second focuses on value-added services. The third focuses on out-of-store market opportunities. The following are the major product categories offered by the company:
• In-Store Coffee Beverages and the Frappuccino Line: The entire coffee product range includes different types of coffee with the Frappuccino product line of iced blended coffee mixes being the most remarkable. Note its stores offer hot and cold coffee drinks.
• Non-Coffee Beverages Such as Teas and Juices: It also offers a range of hot and ice tea varieties, blended tea preparations, hot and cold basic and blended chocolate drinks, sodas, the Ethos water product line, blended fruit juices, and processed fruit juices in its stores. Some stores in selected countries also offer alcoholic beverages.
• In-Store Range of Food and Meal Selection: Most stores offer hot breakfast food items such as sandwiches and wraps, oatmeal and yogurt, as well as lunch meals, pastries and other sweet food items to include doughnuts and cakes, and processed or packaged food products such as cookies and chocolates.
• Coffee Capsules and Instant Coffees: Part of the product strategy of Starbucks is to sell coffee products for personal use to expand its business further. These include coffee capsules and single-use coffee capsules, the Starbucks Reserve brand of whole bean coffee, different roasts, and the VIA brand of instant coffee and tea.
• Company-Branded Merchandise Items: The company also sells cold cups, mugs, tumblers, water bottles, reusable straws, and shopping bags slapped with its logo in its stores and partner distributors. It also sells the Verismo line of consumer-grade coffee makers beginning in 2012 for brewing espresso and regular chocolate.
• Several Value-Added Goods and Services: Starbucks offers a range of goods and services to add value to its entire business. These include the trademarked cup sizes such as the Venti and Grande size variants, non-dairy and sugar-free beverage options, customizable drinks, free use of electricity and Wi-Fi internet access, and the membership and rewards program through the Starbucks Card.
2. Price Strategy
Another notable element of the marketing mix of Starbucks is its price strategy. It is important to highlight the fact that the prices of most of its in-store and out-of-store products fall under the general premium pricing scheme. Hence, compared with other coffeehouses, especially independent and smaller ones, its products are more expensive.
The reason behind this price strategy centers on the need of the company to cultivate and maintain a sense of product superiority over its competitors, including non-mainstream coffeehouses. It justifies the higher price tags of its products further by offering excellent customer service and a premium coffeehouse experience.
3. Place or Distribution
Remember that the company operates a chain of coffeehouses across the world. It has over 30000 stores in 80 countries. These stores serve as the main point-of-access for customers to avail its products. However, Starbucks does not own all of these stores. Its distribution strategy uses licensing and franchise business models to expand and reach critical markets.
Licensed stores are existing and established companies that are licensed to operate a kiosk in their establishments. This is the common scheme observed in several European countries and certain locations in the United States. Franchises are stand-alone stores owned by separate companies formed for the purpose of operating coffeehouses.
Of course, the company has partnered with other companies to help it with market access. Examples include the partnership with the Walt Disney Company to open stores and kiosks in its leisure parks and several retailers that serve as third-party distributors of its out-of-store products such as its Verismo coffee makers and range of instant and roasted coffee products.
It also has a dedicated e-commerce platform for ordering some items from its in-store menu and out-of-store merchandise. In addition, in several countries, it has partnered with online food delivery platforms such as Uber Eats in the United States, and Foodpanda and Grab Food in Asian markets in East Asia and Southeast Asia.
4. Promotion Strategy
Another important element of the marketing mix of Starbucks is its multi-faceted promotion strategy that centers on using integrated marketing communication to take advantage of different communication channels and specific tactics in reaching its target customers. The following are the channels in which the company promotes its brand and products:
• Non-Paid Marketing Communication: This consists of offline and online mediums of communication such as its stores, official website and regional websites, and official social media accounts on Facebook, Twitter, Snapchat, YouTube, Pinterest, and Instagram that serve not only to provide company information to the public but also deploy different marketing campaigns.
• Paid Marketing Communication Channels: The company also pursues advertisement using offline and online communication mediums. Examples include commercial spots on television, product placement in print, outdoor advertising such as billboards, and search engine and social media advertising, among others.
• Sales Promotion and Value-Added Services: An integral activity within the marketing mix of Starbucks and part of its specific promotion strategy is the use of sales promotion and value-added services to encourage sales and repeat sales. These include discounts and perks coursed through its Starbucks Card program, special discounts or freebies during special occasions, and moment marketing.
• Publicity Through Partnership and Public Relations: Starbucks has also partnered with other companies or brands such as Apple to improve brand recall and brand equity. It also has a dedicated corporate social responsibility program aimed at improving its corporate image while promoting sustainable business conduct.