Case Study
David’s Tea was founded in 2008 by tea enthusiast, David Segal, and his cousin, Herschel Segal. Headquartered in Montreal, the duo opened their first retail space on Queen Street in Toronto and quickly expanded to over 75 stores in North America. David’s Tea built its business on selling over 150 varieties of loose leaf tea and accessories, lauding the health benefits and deliciousness of tea to an increasingly health-conscious and discerning target market.
In 2012, David’s Tea opened its first retail store in Prince Edward Island. Located in the northern end of the downtown core, David’s Tea is ideally situated within a one-block radius of two major federal buildings, a technology-driven office building, the electrical utilities office building, most of the major banks, the performing arts center, and plenty of small locally-owned restaurants and shops. Also along the same block and street front is a Running Room outlet and a Starbucks.
Like all David’s Tea locations, the Charlottetown store was corporately owned and managed. Upon the store’s opening, David’s Tea hired Laura Smith, a recent UPEI Business School graduate, and tea drinker, to be the local store manager. Laura’s responsibilities included the day-to-day management of the Charlottetown location including staff, scheduling, inventory management, purchasing, and working closely with the head-office to help David’s Tea reach its organizational goals. Most of the marketing related decisions with regards to products, pricing, place, and promotion, were the responsibility of the head office. However, Laura was given a small amount of leeway to take initiative if local opportunities presented themselves.
In January 2016, Starbucks announced the closure of the Starbucks located two-doors down from David’s Tea. To Laura, this represented a real opportunity for David’s Tea to capture consumers who were used to visiting Starbucks regularly. Before she acted, Laura knew it was important to stop and reflect on what she learned in her introductory marketing class at UPEI to help make sure she
- truly understood the nature of the opportunity in front of her, and
- crafted a marketing strategy that would benefit David’s Tea.
Question 1
Laura knows that all customers go through the same 5 steps when making a consumer purchase. To help Laura better understand her customers, provide a detailed account of the 5 steps of the consumer buying process specifically for David’s Tea.
The 5 steps of the buying decision process for David’s Tea can be described in the following way. First of all, the customer recognizes the need for buying the product. At this point, a tea purchaser can be guided by internal stimuli (love for tea or thirst, for example) or external ones (a friend who is a tea lover and keeps talking about tea). After the need is recognized, the potential customer seeks information.
At this stage, Laura needs to be certain that the customers will have numerous means of learning about David’s Tea, including happy relatives who enjoy the product (and who become the personal source of information), advertising (from commercial and public sources, for example, mass media and packages with David’s Tea logo), and eventually personal positive experience. The customer is then going to consider the alternatives. With Starbucks closing, the number of alternatives for the suddenly thirsty customers will diminish, but David’s Tea still needs to distinguish itself from the rest of the brands available.
The purchase decision of the customer is the next stage; this stage is affected by David’s Tea reputation and the level of service, but many of the factors that influence the decision can remain unaffected by the store itself. For instance, the suddenly thirsty customer may discover that she had left her purse at home. The final stage is the postpurchase behavior. If the customer is satisfied with the buying experience, they are likely to return to the store, which is the ultimate goal for Laura. To this end, the store needs to be customer-oriented and enhance the experience by the service, environment, bonuses, and other perks that suit David’s Tea brand. By knowing this process, Laura can help the customer move through it and make sure that the perception of the brand is positive.
Question 2
Laura remembers that differentiation and positioning are critical parts of a competitive marketing strategy. Help Laura create a detailed differentiation and positioning strategy.
Question three will dwell on the customers of Laura; the specifics of the ideal customer image are directly connected to the positioning strategy of a product. The product is positioned as a high-quality, delicious, healthy beverage; the customers have the chance of becoming the “members” of a tea lover “club” and show their belonging by buying the accessories from the company. The high quality is correlated to the luxuriousness of the product and its high price. Indeed, given the fact that Laura’s store competes with Starbucks and given the image of David’s Tea, it is unlikely that the case store is lowering the prices.
The answer to question 1 shows that for Laura, it is important to distinguish the brand from others to ensure that the customer chooses David’s Tea and not its alternative. The differentiation strategy for Laura’s store (the one that distinguishes it from the rest) may focus on three qualities of David’s Tea: it is healthy, delicious, and David’s Tea. This way, she can exploit and at the same time support the reputation of the brand and avoid the differentiation strategy of lowering prices.
Question 3
Laura knows it’s easy to lump all of her customers into one simple category = “tea lovers”. But the truth is that many segments make up the customers of David’s Tea. Help Laura by identifying some market segmentation strategies that may be relevant for David’s Tea.
There are several marketing segmentation strategies, and some of them are especially relevant for Laura. Since Laura is in charge of a single store, geographical segmentation can only be of use if she can see any means of suggesting localization strategies for the product. Similarly, many of the demographic segmentation variables are unlikely to work (like gender, race, or marital status), but the income can be of significance.
From the case study, it can be concluded that David’s Tea focuses on positioning the beverage as a delicious, luxury product (that can rival Starbucks ‘ coffee). Also, the case study states that the store provides accessories; it is apparent that David’s Coffee works to attract loyal customers who will “belong” to this club of tea lovers. Therefore, it may be suggested that the income of the consumers is likely to be above the average. It also follows that behavioral and psychographic segmentation is of particular importance for Laura: as stated in the case study, her customers are likely to be tea lovers who are attracted to high-quality products and lead a healthy lifestyle.
To sum up, Laura will benefit from segmenting her market on multiple bases. From the case study, we may suggest that her typical customer is a person who lives in Charlottetown, tries to lead a healthy lifestyle, has an over-the-average income and a taste for stylish and luxurious things, loves tea, and has the potential of becoming a loyal customer of the “tea lovers club.” Possibly, Laura has more details to add to this profile.
Question 4
One of the target markets that Laura has often overlooked is the business market in Charlottetown. She knows that selling to other local businesses (such as offices and restaurants) represents a good opportunity for David’s Tea. But Laura is unsure how to proceed. Help Laura buys remind her of the important differences between business buyers and consumer buyers and how these differences are important to a business like David’s Tea.
Business customers’ behavior is different from that of the consumer customers, and Laura needs to keep in mind the following aspects. The buying decision process is rarely spontaneous for a business buyer. Moreover, it is going to be centralized, and it is not unlikely to involve some people, which is also explained by the fact that such deals typically involve large sums of money. Economic stimuli (for example price), quality of the product, and reputation (that Laura’s store has yet to earn as a supplier) will be of primary importance.
However, the people involved in the decision process do not become cogs in the machine; they are still affected by social stimuli, which means that building proper relationships with them is also of importance. To sum up, Laura needs to get better acquainted with the businesses that attract her attention and the people who run them, learn more about the deals she can have with them, negotiate, mind her liabilities, and demonstrate that David’s Tea is a responsible business partner.
Question 5
The marketing landscape is changing and Laura needs to be aware of and prepared for these changes. Help Laura by providing detailed explanations of the way the marketing landscape is changing and how these changes might impact David’s Tea.
The marketing landscape will always be changing, but from Laura’s case, it follows that some very specific changes are occurring in her environment. From the case study, it is not clear why Starbucks is closing. In effect, it might be the result of the decline in economics on the global scale or locally in Charlottetown, which indicates a threat for any business. However, personally, for Laura’s store, the disappearance of a very famous rival means that it has the opportunity of attracting its customers. Starbuck’s product is coffee, and the introduction of coffee to a teashop is a questionable action, but Laura can consider it. In other aspects, Starbuck’s customers are similar to those of David’s Tea in being attracted to luxurious beverages.
Laura needs to consider the opportunities and threats that are related to the change in her immediate environment. Moreover, she needs to consider global trends. One of them is the development of technology, in particular, mobile phones and tablets. Nowadays, a technologically-savvy store may offer, for example, a free Internet connection and means of paying for the order with the help of a mobile phone. Laura needs to keep up with the change in that arena as well, transforming it into the strengths and competitive advantages of her store. To sum up, Laura needs to conduct research (or have it conducted) and monitor all the business-relevant aspects of the changing environment now and in the future to ensure that her business is flexible, which is a competitive advantage of its own.