INTRODUCTION

The Starbucks Coffee, Tea, and Spice Company was founded in Seattle in 1971 byJerry Baldwin, Gordon Bowker and Zev Siegl, with a vision to educate the consumers aboutfine coffees. Starbucks began to expand when Howard Schultz took it over in 1987. His planw a s t o r e create the Italian espresso bar experience in America by making a p e r s o n a l relationship between consumers and coffee. Within years, they grew from a small, regional business into the undisputed leader in the speciality coffee industry by buying only the bestquality coffee and providing an unmatched store experience (Stanley, 2002). T o i n s p i r e a n d n u r t u r e t h e h u m a n s p i r i t o n e p e r s o n , o n e c u p , a n d o n e neighbourhood at a time.---Starbucks Mission Statement from their websiteE v e r s i n c e i t s e s t a b l i s h m e n t t h e r e h a s b e e n a s h a r p g r o w t h i n t h e c o m p a n y performance. According to their 2008 annual report (from Starbucks website), they have nearly 17,000 stores in 49 countries. This report deals with the targeting and positioning of S t a r b u c k s w h e n i t w a s l a u n c h e d a n d h o w d e c i s i o n s o n m a r k e t i n g m i x s u p p o r t e d t h a t positioning.

2. TARGETING
Coffee consumption in the U.S. has been trending down since 1 9 6 0 s ( r e f e r c a s e study). So Starbucks was extremely cautious in selecting its target markets. A target market,according to Kotler and Armstrong (2004), consists of a set of buyers who share commonneeds or characteristics that the company decides to serve. The decision of select ing targetsegments can be assessed by looking at market factors, competitive factors, and political,social, and environmental factors (Jobber, 1995). Price, bargaining power of customers ands u p p l i e r s a n d b a r r i e r s t o entry all comes under the market factors , and in the case o f Starbucks, their coffee was expensive and they were trying to re-create a new coffee culturein America. Hence, they have low barriers for entry. Since they were extremely careful ineach step of coffee making, they tried to maintain a long-standing relationship with their suppliers (Stanley, 2002) and similarly they did not have any real competition threats.Starbucks targeted office workers, with middle to high incomes, who had a desire to purchase premium products. Schultz wanted Starbucks to become the Third Place, the place between home and work where people could gather, relax and interact with one another ( r e f e r c a s e s t u d y ) . S o t h e y w e r e v i g i l a n t a b o u t t h e i r q u a l i t y c o n t r o l t o m e e t t h e h i g h expectations. Also they paid a great deal of attention to the details of the store everythingf r o m t h e l a y o u t , t o t h e f u r n i t u r e , t o t h e m u s i c ( i b i d . ) . M o r e o v e r , t h e y w e r e i n t h e introduction stage in the product

lifecycle.Target marketing can be done in three different ways; undifferentiated, differentiateda n d c o n c e n t r a t e d . C o n c e n t r a t e d ( o r n i c h e ) m a r k e t i n g d i r e c t s i t s e f f o r t s t o w a r d s a s i n g l e market segment and creating and maintaining an exclusive strategy for each segments (Dibbe t a l . , 1 9 9 4 ) . A n o t h e r a p p r o a c h t o t h e m a r k e t , k n o w n a s d i f f e rentiated (or segmented)marketing, approach the mass market by designing separate products and marketing

programs for the different segments (Boyd & Walker, 1990). In undifferentiated (or mass)marketing, the firm ignore market segment differences and target the whole market with ones t r a t e g y ( K o t l e r & A r m s t r o n g , 2 0 0 4 ) . W h e n S t a r b u c k s l a u n c h e d , t h e y u s e d t h i s undifferentiated marketing stra t e g y a n d t h e y c r e a t e d a n d m a i n t a i n e d t h e m a r k e t i n g m i x considering the market as a single segment. A major difficulty in using this targeting strategyis developing the brand to satisfy all consumers (ibid.). Starbucks used their services withoutcompromise in quality for attaining this. Moreover, they were aggressive in the market byopening 15 new stores in 1988; 20 in 1989; 30 in 1990; 31 in 1991; and 53 in 1992 (refer case study).

3. POSITIONING AND MARKETING MIX

After deciding its target markets, the company must decide what position it wants too c c u p y i n t h e i r t a r g e t m a r k e t . A p r o d u c t s p o s i t i o n i s t h e w a y the product is defined b yc o n s u m e r s o n i m p o r t a n t a t t r i b u t e s s u c h a s p r i c e , q u a l i t y , c o m p e t i t o r , p r o d u c t c l a s s , application and so on(Kotler & Armstrong, 2004). Companies tried to position their productsin such a way as to distinguish themselves from the competitors and give them the greateststrategic advantage in the target market. By the time Schultz acquired Starbucks in 1987;transactional marketing was being replaced by relationship marketing. Profit from retainedlong term customer relationship became the key of marketing and business. Relationshipm a r k e t i n g a i m s a t d e l i g h t r a t h e r t h a n s a t i s f a c t i o n o f c u s t o m e r s . A n d S t a r b u c k s r e a l i s e d public opinion, even though it takes longer to cultivate, when energised can help pull thec o m p a n y i n t o t h e market (Kotler, 1986). Fig. 1 shows the position of Starbucks on t h e perceptual map.High Low HighPriceQuality LowFig. 1: Perceptual map (Adapted from Czinkota et al. (1997))

3.1 . Product
Starbuc Starbucks tried to position themselves as a premium product in the coffee industry bycreating a high standard, introducing innovative products and providing excellent service.Schultz knew how perishable coffee was and they were so fanatical about quality control,and hence they carefully monitored each and every step of coffee production. They boughtdark-roast, whole bean coffee from places like Sumatra, Kenya, Ethiopia and Costa Rica;roasted them in their own plants; and sold only through company-owned stores (refer cases t u d y) . T h e y u s e d t o t a l q u a l i t y m a n a g e m e n t ( T Q M ) i n w h i c h a l l c o m p a n y s p e o p l e a r e constantly involved in improving the quality of products (Kanji, 1996). Usage of nonfat milk a n d i n t r o d u c t i o n o f F r a p p u c c i n o m a d e a s i g n i f i c a n t p r e s e n c e i n t h e b a l a n c e s h e e t o f Starbucks. Moreover, they provi d e d s e a s o n a l o f f e r i n g s , s u c h a s s t r a w b e r r y a n d c r e a m Frappuccino in the summer and gingerbread latte in Christmas, were introduced. Graduallyfood items such as cookies, pastries, sandwiches and salads made their way int o the stores(ibid.). Later they went on to develop new products with other companies. This shows howc a u t i o u s S t a r b u c k s w a s t o k e e p t h e i r s t a n d a r d h i g h a n d m a i n t a i n t h e i r p r e m i u m q u a l i t y image. 3. re 2c .Pi The amount of money a buyer must give to the seller for a specific quantity of the product is the price of that product and usually consumers use this as an indicator of quality(Dalrymple & Parsons, 1986). Price and quality determines the value of the product. Whenlaunched, Starbucks was expensive and was positioned in accordance with that. They alwaystried to deliver the high value promised to the consumers. They bought the quality beans,gave effective and efficient training to staffs, and moreover, made an atmosphere to enjoyc o f f e e , m e e t f e l l o w p e o p l e a n d t a k e a b r e a k f r o m t h e b u s y l i f e . T h e s e a l l j u s t i f y t h e i r pricing and show how price supported their positioning. 3.3. Distribution & Service Distribution channels links the organisations product or service to its consumers; andin a producer-consumer (direct supply) channel, as in the case of Starbucks, maintaining a personnel relationship with the customers is significant (Brassi n g t o n & P e t t i t t , 2 0 0 0 ) . However, from a distribution point of view Starbucks got an advantage by sticking on to itswinning store location formula for its new stores (refer case study). They always selected highly visible locations and opened stores as clusters. As demand grew, these store clustersmade them able to manage the increased traffic and to keep their competitive position. In thesame way, they took care about the services provided in the stores. Howard Schultz aimed tounlock the romance and mystery of coffee in coffee bars, and he knew how important therole of baristas in achieving that. Baristas ability to engage the customers was the heart of Starbucks experience. Starbucks invested heavily in training their staffs and did innovativetactics to

manage their human capital. Thus they differentiated themselves in the market byconstantly providing higher quality services. 3.4. Promotion All marketing activities that attempt to stimulate buyer action or sales of a productcan be considered as promotion (Shimp, 1997). Starbucks used to organise a big communityevent prior to the opening of its stores (refer case study). Artworks were designed to boasteach citys personality, and it was used on commuter mugs and T-shirts. They also recruitedlocal ambassadors from new partners and from customers to promote their brand (ibid.). They didnt use advertising but they used those funds for acquiring key locations. Starbuckstried to establish a national dominance before other speciality coffee bars comes into the picture. 4. CONCLUSION We arent in the coffee business, serving people. We are in the people business,serving coffee--- Howard Schultz (Serwer, 2004)S t a r b u c k s c l a i m e d their leadership by focusing on a strategy of new products, a stronger connection with customers as the Third Place and expanding store locations in theUnited States and abroad (refer case study). They never compromised on their quality andservice standards and maintained their customer relationships with utmost care. This reportanalysed the target markets and positioning strategy of Starbucks while it was launched.Also, it shows how the marketing mix variables (product, price, distribution and promotion)a l o n g w i t h s e r v i c e s s u p p o r t e d t h e i r p o s i t i o n i n g . T o d a y, S t a r b u c k s i s i n c i t i e s a l l o v e r America and in 48 other countries. The level of success achieved by Starbucks holds someimportant lessons and some much needed inspiration to the business world .