Running head: 1

T.L. Dashner

UOP MKT/571

August 27, 2014

Mr. Mitch Korolewicz

Author Note

This document charts the marketing endeavors of Starbucks both nationally and globally.

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In this document the market segmentation of the Starbucks with its target market,

demographic, psychographic, geographic, and behavioral characteristics are discussed in detail.

A positioning statement for the company with careful consideration of its brand strategy is

underscored and evaluated for success or failure in today’s global markets.

What Starbucks is all about

Starbucks has a fairytale beginning. It all began with a fresh brewed cup of coffee in Seattle,

Washington in 1971. Starbucks (“Our Heritage | Starbucks Coffee Company,” n.d.) had a single

store in the city’s historic Pike Place Market. The name, Starbucks, inspired by the classic, Moby

Dick, induced the mystery of the high seas and the seafaring ways of the early coffee traders.

Howard Schultz (current CEO) in 1981, walked into a Starbucks store and took a sip of the rich

flavored Sumatra and became a believer. Schultz came aboard a year later. Schultz traveled to

Italy in 1983 and became mesmerized with Italian coffee bars. He brought the Italian

coffeehouse experience to the United States. He hoped that Americans would come to know it as

a place for friendly chats and a sense of community—the number three place between the office

and home. Schultz left Starbucks to start his own coffeehouses but returned in August 1987. He

hoped, with the help of investors, to purchase Starbucks. From the beginning, Starbucks

differentiated itself as a special kind of company—one that celebrated good coffee and brought a

real sense of connection and community. In 2014, with more than 21,000 stores in 65 countries,

Starbucks is the top tier roaster and retailer of specialty coffee in the entire world.

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The Early Years1

During the early years, Starbucks targeted affluent customers, well-educated consumers, white

collar groups, and ages 25-44. As time passed by, Starbucks realized that opportunities for

expansion also existed in a number of other market segments. The company stretched its target

market to include younger, less-educated, and low-income customers. Starbucks discovered that

a large segment of coffee connoisseurs lived in urban areas of America. Urban areas contained a

higher number of educated, working professionals who were looking for that “third place”

between work and home. Later Starbucks discovered that it could appeal to just about every age

group. Starbucks reached beyond its initial target group and found success in rural areas,

ethnically diverse neighborhoods, kiosks in grocery stores, and with multiple stores in single

cities. According to a Forbes article dated April 25, 2013:

Starbucks rode the baby boomer trend in the 1990s, the swelling

ranks of mid-age professionals that created the need for a ‘third

place,’ an ‘affordable luxury’ where people could share and enjoy

a cup of coffee with friends and colleagues, away from work and

home. The chain has inserted itself into the American urban

landscape more quickly and craftily than any retail company in

history, and has forever changed the way Western companies

market themselves to consumers, with a four-fold strategy: (1.)

Right market segmentation. The company has stayed with the

upper-scale of the coffee market, competing on comfort rather than

convenience, which is the case with its closest competitors,

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McDonald’s and Dunkin Donuts. (2.) The company continues to

focus on its original product bundle that includes good coffee,

quality service, and a nice environment to hang around. (3.) A

superb leadership. Company founder, Howard Schulz, who

continues to come up with innovative products to expand the

company’s product portfolio, leads Starbucks. (4) China

expansion. As is the case with the Japanese, Chinese people live as

extended families in small houses. This means that there is a strong

demand for Starbucks as a ‘third place.’ Last year [2012],

Starbucks opened 500 new stores in China, bringing the total to

1500 (Mourdoukoutas, 2013, para 3).

Starbuck Market Demographic. Coffee in America is a mainstay. There are two legal drugs in

America that are purchased every morning, noon, and night in America: Caffeine and Sugar.

Starbucks supplies both at the demand of every customer for a upscale coffee and sweet-roll. In

fact, “fully 60% of all U.S. households use either whole or ground coffee beans at home. The

average U.S. household that uses whole or ground coffee consumes 4.2 cups per day. In total

that’s about 280.5 million cups of coffee consumed at home by Americans each day or about 102

billion cups per year. 13% of American Adults go to Starbucks. Starbucks consumers are 11%

more likely to be registered Independents and 11% more likely to be registered Republican.”

(“Demographic and Preferences of Coffee Drinkers in America | Marketing Forward,” 2009, par.

1),

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Psychographic. Psychographic segmentation splits the market into customer groups according to

lifestyles. It considers influences on purchasing behavior, including attitudes, expectations, and

activities of customers.  If these attributes are discovered, then marketing campaigns may be

customized to customer motivations. For example, lifestyle patterns and customer behavior may

change through different stages of life. Customer opinions, views on the environment, and

cultural ideas have a large impact on the merchandise they purchase, such as a demand for

organic foods and soft on the environment. Mainly, Starbucks customers have college degrees

with advanced incomes who like a gregarious atmosphere. Starbucks focuses on only one group:

the gourmet coffee drinker and expands its product to keep that segment interested.

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Geographic and Behavior Characteristics. Howard Schultz (“Howard Schultz:

Redefining the Role and Responsibility of a For-Profit, Public Company | Starbucks Newsroom”

(2014, August 21), has stated that a more disciplined, data-driven approach to store openings

have shown very different results over the past two years. In short, he said that the store openings

of 2011 and 2012 had produced some of the best sales in the history of the company, with a

sales–to-investment ratio of 2:1, very strong compound growth, and average per-store volumes at

record levels. Starbucks started using GIS technology and data in the late 1990s. In regard to

consumer behavior, customers decide on a particular brand based on its functionality, emotion

connection or both. The functionality of the brand is important to customers, but they also select

a particular brand because customers can express their personality or social status. Starbucks

prices for its products are on the upper end of pricing. Loyal customers have no problem paying

the premium price without much information about alternative brands. Starbucks wants its

customers more involved in its products and does this in several ways: (1.) Starbucks is marketed

as a status item and has more economic, psychological, and social risk than, say, off brand coffee

or less expensive coffee from McDonalds. (2.) The company uses a number of campaigns, like

offering new products, coffee flavors, or sample pastries. This is a positive use of customer

behavior theory that predicts customers may change buying habits just to try something new.

Starbucks Positioning

A positional statement or brand strategy, is a corporate declaration which clearly defines its

place in the market. With a target audience in view, it describes not only the primary benefits of

the company’s product, but also differentiates the company from competitors, essentially

sketching a picture of how the company wants its customers to perceive and relate to its brand.

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Conclusion

This document has charted the marketing endeavors of Starbucks both nationally and

globally. More specifically, it has documented the market segmentation of the Starbucks with its

target market, demographic, psychographic, geographic, and behavioral characteristics are

discussed in detail. A positioning statement for the company with careful consideration of its

brand strategy is underscored and evaluated for success or failure in today’s global markets. At a

time when many companies are cutting benefits, Starbucks has invested in its employees by

spending $250 million in healthcare benefits for eligible full and part-time employees, sharing

$234 million in pre-tax stock gains with partners, and matching $50 million in 401(k)

contributions. Since the company started offering equity to partners in 1991, it has shared more

than $1 billion in value in the form of stock with its stakeholders. Starbucks is poised to sustain

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its growth globally and its marketing dynamics is just one factor in the mix that makes that

happen.

 

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References

Our Heritage | Starbucks Coffee Company. (n.d.). Retrieved August 19, 2014, from

http://www.starbucks.com/about-us/our-heritage

Mourdoukoutas, P. (2013, April 25). Starbucks And McDonald's Winning Strategy - Forbes.

Retrieved from http://www.forbes.com/sites/panosmourdoukoutas/2013/04/25/starbucks-

and-mcdonalds-winning-strategy/

Demographic and Preferences of Coffee Drinkers in America | Marketing Forward. (2009,

December 1). Retrieved from

http://www.experian.com/blogs/marketing-forward/2009/12/01/demographic-and-

preferences-of-coffee-drinkers-in-america/

Howard Schultz: Redefining the Role and Responsibility of a For-Profit, Public Company |

Starbucks Newsroom. (2014, August 21). Retrieved from

http://news.starbucks.com/2014annualmeeting/howard-schultz-2014-shareholders-speech