Case Analysis |
What factors accounted for the extraordinary success of Starbucks in the early 1990s? What was so compelling about the Starbucks value proposition? What brand image did Starbucks develop during this period? Describe the original target market.
After joining Starbucks’ marketing team in 1997, Howard Schultz traveled to Italy. He was very impressed by the Milanese coffee culture and the way of its services. He really liked the espresso bar that had attracted a lot of customers. Upon his return he suggested that Starbucks set up an espresso bar in the corner of their downtown shop. His idea was to make it a place where people go to relax ...view middle of the document...
Despite a thrifty advertising budget, the business thrived on point-of-sale and local-store marketing materials placed alongside the stores, which were situated in high-traffic, high-visibility locations. The company also sold their coffee products to non-company-operated retail channels, and attempted to saturate the market with coffee almost everywhere consumers shopped: offices, grocery stores, hotels, airlines, restaurants, and licensed stores.
Employee satisfaction at Starbucks is exceptionally high. All employees, including corporate executives, are first trained as baristas, which leads to a better understanding of the business. Starbucks had one of the lowest employee turnover rates in the industry – around 70%. This leads to more experienced employees and lower training costs. The company also had a generous policy of giving health insurance and stock options to every employee. Happy employees with positive attitudes most likely influence their environments in a positive way.
Product innovation was also an important factor in Starbucks’ initial success. New products were launched regularly, including every holiday season. Keeping in mind that the complexity of the drink affects baristas’ acceptance of new drinks, Starbucks successfully launched many new products. Service innovation also played a positive role as demonstrated by the successful introduction of Starbucks’ stored-value card, which led to increased sales and market share.
How does the Starbucks of 2002 differ from the Starbucks of 1992? How do the customers differ? How could such a successful brand lose its customer focus? How has Starbucks achieved its extraordinary growth? What have been some of the consequences of that growth?
In the beginning of 1992, Starbucks was based mostly in North America. Trading mostly in whole coffee beans, it had 140 stores in the Northwest and Chicago. In 1998 Starbucks had opened more than 1,000 new stores in North America. By 2002, the company had expanded its international presence significantly, and increased its number of international stores to 1,312. International stores now accounted for over 20% of all stores. The company also expanded their North American operations three-fold.
When Starbucks first started their customer base consisted mainly of affluent, highly-educated individuals (skewed female). Now in 2002, their new customer base is comprised of younger, lower-income individuals with less formal educations (skewed male), among a more diverse demographic. Newer customers also tended to visit the store less often.
Starbucks’ marketing initially proved effective; however the company lacked a cohesive marketing group. Therefore it was left to the company executives to offer their input as needed. This led to an inefficient process for gathering and analyzing market data, and a divide formed between what the customers were asking for and what the company was offering. The company was...