Coffee consumption in the U.S. has been trending down since 1960’s. 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 common needs or characteristics that the company decides to serve. The decision of selecting target segments can be assessed by looking at market factors, competitive factors, and political, social, and environmental factors (Jobber, 1995). Price, bargaining power of customers and suppliers and barriers to entry all comes under the market factors, and in the case of Starbucks, their coffee was expensive and they were trying to re-create a new coffee ...view middle of the document...
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 bought dark-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.
They used total quality management (TQM) in which all company’s people are constantly involved in improving the quality of products (Kanji, 1996). Usage of nonfat milk and introduction of Frappuccino made a significant presence in the balance sheet of Starbucks. Moreover, they provided seasonal offerings, such as strawberry and cream Frappuccino in the summer and gingerbread latte in Christmas, were introduced. Gradually food items such as cookies, pastries, sandwiches and salads made their way into the stores. Later they went on to develop new products with other companies. This shows how cautious Starbucks was to keep their standard high and maintain their premium quality image.
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. When launched, Starbucks was expensive and was positioned in accordance with that. They always tried 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 enjoy coffee, meet fellow people and ‘take a break’ from the busy life. These all justify their pricing and show how price supported their positioning.
Distribution & Service
Distribution channels links the organization’s product or service to its consumers; and in a producer-consumer (direct supply) channel, as in the case of Starbucks, maintaining a personnel relationship with the customers is significant (Brassington & Pettitt, 2000). However, from a distribution point of view Starbucks got an...