CASE STUDY SOLUTION
SUBMITTED TO SUBMITTED BY
Dr. Poonam Sharma Simran Mehrotra (JN180149)
Q. How Starbucks take our retail planning strategy and put it
into an actionable plan in term of its Retail Mix?
Fortune 500 company, Starbucks share prices reached its peak in 2006 and declined
unexpectedly in 2008. Although its business has picked up in 2011 with an increase in
operating profits, Starbucks has lost its market leader position to Costa, a chain coffee shop
business owned by Whitbread plc. Starbucks’ strategic issues are its decrease in market
share, negative brand perception that was invoked by its competitors and its devalued
Starbucks’ Experience that was its competitive advantage
The overall retail planning strategy of the café king is based on the three basic elements of
retail mix
Which areas following :-
Retail Strategy Elements – the various elements in the retail mix of the company
separates the outlet from the rest of the brands and has developed a competitive
advantage for the company .
Target Market – Starbucks aims at catering their service to the upper middle class
and above when it started. But today their focus is on all the various segments of the
society. They aim at serving they’re each customer uniquely.
Competitive Advantage – over the period of its operation, Starbucks has developed a
competitive advantage for itself in terms of its target customers, its services and the
unique in store experiences it gives to its customers.
Speaking of the Retail Mix Elements of Starbucks, here is a brief discussion:-
PRICING
While Starbucks does differentiate their products with being highly quality couple
with the whole ‘Starbucks Experience’, in times of economic sluggishness, consumers
had to switch costs to competitor’s products with lower prices and forgo paying a
premium. These premium prices could also pose some weakness for it to succeed in
developing countries. With the due course of time, Starbucks has developed the
following characteristics in terms of pricing.
Value Based Pricing Strategy – the pricing of the products has been based according
to the value in the products served by the company. Referring to the Starbucks’ case,
price increases throughout the company’s history which has led to the most price
sensitive customers, leaving a loyal, higher-income consumer base that perceives
these coffee beverages as an affordable luxury. In order to compensate for the
customers lost to cheaper alternatives like Dunkin Donuts, Starbucks raises prices to
maximize profits from these price insensitive customers who now depend on their
strong gourmet coffee. When it comes to competing with cheaper chains like Dunkin,
Starbucks uses price hikes to separate itself from the pack and reinforce the premium
image of their brand and products. The customer base of Starbucks is rarely price
sensitive Starbucks coffee maintains an inelastic demand curve, and a small price
increase can have a huge positive impact on their margins without decreasing
demand for beverages.
Product
Starbucks has been ruling the market the main factor being its factor. Since the time
it has been operational it has adopted the technique of product differentiation
offering differentiators such as
premium product mix
locations
coffee beverages reputation and supreme customer service that translated to
building a premium valued brand which is costly to imitate for competitors.
Also, the company keeps a keen eye on the products excelling in the market.
Starbucks has made some key acquisitions such as Teavana (Tea products), Bay
Breads (premium bread products), Evolution Fresh (fresh juice products) etc. to use
the product diversification strategy.
Promotion
The company uses these main strategies to reach out to its customers-
Starbucks Card - Starbucks Card is a technique that gives customers the opportunity
to promote Starbucks’s products through a referral system. When a customer
purchases a gift card, it not only shows brand loyalty, but it also provides the
company with free advertising, and brings in new customers. Starbucks also provides
a card for corporate sales, which are used for extrinsic rewards to show employee
appreciation for a job well done, or a gift to a client.
Delivery services - There are very few or rare coffee outlets that are willing to deliver
without placing any conditions or restrictions.
Unique product experience – Starbucks has developed a customer base by
offering international teas and coffees to accommodate those customers that
want a taste from home or for locals that enjoy tea.
Apart from all the above Starbucks has also been actively contributing to the
CSR activities and fulfilling its duties towards the society as well.
Place
Since its inception Starbucks has aimed at operating in the most prominent
location of the cities. These locations include
In high-traffic, high-visibility locations near a variety of settings, including
downtown and suburban retail centres, office buildings, university campuses,
and in select rural and off-highway locations across the world.
Cafés or coffeehouses. However, there are various other places or channels of
distribution available for these products. In this case, the following are the
main venues or places that Starbucks Corporation uses to reach its target
customers:
Coffeehouses/Cafés
Retailers
Mobile apps ( Though the initiative saw a closure in the year 2017)
Merchandising in the local outlets.
Starbucks aims at attracting customers though different methods which further
include 87000 Combinations of Drinks
Locally Valuable Drinks
Food Items
Equipements & Brands
Store Design & Display
The outlet aims at providing unique in store services to the customers .To achieve this,
Starbucks has undertaken the following
Goal In-house Design Studios
Design Concepts
Layout
Lightings
Product Display
Customer Services
Every Customer visiting the outlet is met by a different and a =n unique experience.
Starbucks has pritorised customer service as one of its most important [Link] following is
achieved by.
Trained Baristas
Payment Options
Free Wi-Fi