The article analyzes the current state of the world-famous American company Starbucks, whose main product range is represented brands such as Coffee Starbucks, Seattle's Best Coffee, tea Tazo, a new development, La Boulange and Torrefazio ne Italia Coffee.
As discussed in detail factors such as human resource management, pricing strategy, marketing, which are undoubtedly important in achieving success Starbucks worldwide.
In general, it can be concluded that the result of the success of Starbucks is a welldesigned financial instruments and strategies, which result in the stability of the success and popularity worldwide.
Nowadays with increasing global interconnectedness, it is not surprising that some company names as e.g. Starbucks are not new to majority of people all over the world. Almost majority of world population can today or has even once in their life experienced the taste of the Starbucks hot coffee drinks or popular cold drinks.
Starbucks is a world known American coffee retail chain that services coffee and other related beverages. The company purchases, roasts and sells high-quality coffee beans and handcrafted coffee and tea beverages and a variety of fresh food items, ice cream and ready to drink products. The main range of products is represented by the brands such as Starbucks Coffee, Seattle’s Best Coffee, Tazo Tea, Evolution Fresh, La Boulange and Torrefazio ne Italia Coffee. The company operates with over 18 thousand retail stores in over 55 countries and runs the business through the basic directions in USA, international market, consumer products group and other1.
The paper will provide basic, key information on Starbucks. More importantly it will cover its growing strategies, which are exceptionally useful given success Starbucks achieved worldwide. Afterwards, in the paper we will discuss about other factors that undoubtedly also played significant role in achieving success as human resources management, pricing strategies, marketing factor and their prospects for future.
20,891 stores in 62 countries, including 13,279 in the United States, 1,324 in Canada, 989 in Japan, 851 in the People's Republic of China, 806 in the United Kingdom, 556 in South Korea, 377 in Mexico, 291 in Taiwan, 206 in the Philippines, 179 in Turkey, 171 in Thailand, and 167 in Germany. In addition, Starbucks is an active member of the World Cocoa Foundation.
Starbucks offers hot and cold beverages, whole-bean coffee, microground instant coffee, full-leaf teas, pastries, and snacks. Most stores also sell packaged food items, hot and cold sandwiches, and items such as mugs and tumblers. Starbucks Evenings locations also offer a variety of beers, wines, and appetizers after 4pm. Through the Starbucks Entertainment division and Hear Music brand, the company also markets books, music, and film. Many of the company's products are seasonal or specific to the locality of the store. Starbucks-brand ice cream and coffee are also offered at grocery stores.
From Starbucks' founding in 1971 as a Seattle coffee bean roaster and retailer, the company has expanded rapidly. Since 1987, Starbucks has opened on average two new stores every day. Starbucks had been profitable as a local company in Seattle in the early 1980s but lost money on its late 1980s expansion into the Midwest and British Columbia. Its fortunes did not reverse until 1990 when it registered a small profit. By the time it expanded into California in 1991 it had become trendy. The first store outside the United States or Canada opened in the mid-1990s, and overseas stores now constitute almost one third of Starbucks' stores.
The company sells a variety of coffee and tea products and licenses its trademarks through other channels such as licensed stores, grocery and national foodservice accounts. Some of the key brands under which the company offers its products include Starbucks, Tazo Tea, Seattle’s Best Coffee and Starbucks VIA Ready Brew.
Starbucks operates through four business segments: the US, international, global consumer products group (CPG) and other.
The US segment runs company-operated stores and licensed stores within the US. The international segment operates company-operated stores, licensed stores, as well as foodservice stores primarily across Canada and the UK. The CPG segment includes packaged coffee and tea, Starbucks VIA Ready Brew and other branded products sold worldwide through channels such as grocery stores, warehouse clubs and convenience stores, and US foodservice accounts. The other segment includes Seattle's Best Coffee operating segment and Digital Ventures business and unallocated corporate expenses that pertain to corporate administrative functions that support the company’s operating segments.
In terms of revenue generation, the company has four channels: company-operated stores, licensed stores, consumer packaged goods and foodservice operations.
Starbucks’ company-operated retail stores are located in high-traffic, high-visibility locations, such as retail centres, office buildings, university campuses. The company-operated stores offer a choice of regular and decaffeinated coffee beverages, a wide range of Italian-style espresso beverages, cold blended beverages, iced shaken refreshment beverages, premium teas, roasted whole bean coffees, and a variety of Starbucks VIA Ready Brew soluble coffees.
Starbucks’ company-operated stores also offer a variety of fresh food items, such as pastries, prepared breakfast and lunch sandwiches, oatmeal and salads, as well as juices and bottled water.
The company also offers food warming program in its stores across the US, Canada and China, with over 90% of the stores in these markets providing warm food items. The companyoperated stores also sell a variety of beveragemaking equipment and accessories apart from free access to wireless internet. By the end of FY2011, the company had a total of 9,031 company-operated stores across the US and other regions.
The licensed-stores are operated in combination with the company’s local partners while each of them has respective operating and store development experiences. As part of licensing agreements with most prominent retailers in the market, the company receives royalties and license fees and sells coffee, tea and related products for resale in licensed locations. By the end of FY2011, the company had 2,334 licensed stores in Asia-Pacific, 862 in the EMEA region and 4,776 across Americas.
The CPG channel includes revenues from product sales to and licensing revenues from manufacturers that produce and market Starbucks and Seattle's Best Coffee branded products through licensing agreements. During FY2011, the company transitioned its previous distribution arrangement with Kraft Foods Global, which included the marketing, advertising, and promotion of the afore-mentioned products, and began selling them directly to the grocery and warehouse club stores in Canada, the UK and other European countries. Through the CPG channel, Starbucks also sells packaged coffee and tea directly to warehouse club stores in international markets. Additionally, the company also has licensing agreements with several licensees to whom it sells ingredients to manufacture its branded products. Significant licensing agreements include: the North American Coffee Partnership, a joint venture with the Pepsi-Cola Company in which Starbucks is a 50% equity investor, which manufactures and markets readytodrink beverages, including bottled Frappuccino beverages and Starbucks DoubleShot espresso drink and Seattle's Best Coffee ready-to-drink espresso beverages in the US and Canada; licensing agreements with Arla, Suntory, and Dong Suh Foods for the manufacturing, marketing and distribution of Starbucks Discoveries, a ready-to-drink chilled cup coffee beverage, in Europe, Japan and South Korea, respectively; a licensing agreement with a partnership formed by Unilever and Pepsi-Cola Company for the manufacturing, marketing and distribution of Starbucks super-premium Tazo Tea beverages in the US and a licensing agreement with Unilever for the manufacturing, marketing and distribution of Starbucks super-premium ice cream products in the US.
Through the foodservice channels, the company sells Starbucks and Seattle's Best Coffee whole bean and ground coffees, a selection of premium Tazo teas, Starbucks VIA Ready Brew, and other related products to institutional foodservice companies that service business and industry, education, healthcare, office coffee distributors, hotels, restaurants, airlines and other retailers. The company also sells the Seattle's Best Coffee branded-products through arrangements with national accounts. Major customers in this channel are SYSCO Corporation, US Foodservice, and other distributors.
Looking into Starbucks specifically, we need to analyze how it performs as a company and whether or not it will continue to perform. In order to gauge this performance we look at both the company’s characteristics and those of the surrounding market and see what needs to be done for the future. An excellent tool for gauging these qualities is Strengths, Weaknesses, Opportunities, and Threats analysis, also known as SWOT analysis:
Strengths: Pretty much everyone, at least within the US, knows the name Starbucks and associates it with high-end coffees. In addition, people see Starbucks as the biggest and best in the business. This is a significant strength because Starbucks has a natural edge over its lesserknown competitors in that people already associate it with a high quality and popular experience.
The enormous number of Starbucks locations allows them to reach almost every domestic market as well as a good number of international ones. This allows them to implement new products quickly across a large demographic and ensures a large exposure of clientele to prevent new entrants from gaining market share. Additionally, taking advantage of existing establishments such as Barnes and Noble and opening smaller cafés in other businesses allows them to expand their market while keeping costs low. This also allows them expand their marketing potential to different demographics.
While their business isn’t as well established internationally as a company like McDonalds, there is an extremely large benefit to having a globalized business (see Appendix).
Aside from the obvious scale advantages, being international also helps to prevent the rise of international competitors that may build up enough capital to jump into the American market.
Starbucks has a well-known practice to make efforts to preserve the environment and be ethical in its dealings. This gives the company a good public image, which serves to counter some criticism that its sheer size creates. Its size also helps its position in the market. Being ahead of all its competitors in the industry in terms of size and volume allows them to set the prices and prevent the growth of other companies.
Starbucks successfully changed the public opinion of coffee products from a commodity to a luxury good, and in so doing, enabled an increase in price for these goods to a much higher level than would have been possible before.
Starbucks’ mission to make its stores a “third place” for people to go besides work and home comes by offering services like free internet and comfortable chairs. This goal gives Starbucks the ambiance to go along with its product. While Starbucks has an exceptional edge in the coffee industry, it has some weaknesses that may leave it vulnerable to changes in the market.
Weaknesses: While most people consider Starbucks coffee a luxury good and would pay whatever price is set for it, there is an increasing opinion that Starbucks charges too much. They are also very inflexible in terms of location. For example, Starbucks charges the same price for their products whether you’re in LA or Beijing.
Basically, the main problem for Starbucks is that its entire business rests on the coffee industry. If coffee does turn out to be a fad, they must diversify or go out of business whereas other competitors, such as Dunkin Donuts, have investments in a variety of industries.
In addition to fixing its prices for international customers, Starbucks also has lacked some tact in the way of international relations. In Israel, Starbucks has had a hard time taking off because it won’t maintain kosher standards. In general, Starbucks keeps its business plan formulaic and centralized and does not tailor its branches to the locations they are being placed in.
Moreover, Starbucks offers only one flavor of coffee, as opposed to its competitors such as Peet’s and Coffee Bean& Tea Leaf, which offer a large variety of coffee’s to choose from.
This lack of selection makes Starbucks an unappealing choice for many coffee drinkers.
Opportunities: By purchasing companies such as Seattle’s Best, XM Café, and Tazo Tea, Starbucks used a different brand name to get business in a different market niche. Starbucks also offers a range of products that it sells to other companies such as its bottled Frappuccinos and other specialty goods, which expand its market at a lower cost than opening full branches.
They used their vast resources to develop an international business. This generated even more revenue for Starbucks and really helped to develop their brand image. One of their biggest opportunities continues to be in expanding and diversifying their business with their vast wealth.
Threats: Recently, serious competition has presented itself. Several companies are developing coffee products that rival those of Starbucks. Companies such as Peet’s and the Coffee Bean have grown large enough to seriously compete with Starbucks. Other companies, such as McDonalds, Dunkin Donuts, Burger King, etc, already have the infrastructure in place and are instead adding quality coffee to their menus to compete with Starbucks.
Another potential threat is that coffee is just a fad and eventually people will grow out of it. If this is the case, Starbucks’ only hope is to diversify its business into other industries to potentially give it some security from fluctuations in the coffee market. Because of the specialization of their industry, Starbucks is very dependent on supply factors such as the price of coffee beans, which could hurt their business.
Global Growth and Success Strategies
It is not something new that Starbucks has achieved incredible success and popularity. No one argues that the quality of goods is high, but it cannot be the only reason for such tremendous global success. Even Kazakhstan and Ukraine is trying hard to get franchise to open the Starbucks store in their countries, and these attempts were not productive as Starbucks has own expansion strategy. If consider statistics of Kazakhstan, Starbucks is the second franchise most wanted in Kazakhstan, while the first one is Haagen-Dazs icecream brand from Seattle. The wish list also includes McDonalds, Victoria’s secret and IKEA. So what is that apart from good quality that creates such demand all over the world? Of course they are Starbucks’s applied global growth and success strategies. This section will shortly discuss all the growth strategies of the company.
Among all successful US franchise companies two companies clearly stand out, which are Starbucks and McDonalds. According to Joachimsthaler (2007) the common feature of these two leader companies is that they place pivotal role for creating customer advantage. These two companies could reach understanding that what customers want is simply sense of accomplishment that comes from enhancing daily life. This explains how Starbucks became popular. If recall the history, as we all know, Starbucks’ success story started after Howard Schultz’ trip to Italy where he saw that cafe is part of people’s everyday life. So he thought to create “third place” not home, not work – which can be absorbed into regular existence of people, the place where they want to be on a regular basis just to relax, socialize, entertain despite the price they have to pay for that comfort.
The place that would mean different things to different people. This idea of Schultz have affected his retail strategy. Instead of locating the stores around the country where area becomes available with typical franchise arrangements, he has carefully chosen the location so to create such authentic third place atmosphere. So instead of random allocation, the stores were densely allocated in places where most people live, work and play. So in one small area could be several Starbucks stores that compete with each other, but for the overall benefit of the company. Such unusual strategy helped actually to build the brand. Such clustering of stores in one area contributed for quick achievement of market dominance. The success of such strategy can be demonstrated with the figures: over 20 million regular customers per week, so being the American retailer who can claim a higher frequency of visiting customers. Also as the company went public, sales have risen about 20% each year. Such careful approach in opening stores, explains Starbucks’ decision where it opens the stores, where it does not.
Therefore it can be assumed that they have not yet decided to open the store in Kazakhstan, because their main strategy is to cluster the stores, while opening several stores in Kazakhstan may not bring sufficient sales volume, and also due to its geographical location where population is widely spread all over the big territory and there is no high population density, the clustering idea might not work. The other strategy that is widely used is to broaden the available menu. Instead of providing typical products, they focus on providing variety of specialties every time, e.g. during Christmas time they have special drinks.
In addition to those strategies, what Starbucks does is also getting involved in sponsorship and distribution of music production. The company created its own music label, and sold album which included songs of several singers known only in small music industry, but with Starbucks’ distribution they gained the success. For instance, Starbucks sold 775 000 copies of Ray Charles album in 2004, who then received Grammy in 2005 for this album. Statistics and research results showed also that Starbucks customers love the music played in the stores.
Moreover, Starbucks in almost all of its stores has WI FI Internet connection so that customers can relax, surf the internet, read the news, download the music, etc. So this is the strategy applied to create third place by fitting the set of everyday life activities and priorities of their clients.
Overall Starbucks has four pivotal strategy which made the brand “affordable luxury”:
Appropriate market segmentation
The main strategy of the company is to create comfort for the customers. Hence, they target mainly upper class, or upper middle class that can value the comfort, ambience of the store created rather than mere convenience. This class of people usually view the store more than just coffee shop, but as place where they can communicate; feel themselves as part of community, relax with others or by themselves.
This is about focusing on creating good “experience” of coffee consumption. Thus the three most important factors that Starbucks pays attention to are high quality coffee, high quality service and nice environment. Starbucks is prideful for offering good coffee the source of which is Africa, Central and South America and AsiaPacific regions. The Starbucks also controls heavily the supply chain to ensure high quality premium product. Good service is important, and here comes the focus in “customer intimacy”, which will be helpful in retaining the loyal customers (to be discussed later in this paper). Ambience also plays significant role, as top managements understand that people come for coffee, but it is the environment that makes them stay. Hence, arrangements as wi-fi access, good music background, etc. makes nice atmosphere.
Good leadership, headed by Schultz, with desire to innovate the product, to expand portfolio, of being committed to company mission is what makes Starbucks successful. It should be also noted that Starbucks treats its employees in different way. They are referred to as “partners”, and they account for about 60 000 employees all over the world. Company strives to achieve partner satisfaction, so this is the fundament for achieving customer satisfaction. The company provides health insurance, good wages and even stock options, thus company ranks high as the place where good to work. The company also makes internal promotions, for example store managers are usually ex-baristas.
Expansion to China
Chinese community is largely described as extended-family community. Hence, there is a huge demand for third place, so because of such increasing demand and applying its strategy of “third place” using such cultural specifics lead to opening of 500 stores in 2012 in addition to already existing 1000 stores. Obviously, this led to large increase in sales.
These are the key strategies that should be highlighted. What is the most significant to note is that such strategies are so successful, despite the fact that company spends less than 1% of is annual sales for advertising. It can be explained by applying the well thought strategies that built strong brand for the company, thus there is no need to large advertising. They mainly win their customers by more deep, well thought strategies.
Starbucks also apart from clustering its stores it is engaged in building smart partnerships with such big companies like Pepsi-Cola Co. in order to innovate its product portfolio and come up with new products.
Starbucks also largely makes use of social media to get followers through social networks like Twitter, Facebook, Instagram.
Finally, My Starbucks Idea can be also counted as part of their strategy for creating customer relationship. In this website customers can share with their experience, feedback, new ideas if innovating the products, etc. The core of this is that it creates also customer loyalty, customer engagement (feeling of being part of creating something new, or being important and heard), strong customer relationship, and they provide rewards for those with good ideas provided.
To sum up, the right strategies play an important role in creating destiny of any company.
The growth and expansion strategies of Starbucks have been actually deeply thought, focused on high quality product and service provision, and for creating enjoyably ambience for the customers. Therefore instead of just expanding by opening more stores in available areas, they carefully consider each location, its population and mainly expand by creating clusters in one area which is central or hub place.
Global Human Resources Management
Brand loyalty and attraction of the potential customers on the worldwide scale can be achieved through the effective human resource management and the company’s personnel, despite the location where the company operates. The most vivid difference of the international human resources management from domestic is that it involves more complex procedures in hiring, training and rewarding processes. At the domestic level, human resources are conducted according to the accepted policies and common standard practices whereas at the international scale personnel management requires implication of various legal and business practices. In order to build successful international human resources management the aspects such as translation services, international tax policies, and employee relocation and orientation programs, establishing relation with the host-country government should be taken into account. The most important measure for the international human resources management is to understand cultural diversity and address necessary means in order to benefit the company as well to the host country.
Starbucks experience shows that highly motivated and committed employees lead company to the lifelong success even though competitors can reproduce the products Starbucks serves, but will not be able to duplicate the way the customers are served since people makes Starbucks Starbucks but not the products. Leaded by the philosophy of “employee first” Schultz stresses by saying that “we built Starbucks brand first with our people, not with our consumers. Because we believed the best way to meet and exceed the expectations of our customers was to hire and train great people, we invested in employees”. Along with the unique attitude towards the employees, Schultz engages personnel to be “true ambassadors of Starbucks brand”. In 2012 the company invested into “Leadership Lab” trainings that are aimed to elaborate employees’ empowerment and engagement: This is an excellent example of how employees can be important for strategic vision of the company as well as become irreplaceable asset for the development on the international scale.
The human resources strategy that focuses on hiring and selecting „right people’ as well as commitment to the employees was resulted in gaining second place among large enterprises in the Fortune “Best Companies to Work for” survey in 2005. The company’s recruitment motto is "To have the right people hiring the right people." In the early stages Starbucks realized that motivated and committed human resources were the key to the success. The main criteria for hiring are adaptability, dependability and ability to work with team.
Expansion of the coffee shops in the United States lead to the need for the company to look for other markets to grow and strategies to internationalize required having on the board the experts with international operation experience. Starbucks International hired multinational, multilingual specialists who could work toward global expansion strategies. The international team was in charge of establishing new business, launching new outlets across the world and financing them, developing operation and supply chain processes, monitoring the work and hiring and training international personnel for Starbucks. The international leadership is consists of the executives and senior managers such as John Culver, the President of Starbucks Coffee China and Asia Pacific and Curt Garner, the Chief Information Officer, who oversees Starbucks global technology and engineering services for all Starbucks businesses and operating organizations. Human Resources Management is leaded by Karen Holmes who has been the Executive Vice President, Partner Resources (Human Resources) at Starbucks since 2009.
Despite the fact that internationalization process requires adaptation to the differences in the host country, Starbucks developed universal policies in hiring and retaining personnel worldwide. Recruiting process at Starbucks differs depending on each position (barista versus corporate) and usually it is implemented through company’s intranet, advertising in store and on the Starbucks webpage. Employees are hired based on the application, CV, interviews, background monitoring and tests on the personality. The last two criterions are approached to the senior management positions and very seldom for the baristas positions.
Starbucks heavily invests into developing and trainings programs for the newcomers.
Orientation is implemented by the both line management and the human resources manager. The training programs involves internships, computer-assisted instruction, intranet or Internet, onthejob (OJT) coaching, and videotape. All new employees start to work with a 24-hour paid training program that called "First Impressions." It focuses on coffee knowledge and ways to build a positive customer experience. Managers and assistant store managers also involved in the additional 10 -week retail management training course. Starbucks practices a program called “Total Pay” to compensate its employees. Based on the Starbucks Pay website, “Starbucks’ pay philosophy is to recognize and reward partners’ contributions in achieving the company’s strategic goals and business objectives, while aligning with Starbucks Mission Statement and Guiding Principles.” In order to accomplish this pay philosophy, Starbucks is aimed to recruit and retain talented partners who committed to work for company’s values. In addition to the pay and benefits, Starbucks offers financial incentives like stock options, referred to as Bean Stock, employee discounts, and cash bonuses. Starbucks monitor employees’ satisfaction through the Partner Voice surveys and employee performance evaluation is based on several aspects such as employee traits, employee behaviour, and employee job results.
In 1987 Starbucks became one of the first retail companies that offered part time employees the same package with the benefits that for fulltime employees. The company also provided them with the extended health coverage. Another benefit that company introduced is purchase of the stock and becoming partners in the company. Employees can invest up to 10% of their base earnings to quarterly purchases of the company's common stock at 85% of going stock price. Starbucks supports cultural diversity of the personnel as well as communities they serve. In 2008 and 2009 the company was scored 100% on the Human Rights Campaign Foundation's Corporate Equality Index. Black Enterprise magazine has ranked Starbucks among the 40 Best Companies for Diversity in the U.S., 15 Best in Senior Management Diversity, and 15 Best in Corporate Board Diversity. The idea of diversity at work made the company to be called „the most admired and diversified coffeehouse in the world’. The global presence in 55 countries connects 149 000 people worldwide who have the same passion for the coffee regardless the difference of the values in the society, cultural and language barriers.
Starbucks is most known for their quality coffee shop items such as coffee, teas, and favorites such as hot chocolate. All of their menu items may be ordered in one of three sizes.
They offer a Tall size which is a small, a Grande size which is a medium, and a Vente which is a large. Most of these items start at the low end of a dollar and go up to about $3.50. The price is obviously dependent on the size and style you order. The prices for Tall size vary from
$1.35 to $2.70, Grande size $1.65 to $3.25, and Vente size $1.75 to $3.50 according to the Table below.
For example a basic cup of hot brewed coffee is one of the lowest priced items while more complicated drinks such as the Vente Chai Tea Latte will be a bit more expensive. As you can see from the menu below each item such as coffee and tea comes in a variety of flavors and styles.
Starbucks uses a high quality Arabica beans in its coffee brewing process. Thus, it is the Starbucks’s pricing strategy to charge premium prices for the premium products. Quality plays a key role in setting prices. That is why Starbucks maintains strict quality controls in its coffee sourcing as well as in its customer service and peripheral products to justify its costs. People always are willing to pay high prices, even without trying the product, because they associate the Starbucks name with high quality.
Also Starbucks considers local market costs, including infrastructure investment, real estate and labor costs while setting the product prices. In countries where the currency overvalued, a dollar does not go as far. It would take more dollars to buy a Starbucks latte in a country with a strong currency, like Norway, than in one with a currency that has less buying power, like in India.
This measure – known as purchasing power parity – is crude way to compare the relative strengths of currencies. Below the prices of a Starbucks grande latte worldwide, measuring approximately 473 ml, converted to US dollars using rates of Feb 23, 2013, tax included when applicable.
There is a high competition with brands such as McDonald's and Dunkin' Donuts. Such competitors capture those consumers in the market who are less interested in the premium beverages offered by Starbucks. During the economic downturn customers continue to buy Starbucks’s products, in spite of the fact that it raises the prices for the premium products. In several stores in the US the prices of specialty beverages were increased by up to $0.30.
Especially considering also nice welcoming design of stores, clean and hygiene image adds to strong image of Starbucks as 83% of customers rated cleanliness as highly important (www.starbucks.com). Such design intended at reaching human soul and making customers comfortable in enjoying ultimate coffee experience. Moreover, Starbucks also promotes image of supr e m a i n t h e s a m e ) . ( h t t p : / / porting local communities by being a good blog.priceintelligently.com/blog/bid/184451/ How-Starbucks-Uses-Pricing-Strategy-for-ProfitMaximization).
Another strategy that Starbucks uses to maximize profit is to differentiate its products and continuously improve its service and technology. Starbucks spends a lot of time to and energy in the design of its coffee shops, the music played there and the types of products it sells. Starbucks makes sure to keep current on the latest technology, often times being the first to introduce the newest advancements to its customers.
Starbucks as any company intended to maintain its success pays special attention to retention of customers. They understand that loyal customers are cost-effective way to guarantee continued success for the company. Hence, the paper will focus on customer retention strategies as well.
First of all Starbucks created a real coffee culture by educating the customers on coffee types, origins and roasting process, this facilitated brand credibility and customer trust in quality and brand of the products and services provided. Such credibility was also created by customization of beverages taking into account consumer’s desire – offer flexible drink options like extra cream, caramel syrup, etc. As was already mentioned Starbucks was also consistent in providing new seasonal products, so by differentiating themselves. This helps not only in retaining customers by adding to overall experience of existing customers, but also in attracting new ones.
Moreover, Starbucks gets an advantage by providing high quality drinks at affordable price with a mix of great atmosphere of coffee shops and outstanding services. So sustaining such price level is crucial for customer retention.
Another factor that plays important role as neighbor, procuring materials from local farmers as well contributes to the image of socially responsible shop that aims to grow with the community.
Not less important strategy and actually significant one is expression and valuing loyalty of customers by providing then with Starbucks Loyalty Card, which provides a number of benefits like free syrup and milk options and free beverages with purchase of whole bean. This provides sense of value for their money and would appreciate excellent services by being regular customer.
Additionally, it has been announces that it is not just coffee that drives sales of the company up. It is employees and baristas who directly contact with customers and company facilitates that employees master ability of anticipating customer’s wants and desires in advance, they create client-friendly ambience, where customers want to come back. Employees provide personalized services with smile and in friendly mood such as warm greetings, flexible changes to order and memorizing favorite drink of regular customer, so making each client feel special. It can be argued that this is the most important factor for achieving customer retention and Starbucks understands significance of creating relationships and bonds with customers.
Finally, Starbucks keeps up to date and searches for routine needs of customers regularly. This is evidenced by creating special application for smartphones through which customers can easily convert gift cards into a loyalty card, and even can pay for the drink without using cash.Summing up, Starbucks clearly understands that in nowadays competitive world it is crucial to be able to maintain its customer base. Having loyal customers substantially reduces marketing costs, and moreover such customers if enjoy the services will definitely recommend it to friends, relatives. As the company operates in the way it suffices the clients, such customers will undoubtedly support Starbucks in good and bad times.
Build for the Future
According to the article published in Wall Street journal dated September 2013, the Company has huge plans for the future. The CEO of Company Mr. Schultz shares that they are going to introduce new design concepts, including a modern, modular drive-through made from reconfigured shipping containers. A drive-through window will be a part of 60% of the 1,500 new U.S. stores that are planned for the next five years. There will also be new "coffee tribute" locations, such as the recently opened Kerry Center flagship in Beijing, a two-story store with coffee bars, contemporary furniture, locally sourced Chinese artifacts and a series of coffee workshops. And last week the company announced the opening of a store within the Parisian shopping center Galeries Lafayette, as part of a planned move into more retail spaces.
Overall, it can be concluded that overwhelming success of Starbucks can be explained by complex, well-thought tools and strategies. Their approach is not just to increase sales by opening many shops in all available places, by paying high costs for marketing, but it has more qualitative and sustainable approach. As has been discussed in the paper, the company’s growth strategy, pricing and HR management strategies, and significance they place on retention of customers by providing high quality product and services demonstrate the reasons for gaining such popularity all over the world and sustainable success can be easily expected.
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