Marketing Major Assignment Business report Starbucks

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Tutor’s name: Mr. Nizar Subject: Marketing (2050) Student’s ID: 21897964 Student Name: Elysia Kok Xuan Shao

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TABLE OF CONTENTS

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EXECUTIVE SUMMARY 4

1. INTRODUCTION

1.1 Purpose

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1.2 Scope

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1.3 Limitations

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1.4 Assumptions

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1.5 Methodology

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1.6 Background

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2. IDENTIFICATION OF CURRENT MARKET SITUATION

2.1 Market Category

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2.2 Product Category

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2.3 Identification of Competitors

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3. SPECIFIC OFFER

3.1 Type of Offers

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3.2 Three Levels of Products

3.2.1 Core Products

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3.2.2 Actual Products

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3.2.2.1 Brand

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3.2.2.2 Packaging

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3.2.2.3 Labelling

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3.2.3 Augmented Products

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4. TARGET SEGMENT

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4.1 Characteristics 4.2 Needs and Wants

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5. ANALYSIS OF CURRENT OFFER

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6. CONCLUSION

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7 RECOMMNEDATIONS

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8 REFERNCE LIST

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Executive Summary

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The purpose of this report is to review the appropriateness of the current offer of Starbucks in Singapore offer for the target segment as well as to relate the marketing concepts and theories to the current target segment.

Starbucks was established in 1971, now it is the world’s largest specialist coffee retailer in purchasing high quality beans and selling them to the consumer market. Starbucks vision is to be the most recognized and respected brand of coffee in the world. Starbucks faces competition from other manufacturers and suppliers who are also producing high quality beans and catering to the consumers. Some of their competitors are Spinelli and The Coffee Club. In order to carry out this report, sources of information such as textbooks, journals and websites information are being used.

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In this report, the three levels of product are core, actual and augmented are being discussed at the same time, analysis on of how Starbucks branding, packaging, labelling, and identification. The target segment which is dividing the market into different groups and to cater to them, different products or marketing mix are proposed. Furthermore the different characteristics, needs and wants of the target segment are also discussed.

Starbucks current offer of the beverages products are designed to satisfy the needs and wants of the target segment. For example, Starbucks has different categories of beverages such as brewed coffees, frappuccino and tazo tea to cater to the different market segment. The analysis of the current offer is also given, most importantly is about retaining the customers instead of attracting new customers as attracting new customers needs more cost. However, both are important.

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In conclusion of the report, the three levels of offer; core, actual and augmented and the identification of target segment shows how to be aware of their competitors and their goals to face the competitive situation effectively. Thus recommendations are like changing of packaging and producing more variety of coffee with unique taste should be implemented to retain and attract customers from consumers and reseller markets.

10 Introduction

1.1 Purpose

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The purpose of this report is to review the suitability of the current offer of Starbucks coffee products for Singapore offer for the target segment as well as to relate the marketing concepts and theories to the current target segment

1.2 Scope

In reviewing the appropriateness of Starbucks, the report covers the market category, product category, the identification of major competitors, and the description of specific offer with reference to the three levels of offer, brand, packaging and labeling. Discussion of target segment includes, defining characteristics and the needs and wants in relation to the product category. Recommendations are also given for the development of the current offer.

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1.3 Limitations

The limitations in this report were extreme, relating mainly that the report is unable to cover due to limited information for this offer.

1.4 Assumptions

In this report, Starbucks coffee products are only based on Singapore’s market.

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1.5 Methodology

Information was collated from websites; marketing text books as well as relevant journal articles were used.

1.6 Background

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Starbucks Coffee Company was founded in 1971 by three coffee aficionados. Starbucks, named after the coffee-loving first mate in Moby Dick, opened its first store in Seattle’s Pike Place Public Market. Starbucks vision is to continue to stay on as one of the leading specialty coffee retailer, for all stages and all ages by ensuring they are using the highest quality coffee. At the same time, it is all about the Starbucks experience, the atmosphere and the place that is a refuge for most people to get away from everyday stresses. Satisfaction and valuable are the most upmost importance in our products thus all products have undergone precise research to ensure it meets the satisfaction of the consumers.

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For the industry background in Singapore, the market for Starbucks coffee is quite huge. This is because it consist both local and non-local manufacturers and suppliers due to global trading.

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20 Identification of current market situation

2.1 Market Category

“Market is defined as the set of all actual and potential buyers of a product” (Kotler, Brown, Adam, Burton & Armstrong, 2007, p. 11). In the case of Starbucks, this offer belongs to the Singapore market which is available for the consumer market and reseller market.

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A consumer market is defined as “individuals and households that buy goods and services for personal or household consumption” (Kotler et al. 2007, p. 165). Consumer purchase Starbucks coffee for their own consumption, hence it can be seen as using it for personal consumption.

In Singapore, some examples of reseller markets are NTUC Fairprice, Giant, Cold Storage and Market Place where “organizations that buy goods and services in order to resell them at a profit” (Kotler et al. 2007, p. 165). These are supermarkets that resell Starbucks coffeeto the consumer market in order to make a profit.

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2.2 Product Category

Product can be defined as “anything that can be offered to a market for attention, acquisition, use or consumption that might satisfy a need or want, which includes physical objects, services, person, places, organisations and ideas” (Kotler et al. 2007, p. 386). Starbucks coffee product category is categorised as coffee which are considered as a luxury good.

Product covers both tangible goods and intangible services. For the tangible goods, Starbucks offers a wide variety of coffee to the consumer market. In the case of Starbucks coffee, it offers three types of beverages; brewed coffees, frappuccino and tazo tea for offer.

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Fundamentally, the more intangible or pure services such as those provided by Starbucks can only be defined using process descriptions rather than tangible descriptions of outcomes (Mc Coll, Callaghan, Palmer, 2000, p. 19). As for intangible services it offers a wide range of services such as membership programs, delivering services, providing a “Starbucks experience” for the consumer and many more.

This product category offers to teenagers and working adults. As Starbucks coffee are created with special recipe to suit the taste of every individual. Hence, teenagers who purchase Starbucks coffee products will enjoy both goods and services provided.

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2.3 Identification of Competitors

During these situations, we have to be aware of our competitors and their goals to face the competitive situation effectively. Some major competitors are Spinelli and The Coffee Club.

Spinelli is the company that beliefs in buying, roasting and selling the finest coffee, hence their coffee products are made of the best quality. Seven outlets were opened in Singapore’s central business district by the fall of 1997, with up to forty locations targeted for the region by the year 2000. In addition, Spinelli is also in the process of setting up roasting factories to supply the

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Asian Market. Spinelli brings to Asia years of experience in sourcing, producing and selling premium coffee drinks and whole bean coffee.

The Coffee Club was founded in 1991, with its first outlet in Holland Village. There are thirty seven variations and the best attraction is the Iced Mocha Vanilla—Macciato coffee and milk topped with vanilla ice cream and a drizzle of chocolate syrup. In addition, they serve light meals of cakes, salads, sandwiches, and home-made ice cream. Thus, as compared to Starbucks, The Coffee Club possesses a threat to Starbucks.

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30 Specific Offer

3.1 Type of Offer

Kotler and others (2007) argued that there are altogether four type of offer; product, place, price and promotion. These four different offers, Starbucks have placed huge importance on each of it.

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First product, Starbucks brewed coffee and Starbucks tazo tea are the two products. Both products are completely different and it caters to different kinds of consumer. Consumers who do not drink coffee are still able to get a drink in Starbucks as it offers non caffeine drinks. These are designed to satisfy the needs of the consumers or exceed their expectations.

Second is place, to some consumers ‘convenient’ is the key point. Hence, Starbucks takes into consideration for these consumers. In Singapore, Starbucks coffees are located in city area and sold at the most convenient places like supermarkets, to ensure that consumers do not have to worry about the location as they can purchase it at their nearby supermarket.

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Third is price. Starbucks products are reasonably priced while offering good quality coffee. Comparing Starbucks coffee to Spinelli or The Coffee Club, Starbucks pricing is comparable to its competitors as Starbucks products are targeted towards general publics, thus their pricing are generally acceptable to attract more customers.

Fourth is promotion. Starbucks offers promotion at times, having a Starbucks Passport will entitle customers to get six beverages at a price of $29.90. By doing this, Starbucks are trying to attract new customers to try out their products and retaining our loyal customers.

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3.2 Three levels of Offer

3.2.1

Core Product

The first level is known as the core product, this is the underlying need which a product satisfies. The core product consists of the problem-solving services or core benefits that consumers are really buying when they obtain a product. As Starbucks products, the core benefit of the product is to satisfy their desire to drink coffee.

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3.2.2

Actual Product

The second level is known as the actual product level. It is made available to consumers in tangible form, expressed in terms of the product’s brand, packaging and labelling.

3.2.2.1

Brand

Product branding is essential as it is intended to signify the services of Starbucks and differentiate them from

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major competitors. Branding enables the coffee to build up customer loyalty, charge premium for the brand, and reduce price comparisons and easier cooperation with intermediaries. Lindstorm (2004) suggests that brand are frequently used by companies to provide evidence of consistent standards and are particularly important where a company has potential opportunity to develop an ongoing relationship with its customers.

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3.2.2.2

Packaging

Packaging plays an important role when products are purchased: packaging the first thing that the public sees before making the final decision to consume. For Starbucks, the packaging of coffee is one of their physical evidence. The cups of the coffee are in two simple colour of white and green, is an aesthetic factor of the coffee’s design. This will result in a greater tendency to produce customer perceptions of the service (Ezeh & Harris, 2007). As Starbucks product have a good packaging style, they have a competitive advantage over other firms, as packaging is an extra service that

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contributes to a customers’ sense of pleasure when consuming their coffee.

3.2.2.3

Labelling

Labelling is an important product element which helps to promote the product as well as to provide information for buyers and intermediaries (Assael, Reed & Patton, 1996). At the same time, labelling gives Starbucks an identity. For Starbucks products, the brand is being printed on a dominant spot on the bottle meanwhile keeping it simple, so as to help buyers differentiate their

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products from other brands easily. Meanwhile, labelling gives Starbucks product an identity which can help in social interaction and validation (Shankar, Elliott and Fitchett, 2009).

3.2.3

Augmented Product

The third level of product includes tangible as well as additional services and benefits, included to satisfy additional needs of customers and to further differentiate the product from its

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competitors (Mc Coll et al. 2000). Johnson & Johnson’s augmented product of the offer is their frappuccino drinks. These drinks surpass the customer’s satisfaction at the same time helping Starbucks to differentiate them from other competitors.

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40 Target Segment

Target market is a set of buyers sharing common needs or characteristics which the company decides to serve. Cahill (1997) supports this as he mentioned a target market is at its most basic, simply the market or submarket (such as a segment) at which the

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firm aims its marketing messages. In the case of Starbucksproducts, it refer to a differentiated marketing strategy where it offer any product aimed at a specific segment, using marketing mixes adopted for each segment (Bovee, Houston & Thill, 1995).

4.1 Characteristics

Starbuckshas two target segments mainly coming from the demographic and behavioural segmentation bases.

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For Starbucks, they use multivariate demographic segmentation as no single demographic variable is able to capture the different needs and wants of the buyers. It includes age and life cycle stage and income segments.

Starbucks products are being produced for teenagers and adults, who have a high spending power. Besides that, Starbucks products are priced at $4 to $8 depending on the size of the coffee. By pricing the price as comparable as its competitor is because Starbucks are targeting teenagers and adults with high spending power which is considered as middle or high income.

In the minds of the consumers who purchase Baby Hair Care products, the benefits that they seek for to satisfy their desire for their addiction for coffees.

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Thus, buying Starbucks coffee is due to habit to crave their addiction for coffees. Since Starbucks are able to offer coffee at such a comparable price, it is able to satisfy to its consumers.

4.2 Needs and Wants

According to Kotler et al. (2007) needs are states of felt deprivation and the wants are the form taken by human needs as they are shaped by culture and individual personality. From the customer perspective, the basic needs are to satisfy consumers craving for coffees. As for their want, it is to choose a high quality coffee to satisfy their desire, for example, a good quality coffee that is

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made from the highest quality of coffee beans. This is Starbucks most popular drinks which will be Java Chip frappuccino.

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50 Analysis of Current Offer

The ultimate way to achieve customer satisfaction is through the effective management of customer perceptions, expectations and satisfaction. Customer satisfaction is a short-term, transaction-specific measure of whether customer perceptions meet or exceed customer expectations (Assael, Reed & Patton, 1996).

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Hence, marketers need to understand and really appreciate the value of customers, both to attract and retain.

Base on interpretations, the target segment needs and wants are only being satisfied partially.

The current offer for Price, Place, Product is being satisfied. Due to the reason that, Starbucks products are being priced reasonably and their pricing is lower than their competitors. Meanwhile, Starbucks this brand name can be seen commonly in public areas, which mean that the products can be bought conveniently. Starbucks has coffees ranging from brewed coffees to frappucino and for those who non caffeine drinks they have tazo tea which gives consumer a wide variety of selection.

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However, Promotion is not being satisfied. Starbucks products are hardly seen having any promotions. Regular customers might be dissatisfied as they might think that their support for Starbucks is not being recognised as in a way they are not being rewarded by having freebies or discount even though supporting them for a period of time.

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60 Conclusion

Starbucks product is a well-known brand which provides coffee that is of good quality. Starbucks target segment is teenagers and adults. Starbuck faces competition from other manufacturers and suppliers in coffee products which offers products with big similarities. Some of their competitors are Spinelli and The Coffee Club.

The three levels of offer; core, actual and augmented and the identification of target segment shows how to be aware of their competitors and their goals to face the competitive situation effectively. At the same time, the discussion on target segment is

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being analysed to help Starbucks to maximise their profit by understand their customers’ characteristics, needs and wants.

This report also link about the importance of customer satisfaction and the current offer together, thus some recommendations are also given to improve on the current offer to attract more customers from the local market.

However, this report has several limitations. As this report is only base on Singapore’s market, thus some of the marketing theories used may not be relevant to Starbucks in other countries. Secondly, this report might not be accurate as it does not foresee the problems ahead of the coming years. Thus, there must be a frequent update of information regularly.

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70 Recommendation

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Recommendations

Implementations

Produce high quality beverages

As Starbucks products are well known for serving coffee, Starbucks can produce more beverages which will attract more consumers. To change their perceptions’ Starbucks can try producing a coffee which contains a lower level of caffeine. It will give consumer more choices and satisfaction.

Offering more Promotions

Starbucks products are hardly on promotions, for example discounts or on sale. By having promotions can attract

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more teenagers and adults to try out their products, at the same time rewarding consumers who have been supporting Starbucks.

Change their packaging

Right now, the packaging of Starbucks products is environmentally friendly as they are using recycled materials for their paper cups. However, they could change the design of their packaging to attract more consumers.

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Reference list

Avi, S., Elliott, R. & Fitchett, J.A. (2009) “Identity, consumption and narratives of socialization”, Marketing Theory, Vol. 9, No. 75, pp. 75-94.

Assael, H., Reed, P. & Patton, M. (1996), Marketing: Principles and strategies, Harcourt brace, London.

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Bovee, C.L., Houston, M.J. & Thill, J.V. (1995), Marketing, 2nd edn, McGraw-Hill Inc, London.

Cahill, D.J. (1997), “Target marketing and segmentation: valid and useful tools for marketing”, Management Decision, Vol. 35, No. 1, pp. 10-13.

Ezeh, C. & Harris, L.C. (2007), “Servicescape research: a review and a research agenda”, The Marketing Review, Vol. 7, No. 1 pp. 59-78.

Kotler, P., Brown, L., Adam, S., Burton, S. & Armstrong, G. (2007), Marketing, 7th edn, Prentice Hall, Australia.

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Lindsay, D. (1997), "Shaped to sell: package innovation can boost revenue, decrease cost and build brand", Beverage World, Vol. 116, No. 1, pp. 91-92.

Lindstorm, M. (2004), “Branding is no longer child’s play!”, The Journal of Consumer Marketing, Vol. 21, No.3, pp. 175-182.

Mc Coll, R., Callaghan, B. & Palmer, A (2000), Services Marketing: A Managerial Perspective, McGraw-Hill Inc, Sydney.

Starbucks Coffee Singapore revised 2005, viewed 10 August. 2009,

< http://www.starbucks.com.sg/>

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Spinelli Coffee Company revised 2008, viewed 10 August. 2009,

< http://www.spinellicoffee.com/>

The Coffee Club revised 2006, viewed 10 August. 2009

< http://www.coffeeclubworld.com/>

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