Starbucks Coffee Company

ADMC 150 Sec: 01

March 20, 2014
Kathryn Lapointe and Sarah Berman
Anna Santilli-Finn

Executive Summary
Starbucks main target market is both men and women between the ages of 25 and
40 (O'Farrell, 2014). These people tend to have high incomes, professional carriers
and like to focus on their social lives. This target market grows about 3% annually.
However, the other 40% of Starbucks target market is of men and women between
the ages of 18 and 24 and grows about 4.6% yearly (O'Farrell, 2014). These are
usually college students who like to hang out at their local cafs while doing some
work and enjoying a beverage. These cafes appeal to this target for their high level
of technology and the trendy atmosphere (O'Farrell, 2014).

Competition
Starbucks primary competitors would be other cafes that focus on the same
expertise that it does. Second Cup, and Timothys would be Starbucks fiercest
competitors for the fact that they are all cafes that serve only the best fair trade
organic coffee beans. They are all known for their lattes and share the same target
audience.

Starbucks secondary competitors are McCafe and Tim Hortons because they are
more reasonably priced and have more stores. People gravitate to these kinds of
restaurants because they not only provide hot and cold beverages but also have the
advantage of providing breakfast, lunch and dinner options.

Promotional Activities:
Brand: Starbucks

Mobile application rewards program

When you purchase a drink, you accumulate stars and once you get 12 stars
you are qualified for a free drink. As well, there are different levels and
depending on the frequency of purchase you are able to get certain rewards.

For example, if you are Green level you have the opportunity to get free
refills on coffee and tea in the store

Competitor: Second Cup

Half price Lattes on Tuesday

Competitor: Tim Hortons

February April they have their promotion called Roll Up The Rim To Win
where customers have the chance to roll up their beverages and get a free
coffee, donut, and other prizes

$1 lattes and iced coffees during limited time

Competitor: McCafe

Free coffee for a week

whenever Tim Hortons are
having promotions

$1 specialty drinks during

limited time

Buy 7 coffees get one medium

drink free card

Competitor: Timothys Coffee

Monday low rate of a $1 coffee

Buy 10 get one free card

Combination specials with coffee and baked goods

Marketplace Analysis:
Starbucks was founded on March 30th, 1971 in Pike Place Market, Washington,
Seattle. Gorden Bowker, Jerry Baldwin, and Zev Siegl Founders of Starbucks met at
the University of San Francisco (Starbucks, 2014). After watching Alfred Peet teach a
roasting seminar, they were inspired to establish a caf (Starbucks, 2014). They
originally wanted to name their business Piqued, after a ship from Moby-dick but
unfortunately, that name was rejected and they settled on Starbucks, who was a
young chief mate on the piqued (Starbucks, 2014). A siren from Greek mythology
stimulated their logo, which was to capture the spirit of Seattle and their history of
sailing the seaports (Starbucks, 2014). In Greek mythology, a siren is seen as an
image of the ocean. They would sing a sweet song to consume a seamans body, soul
and overwhelm them with their beauty to the point where they would be obsessed
and lose control of their ship and die (Starbucks, 2014). They are mostly known for
obsession, addiction and death.

Starbucks has been producing amazing coffee since 1971 and now has over 38
coffees available making it easy for customers to find their favourite flavor
(Starbucks, 2014). Each coffee bean requires a unique balance of temperature and
time to reach its individual peak of aroma, acidity, body and flavor (Starbucks,

2014). Although there are only three different kinds of roasts, each has multiple
flavors giving customers variety to discover their staple drink. An interesting fact is
that there are over 87,000 different drink combinations at Starbucks (Starbucks,
2014).

Geographic Market:
Starbucks positions themselves in urban areas. Near schools, business, and high
traffic areas (Lee, 2012). They choose to attach themselves with places and
companies such as Chapters and Indigo because of where they position themselves
and because of the high to middle class consumer (Lee, 2012). Starbucks prides
itself on its high level of technology in which, its best for them to place themselves in
a high demand for technology (Lee, 2012).

Consumer Market:
Starbucks primary demographic is men and women between the ages of 25-40
(O'Farrell, 2014). This age group typically has successful jobs, and likes to maintain
a high-class image. Its secondary target would be ages between 18-24 (O'Farrell,
2014). These are people who like to set up coffee dates, study, and want
environment Starbucks has to offer. Its psychographics are containing a warm, highclass experience with advanced technology (O'Farrell, 2014). Its target market
seems to be a mix of mass marketing and niche marketing. They mainly attract
adults and young adults, however they do appeal to the younger generations

(O'Farrell, 2014). Starbucks is mostly segmented in age and lifestyle and its target
market is split into three segments, adults, young adults and children.

The consumer trends for this market

type would be that most people are
into specialty coffees, want the
flexibility and choice to order their
unique style of coffee and health
conscious alternatives. Additionally,
the key influencers in the market are wide spread from high school students to the
business crowd and seniors.

Competitive Market:
Starbucks main competitors vary by each location. In Canada, the four competitors
are Second Cup, Timothys, McDonalds and Tim Hortons.
Second Cup (Primary Competitor)

Canadas second-largest Canadian-based specialty coffee retailer operating more

than 360 cafes across Canada (Second Cup, 2014).

While McDonalds and Tim Hortons compete with Starbucks on the lower end of
the coffee market, Second Cup competes with Starbucks because of its price,
environment, and similar products

Brand Promise: The coffee company that cares (Second Cup, 2014)

Timothys (Primary Competitor)

Founded in 1975 and produces its own coffee beans, roasting and manufacturing
formats of coffee in their own plant in Toronto (Timothys, 2014).

They are seen to be one of Starbucks competitors because they both harvest
their own coffee beans, and are also a local caf where people come to do work
or have casual business meetings.

Brand Promise: Timothys Coffee promises to provide top quality products and
services to all customers (Timothys Coffee, 2014)

Key Characteristics
o Quality, prompt service, wide selection of beverages, dependable,
pleasant and relaxing environment

McCafe (Secondary Competitor)

McDonalds introduced McCafe, a caf-style accompaniment to their restaurants

in the style of Starbucks (McDonalds, 2014).

Starbucks competes with McCafe because they have specialty drinks and have
upgraded their restaurants to look and feel more like a caf which has increased
their sales up to 60% (McDonalds, 2014)

Brand Promise: McDonalds promises to strive to be more than just a restaurant

and provide excellent quality, service, cleanliness and value (McDonalds, 2014)

Key Characteristics
o Fast service, affordable, convenient, good promotions, consistent, reliable

Tim Hortons (Secondary Competitor)

Founded in 1964 and is one of the largest quick service restaurant chain in
Canada. It specializes in serving fresh coffee, baked goods and home-style
lunches (Tim Hortons, 2014)

They compete against Starbucks because they offer specialty drinks as well
as breakfast, which is the most popular time people go to Starbucks.

Brand Promise: Always serve fresh coffee and baked goods, great service and
top quality (Tim Hortons, 2014)

Key Characteristics
o Fast service, simple, inexpensive, Canadian, convenient and consistent

BRAND:

PLACE:

PRODUCT:

PRICE:

PROMOTION:

UPS:

Starbucks

Located world

Coffee, specialty

$3-9

Starbucks pay-as-

Fair Trade

wide

drinks and cafe

you-go reward

Organic Coffee

food items

mobile application

Competitor:

Located all across

Coffee, Specialty

Second Cup

Canada

drinks and cafe

$3-6

Half price Lattes on Lattes (Latte

Tuesdays

Tuesday)

Mondays are $1

Roast their own

unique coffee

food items

Competitor:

Located all across

Coffee, Specialty

$3-6

Timothys Coffee

Canada, New York, drinks and cafe

small coffee

Washington,

Coffee Cards buy

food items

Boston and South

10 get 1 free

Korea
Competitor:

Located all across

Coffee, Specialty

$1.30-

Roll Up The Rim To

Steeped Tea and

Tim Hortons

Canada, United

drinks, home-

$4.50

Win

Timbits

States and the

style breakfast

$1 lattes and iced

Persian Gulf

and lunches and

coffees at limited

region

baked goods

times

Competitor:

Located world

Coffee, Specialty

McDonalds Cafe

wide

$2-5

- 7 coffees and get

100% Arabica

drinks, fast food

one medium free

Beans

breakfast, lunch

- Free coffee for a

and dinner

full week when Tim

Hortons has
promotions

Micro Economics Factors:

There are numerous microeconomic factors that have impacted Starbucks into
being such a successful brand. Firstly, Starbucks mission statement is to inspire and
nurture the human spirit - one person, one cup, and one neighborhood at a time
(Starbucks, 2014). It is so successful and popular due to their marketing strategies.
They care about their customers, staff, and want to create the brand to be a lifestyle
and culture. The company stands out from its competitors because they personalize
the experience for each customer. From placing your order to receiving it, the
baristas are always engaged and ask for your name to make sure every customer
enjoys their perfect beverage (Starbucks, 2014). Moreover, they offer exceptional
quality coffee combined with excellent customer service. Starbucks takes pride in
itself by providing phenomenal product knowledge and endless hours of training
their staff (Starbucks, 2014).

Macro Economic Factors (PESTLE)

Political:
Political factors that affect the business
Starbucks include the stability of the countries
in which Starbucks purchases its coffee and
other raw goods, they get their coffee beans from countries all around the world in
which some countries have a lot of natural disasters like earthquakes, tsunamis and
wars. This can affect Starbucks because the countries will not be able to give them
any coffee beans and they will have no coffee to sell.
Economics:
The economy can influence Starbucks and their prices in many ways such as
different exchange rates. With the fluctuation of the dollar, Starbucks coffee prices
can be higher in places such as Beijing charging $4.81 for a cup where as in London
the price is $3.81 (Wang, 2013). Starbucks is able to charge more money for a cup
of coffee in Beijing because they have stated that price is based on the composite
costs which includes original sources, equipment, input on infrastructure, logistic,
employees wages, rental fee, and operation cost (Wang, 2013). Additionally,
Starbucks vital supplies such as coffee beans, sugar and milk will be affected
because they are imported making the cost higher due to the weak dollar (Wang,
2013). The company increases the charges of drinks and food in different countries
because they are not only selling drinks they are ultimately selling their brand
(Wang, 2013). The company has said: each Starbucks market is unique and has
different operating costs, so it would be inaccurate to draw conclusions about one

market based on the prices in a different market regarding the new Starbucks in
China (Jourdan, 2013).

Social:
Starbucks has strategically created an environment where customers feel relaxed
and comfortable enough to have a social or casual business meeting. Moreover, they
provide complimentary Wi-Fi allowing students to study while enjoying a beverage.
Every Starbucks you enter whether it is in Toronto or Miami, the interior is mostly
the same (Hennessey, 2012). It has a rich warm colour scheme, baristas in green
aprons, the same menu, and even alternative music playing (Hennessey, 2012).
When you walk in and smell the aroma of coffee and see numerous casual couches,
it screams comfort, relaxation, and a place to simply hangout (Hennessey, 2012).

Technology:
In 2010, Starbucks was appointed the most popular social media brand online
(Adkins, 2013). The company is able to use technology to its advantage and bring
customers back to its stores by giving them an online space such as Facebook or
Twitter to propose ideas and provide feedback on the brand and their experience
with it (Adkins, 2013). Starbucks has taken advantage of the emergence of
innovative technology in multiple ways such as:
Mobile Application

In 2011, Starbucks launched a mobile application that functions on iPhones

and Androids (Adkins, 2013). It is pay-as-you-go and allows customers to

have the ability to load their credit information and have a hands-free
transaction experience at time of purchase. There is also a profile that shows
what drinks you typically get along with all of the specifications (Starbucks,
2014). Once you sign up, depending on your frequency of purchasing, you
receive various status levels such as Green Member and Gold Member
offering you different rewards based on your level (Starbucks, 2014).
Brewing Equipment

The use of technology can improve operational efficiency. Starbucks recently

purchased a single-cup coffee maker called the Clover (Adkins, 2013). The
coffee maker uses detailed technology to produce the system to brew coffee
to specific temperatures and certain flavors (Adkins, 2013).

Legal:

Environmental:
There are many environmental factors that can affect Starbucks depending on
climate change, recycling and more. However, several customers choose Starbucks
for being a substantial contributor to sustain natural resources by:
Recycling in Stores

In many Starbucks stores they try and recycle at least one type of waste
depending on the location of the store where commercial recycling is

available (Starbucks, 2014). The types of waste could include cardboard

boxes or even milk jugs.
Environmentally Friendly Cups

Starbucks offers reusable cups for $1 during the winter season

Customers who are sitting in the store can request their beverage to be put
in a ceramic mug, which reduced the amount of unnecessary paper cups
(Starbucks, 2014). The company also provides 10% post-consumer
recycled paper fiber for their cups and their sleeves are made out of raw
materials saving 100,000 trees a year (Starbucks, 2014)

Green Buildings

Starbucks designs their stores to be extremely environmentally friendly. The

company uses dependable building materials as well as tries to conserve water
by using high blast water for cleaning equipment instead of running water.
Moreover, it uses energy efficient measures such as improving lighting; recycled
flooring tiles and even the cabinetry is made from post-industrial material.
(Starbucks, 2014).

Brand Recommendations:
This worldwide cafe has branded itself to be a high-class comfort zone by simply
getting to know their customers by name and drink. They take this franchised
company and give it the feel of a local cafe. While not only being a coffee shop, they
offer a mass amount of drinks, food, and product, alongside coffee beans, teas, mugs,

and k-cups. Furthermore, Starbucks has consistently managed to stay on top of its
competitors simply because it is a place for everyone, the ambience it provides, and
the reliability and convenience of the experience is the key to winning over
customers and competitors taste buds and loyalty. They are also the first cafe to
incorporate a pay-as-you-go mobile application that features promotions and
rewards. Therefore, it is recommended that Starbucks maintain its current form on
social media and increase the use of technology to enhance its speed and delivery of
promotional services. Another recommendation would be to incorporate drivethrus in urban areas where a lot of student and family-oriented areas are.
Starbucks needs to stand-alone against its competitors and this would be a great
benefit for the company.

References:

Adkins, A. (2013). Retrieved from

http://smallbusiness.chron.com/starbucks-its-use-technology28272.html

Hennessey, R. (2013). Retrieved from

http://www.forbes.com/sites/rachelhennessey/2012/08/06/3-reasons-whystarbucks-still-shines-despite-market-shortcomings/

O'Farrell, R. (2014 ). Who is starbucks' target audience?. Retrieved from

http://smallbusiness.chron.com/starbucks-target-audience-10553.html
Wang, D. (2014). How can Starbucks charges a higher price in China than any other
countries? Retrieved from http://globalpricingstrategies.com/how-can-starbuckscharges-a-higher-price-in-china-than-any-other-countries/