Starbucks United Kingdom Marketing Plan
Starbucks Marketing Plan
Contents
TOC o “1-3” h z u The External Environment PAGEREF _Toc376343801 h 1Political, Legal, and Regulatory Issues PAGEREF _Toc376343802 h 2The Customer Environment PAGEREF _Toc376343803 h 2SWOT Analysis PAGEREF _Toc376343804 h 3F. Matching, Converting, Minimizing, and Avoiding Strategies PAGEREF _Toc376343805 h 53. Marketing goals PAGEREF _Toc376343806 h 5Marketing Strategies PAGEREF _Toc376343807 h 6References PAGEREF _Toc376343808 h 8
Situation Analysis
The External Environment
Competitive Pressures
The UK market has a highly competitive retail space for hot drinks making it difficult for new entrants to penetrate. Nestle controls the largest market share for instant coffee and has a better understanding of the local consumers.
Economic Growth and Stability
The UK market has experienced difficult financial times since 2009. The Euro crisis too has been reduced consumer purchasing power. These difficulties make it reasonable for consumers to spend on necessities first, and less on discretionary items such as instant coffee.
Political, Legal, and Regulatory Issues
The UK market has stringent regulatory issues compared to the U.S. market. Starbucks has suffered a tainted image after revelations that the company has been evading tax since 1998. According to the company statement released in 2012, the company has only paid corporation tax worth 8.5 million pounds since its entry into the U.K market in 1998.
Changes in Technology
Starbucks’ competitors deliver coffee to the customer within the shortest time possible. This requires new machines and expertise. Technology helps beverage companies to advertise, deliver, and process payment for their products especially using information systems and social media.
Social Cultural Factors
The UK culture is conservative when compared to American culture. The American style of making coffee is still unpopular in the UK. UK customers prefer personalized services and courtesy-filled service delivery.
The Customer Environment
The UK market for hot drinks is an espresso zone. Customers have refined tastes for good coffee that has been brewed using traditional British, Italian and French styles. To penetrate and gain acceptance in the UK, producers must understand these tastes. Traditionally, UK customers prefer a strongly brewed coffee compared to Americans, and also like a variety of coffee (Hot Drinks Industry Profile: Europe 2012). Most customers have also complained that Starbucks coffee is very light and does not have adequate milk. The UK consumer is more sensitive to pricing and location of the coffee houses after the economic downturn.
Internal Environment
Starbucks entered the UK using a profit-oriented model as opposed to a customer-oriented strategy. Most of its service delivery methods were not in line with consumer tastes, and so it has taken the company almost a decade before it started making profits. In the recent days however, Starbucks has shifted to a customer-oriented strategy that has resulted into changes in its management, restaurant settings, design, and locations as well as on products.
The internal structure of Starbucks is still American-based. For instance, the design of cafés and top leadership followed the American style. As a result, Starbucks has been perceived as pushing its American business model, as opposed to understanding the UK market. The company is closing stores in expensive locations and moving to areas that are accessible to customers especially the working class.
SWOT AnalysisStrengths
International Operations With Huge Revenue Base
Starbucks has about 2,000 international operations and 3,200 licensed stores that generate a lot of revenue. This revenue can be used to enhance its competiveness in struggling markets such as the UK. For instance, the company has planned to spend a percentage of its revenue in marketing in the UK through revamping stores and loyalty programs.
Product Quality and Brand Equity
Starbucks is a premium brand that is easily acceptable all over the world due its high quality drinks (Starbucks Corporation SWOT Analysis 2012, p.4). The Starbuck’s brand has been built through quality products.
Research and Development
Starbucks is known for its ability to develop new food and beverage products for potential markets such as the UK. For instance, the company recently launched instant coffee Starbucks VIA Ready Brew that will maintain its freshness for a long time.
Strong Distribution and Marketing Channel
The company has leveraged on technology to get its products to consumers easily. In addition to its four distribution channels –retail stores, company stores, foodservice and consumer packaged goods (Alderman 2012), the company has also introduced mobile applications to enable the customer to access its gifts, machines and other products easily.
Weaknesses
Taxation and legal Suit
Starbucks reputation suffered from the tax evasion allegations and ongoing lawsuit where the company had not updated its tax records for a number of years. This may affect its brand image in the UK.
Business Model
Starbucks business model in the UK is weak in management and strategy formulation. For instance, Liu and Herbst (2009) shows that the company located its stores in expensive locations that were not frequented by customers occasioning losses due to high rent expenses.
Heavy Restructuring
Starbucks has been through several restructuring processes in various market segments including the UK (Liu & Herbst 2009). Restructuring comes with heavy capital outlay and heavy marketing campaigns to bring customers on board.
Opportunities
Instant Coffee Segment
Starbucks has made significant developments in the instant coffee segment. Unlike competing products that use by-products and other chemicals, the invention of Starbucks VIA Ready Brew has enabled the company to serve customers with natural roasted coffee without preservatives.
Demographic Factors
Demographic factors are in favor of Starbucks growth in the European market. There is increase in working population and demand for eating-out joints that will boost its sales. The younger generation is more receptive to Starbucks products and their mode of preparation.
Revamping U.K. stores
Starbucks is changing everything in Europe from management and food and drinks that they serve to location of stores. This revamp will restore customer confidence, attract more customers and take advantage of existing opportunities such as continental tastes.
Threats
Economic Conditions
The economic downturn, the slow economic recovery and looming euro crisis have lowered consumer’s purchasing power and ability to have discretionary expenditure (Starbucks Corporation SWOT Analysis 2012, p.7). The company is also facing currency risk.
Health Consciousness
Most consumers are increasingly aware of health problems posed by fast food, snacks and large intakes of coffee. As a result, they are making more health conscious diet decision that may negatively affect the company sales.
Competition
In the foods section, the company is competing against well-established French pastries that have won customer loyalty over the years (Alderman 2012). There are more than 50,000 traditional French coffee outlets and almost the same number for Italian coffee (Jargon & Stevens, 2012).
E. SWOT Matrix
Strengths:
International operations with huge revenue base
Product quality and brand equity
Research and development
Strong distribution and marketing channels
Opportunities:
Instant coffee segment
Demographic factors
Revamping U.K. stores
Weaknesses:
Taxation and legal suit
Business model
Heavy restructuring Threats:
Economic conditions
Competition
Health consciousness
F. Matching, Converting, Minimizing, and Avoiding StrategiesThe company has generated revenue from other operations, which can be pumped into the UK market through marketing. The revenue can be used to increase market share through strategic alliances, marketing campaigns and promoting the brand.
Starbucks is known for its efficient and functional distribution strategy in U.S. and china. The same can be extended to the U.K. to take advantage of the demographic factors such as the younger generation that can be a target for mobile applications and loyalty programs. To compete with Nestle in the instant coffee segment, the company can use its strength in research and development to develop fine and quality products.
The company can take advantage of its robust business model to formulate a strategy that is more acceptable to the UK market. However, brand reputation will remain a big challenge for Starbucks in UK. The company must update its taxation payment and come up with campaigns to redeem its image. The company can use corporate social responsibility to build its brand reputation.
Economic conditions will also remain a challenge for the company. However, it is important for the company to readdress its pricing strategy to attract customers with low discretionary income.
3. Marketing goals
Marketing Goals and Objectives
Marketing Goal
To increase market share by around 10% by 2014 and improve the brand image os Starbucks in the European market
To increase sales revenue by 30% by 2014
Marketing StrategiesPrimary Target and Marketing Mix
Starbucks Europe has been struggling to increase its market share in Europe, and have only managed to increase its sales by measly margins. This can be attributed to intense competition from European players as well lack of acceptability.
Target Market
The target market for the product will be men and women between 20 and 50 years. The target group is divided into young professionals and middle-class professionals. These target customers hold business meetings regularly in luxury coffee shops over evening, mornings, and lunch times. They also have discretionary income to spend on coffee. They are also like eating out and can tag their families and friends. They are tech-savvy and become a target for mobile applications distribution. The segment can be easily targeted to change the culture of having breakfast by promoting take-away or delivery in offices.
The Product
The main product on offer will be premium coffee. The product offers varied choices for the customer, where the customer can choose between traditional coffee and instant coffee. Coffee will be served in serene environment. For instance, within the restaurant, there will be availability of internet and teleconferencing devices. There will be downloadable materials such as games and music accessible within the café. In addition, the product will be tailored to give a mix of UK and American culture.
Pricing
Coffee is generally cheaper in the UK than in the US. Customers have previously complained about high prices of Starbucks coffee. The premium coffee segment will strike a balance between luxury and reasonable prices. The target market has discretionary income, but is also price-conscious. Premium coffee will be priced at £ 3. Coffee ranges between £1.7 and £3.5 in most parts of UK. Offering premium coffee at £3 will be acceptable to middle-class customers for all sizes and varieties.
The company expects that by offering all coffee varieties and sizes for £3 will be a way of promoting sales and consumption in large quantities. The quality of the coffee will be similar to the product sold in the luxury segment. The pricing is meant to provide discount, given the quality of tea and packaging, while making customers recognize the power and quality of brand they are consuming. The pricing strategy is also geared towards encouraging a culture of high-volume coffee consumption. Corporate clients will get a 10% discount.
Distribution
The new product will not increase its intermediaries. However, the company will increase its strategic alliances to ensure that the product can reach the consumers wherever they are and in good time. In addition to retail service and food stores, there will also be collaboration with airlines and vendors that can easily access the middle class segment. Starbucks will also move a number of stores to business districts frequented by young professionals and close to offices.
The product will be distributed through Starbucks-operated stores, retail stores, consumer packaged goods and food service. The company will capitalize on the use of mobile applications to ease delivery and payment of goods and services. The company will partner with service providers such as PayPal or iPhone to reach a wider customer base. Loyal customers will also be rewarded through free delivery to offices, and so the company will collaborate with different firms to increase sales.
Promotion
The company plans to spend about 20 per cent of sales revenue on promotion. Promotion strategies include;
Loyalty Program
Instead of giving away free coffee, the company will introduce a loyalty program to encourage customers to come back, and with more customers. In the program, customers will get a card that will earn points every time they visit a coffee store or any other outlet to purchase Starbucks ’ product. Customers will gain points by increasing theirs pending on premium coffee, and move from one level to another as they buy more Starbucks products.
Social Media Advertising
The company will use social media platforms such as Facebook, twitter, MySpace, Piniterest among other platforms. Apart from promotion and encouraging customer feedback, they will be used to reinforce the loyalty program by encouraging registration.
Celebrity Advertising and Brand Ambassadors
The company will make use of fashion, music and sports celebrities to market the product among its fans. This will also include sponsorship for games that are favored by young and middle-class professionals.
Re-branding
The products will be re-branded to adapt a European face, and served in restaurants that accommodate European culture. This will include packaging and inclusion of more continental tastes to appeal to customers that are keen on authentic European tastes.
ReferencesAlderman, L, 2012, ‘Europe Remains a Challenge for Starbucks ’, The New York times, accessed 8 September 2013. http://www.nytimes.com/2012/03/31/business/Starbucks -tailors-its-experience-to-fit-to-european-tastes.html?adxnnl=1&pagewanted=all&adxnnlx=1378558930-u1dskMazAu2BorTIRO/XSA&_r=1&’Hot Drinks Industry Profile: Europe’ 2012, Hot Drinks Industry Profile: Europe, pp. 1-36, Business Source Complete, EBSCOhost, viewed 8 September 2013.
Jargon, J, & Stevens, L 2012, ‘Starbucks Jolts Europe’, Wall Street Journal – Eastern Edition, 28 December, Academic Search Premier, EBSCOhost, viewed 8 September 2013.
Liu, L, & Herbst, M 2009, ‘Europe’s New McCafé Culture’, Businessweek, 4149, p. 70, Business Source Complete, EBSCOhost, viewed 8 September 2013.
‘Starbucks Corporation SWOT Analysis’ 2012, Starbucks Corporation SWOT Analysis, pp. 1-11, Business Source Complete, EBSCOhost, viewed 8 September 2013.
