Background Analysis
Starbucks Coffee Corporation was founded in 1971 in Seattle, the USA. The company is a brand premier coffee retailer and roaster. Nowadays Starbucks operates in more than 62 countries and has approximately 200 000 employees. The company’s feature is that they use only high-quality coffee and tea sorts with a variety of supplies and food items. It is an interesting fact that Starbucks offers more than 87 000 combinations of coffee and tea drinks.
In 1992, Starbucks has gained popularity with 165 stores around the world and became a public company when it launched its initial public offering (Jeric, 2021). The company continued expanding globally and opened another store in Asia namely in Singapore. Nowadays China is the second-largest country with Starbucks shops as it has more than 15 000 stores across the country. Japan is the third nation with more than 1 500 coffee shops.
Speaking of the customer statistics, it is necessary to point out that the main target of Starbucks corporation is affluent and high-income citizens. Their logic is that people with more money want to drink branded high-quality coffee. There is no surprise that Starbucks shops are opened in well-off neighborhoods, near office buildings and in prestigious parts of a city. Still, Starbucks is also popular among middle-class people because they want to feel the prestige and afford themselves a cup of branded coffee, but not so often as affluent people do.
It is also clear that some people use Starbucks not as a place to drink coffee but as a place to sit and do their chores. It is a common case when a person comes to Starbucks with a laptop, orders a cup of coffee or tea and spends hours sitting and doing their job. It has become available thanks to the WI-FI services affordable in Starbucks.
Speaking of competitors, the industry has a monopolistic competition, with Starbucks having the largest market share. Although the main opponents include Dunkin Donuts, McDonald’s McCafe, Starbucks has no clear competition that can truly rival it in size or revenue on a global scale.
Company Analysis
Starbucks was originally founded in 1971 by Jerry Balswin, Gordon Bowker, and Zev Siegl, and the first shop was situated in Seattle Pike Place Market. From this location, Starbucks sold high-quality whole coffee beans, dark-roasted in small batches.
The name of Starbucks was chosen in honor of the coffee-loving first mate in Herman Melville’s “Moby Dick”. The current company logo, is a twin-tailed siren, from Greek mythology, encircles the Starbucks name.
Starbucks stores and cafes offer a clean, relaxing atmosphere with free wifi for customers.
The Starbucks operation system is driven by its goals and missions. They include strengthening positions in the coffee industry, investing in technologies and the customers’ comfort, and building brand awareness.
Starbucks organizational structure includes geographic division by regions, which is considered as the operating segments: The first segment belongs to ‘Americas’, which consists of the US, Canada, and Latin America. The second segment includes China, and the Asia Pacific, the third segment covers Europe, Middle East and Africa (Mazouni, 2017). The last piece is named Channel Development, which compromises roasted whole bean and ground coffees, a variety of ready-to-drink beverages, and other branded products.
The revenues of Starbucks are originated from the following business segments: company-operated stores, consumer packaged goods foodservice operations licensed stores.
Starbucks offers a wide range of products. There are more than 30 blends and single-origin premium coffee types, fresh-brewed coffee, hot and iced espresso beverages, coffee and non-coffee blended beverages, smoothies, and teas. The company also provides its clients with the ability to buy official merchandising products. They include coffee and tea brewing equipment, mugs and accessories, packaged goods, music, books, and gifts. It is necessary to point out that Starbucks mugs and thermocouples are considered to be one of the most popular gifts for everyone.
Marketing Analysis
As Starbucks is oriented toward affluent customers, one of its marketing strategies is the location. As it was said above, Starbucks has approximately 20 000 stores and they are mainly situated in large cities near office buildings, wealthy avenues and shopping malls. Still, speaking of America, it is also possible to find Starbucks in small villages. This strategy works well because it is common for businesspeople to come and buy a cup of coffee in the morning before going to an office and then having a snack with another cup during the day. People who have money want to get the best service and high-quality drinks and Starbucks can offer these things.
What is more, age segmentation is also part of the strategy. As the company is oriented on wealthy people, it is possible to suppose that people from 25 to 40 are the main target of Starbucks. Moreover, the segment includes children of richer parents and their age varies from 16 to 24.
Then it is necessary to point out that good customer service can also be called a part of Starbucks marketing strategy. Clients are free to spend as much time in a coffeeshop as they wish, Starbucks always has an open space with tables, chairs or lounge zones where everyone can meet their friends or have a chat with another random client (Gleeson, 2019). Moreover, coffeeshops offer free WI-FI zones so customers can work there or consume internet content for free while drinking or eating.
It attracts people so they can order more than one cup of coffee or tea or buy a salad or a sandwich while they are working on a project. Finally, Starbucks is extremely personalized. Employees always ask for people’s names to write them down on cups or write any greeting or a piece of advice there. It creates a special atmosphere between a client and a staff member and it certainly attracts a person so they have a desire to come again and get one more beautiful and interesting signature on a cup.
Pricing Strategies
Every business can use various pricing strategies for best-selling its product or service. It is important to set the process to gain maximum profit. A wide range of designs is usually used to protect an already existing market from new competitors, to increase market share or to enter a new market. Starbucks Corporation and its successful pricing policies are the object of interest for everyone who wants to promote his or her company in the sphere of food and drinks services. The company uses a great number of techniques and sources to maximize its profit and attract more and more clients around the world.
To begin with, it is necessary to say that Starbucks has always offered its clients high-quality food and drinks. It is crucial to take into account the price of premium coffee beans, the labor costs and shipping expenses. Nevertheless, it is impossible to deny that Starbucks coffee products may be overprice. Besides being expensive, the prices of Starbucks coffee vary around the globe. According to numerous data sources like the MarketWatch, a cup of Starbucks latte can cost up to $12 in Russia and $7 to $8 in most Asian countries (Morris, 2018). Still, even though Starbucks coffee is so expensive (approximately $3.5 per medium cup), a client always knows that he or she pays for a rich taste and flavor.
Then, here it comes to the place. Starbucks has always been focused on creating their stores as the medium between work and home for a person. It has always been a special third place where people could energize on their way from home to work and have a rest after a hard day in an office before going home. The atmosphere is always important for a person as it is one of the crucial concepts of how a store should work. People should feel comfortable in any of their conditions, whether they are feel sleepy or exhausted. One of the aspects of Starbucks pricing policy is exactly the environment of their coffeeshops, which customers are ready to pay fo.
Technologies have become an essential part of every person’s life. Social networks unite people all over the world and Starbucks did not lose the chance to take a moment and create a special community around the brand. The Starbucks website allows users to share their experiences and reviews of drinking coffee and visiting the stores. What is more, social nets, mobile apps and other resources connected with Starbucks give customers a chance to follow the news and discount sessions provided by the company.
Personalization is another point that shapes the Starbucks pricing strategy. Clients always feel delighted when they are treated individually and are ready to come to this or that place again and again to get personal service. Starbucks is smartly using this knowledge as their approach is represented in writing people’s names on cups with coffee. Moreover, a customer can ask to write any greeting or signature, which is also a pleasant step towards winning credibility. It is obvious that a person will come back to the store again and again if he is treated in a unique way there.
Throughout the existence period of Starbucks, the organization has been known for implementing innovative ideas. Starting from offering a great variety of coffee flavors to providing availability to order food, the Starbucks Corporation has always set the rules of how a perfect coffeeshop should operate (Kline, 2017). What is more, Starbucks is one of few coffee companies that has its own mobile application available, where discounts, news, and the possibility to order coffee online are presented.
Finally, the marketing strategy of Starbucks has always been oriented on the ‘word-of-mouth’ advertising method. The quality of drinks, service and approach of employees have always spoken for themselves. The connection with the brand’s pricing strategy comes from the idea that people should pay for the famous coffee worldwide coffee with few commercials on TV and in other mass media resources.
To crown it all, it is necessary to state that Starbucks provides a successful pricing policy implementing various strategies and using them for maximizing profit. The last point is true as the company has maintained the leadership in the market of coffee selling since its foundation till present times.
Reference List
Mazouni, Mourad. (2017). How Starbucks uses pricing strategy for profit maximization. Pricing and Revenue Optimization, pp.2-4.
Gleeson, P. (2019). How to open a small taco place. Small Businesses, p. 1.
Jeric, N. (2021). 30+ Starbucks statistics and facts with pumpkin spice. Capital Counselor, pp. 1-3.
Morris, Ch. (2018). Starbucks quietly raises prices—again. Fortune 500, pp. 1-2.
Kline B. (2017). Starbucks opens a new store in China every 15 hours. USA Today, p. 2.