1a) What is the core product that Starbucks offers?

b) What are the actual and augmented levels of that product?

Core Product

Coffee

Actual Level

-Brand Name- Features- Quality Level- Design- Packaging

Reference Kotler (Page 222)

Brand NameStarbucks was named after a character in the novel Moby Dick

The seafaring name seems appropriate to adopt the name for a store that imports the world’s finest coffees

Easily translated in other languagesChinese 星巴克 (xīng bā kè)

Japanese - スターバックス (sutaabakkusu)

Korean - 스타벅스 (seu-ta-beok-seu)

Design

The logo was changed over the years to appease members of the public due to it controversial image

INITIAL LOGOSECOND LOGOCURRENT LOGO

FeaturesStarbucks has a ‘You-Call-It' culture

allowing the customer to specify all

modifications to the drink.

Packaging• In view of their recycling efforts,

Starbucks uses recyclable cups

• Starbucks logo is printed on cups for

easy recognition

Quality LevelUses the finest beans from across the world to satisfy the taste and preference of different consumers.

Ranging from - Latin America- Asia/Pacific - Africa/Arabia- Dark Roast Blend - Multi-region blends

The coffee from the around the world comes in different tastes and characteristics providing various choices for Starbucks’ consumers

Augmented Product

- After-sale service- Delivery and credit- Installation- Warranty

- After-sale Service- Delivery & Credit

Reference Kotler Page 222

After-sale Service

• Wireless connections in all outlets

• Adding atmosphere to their

coffeehouses

Delivery & Credit• Free delivery

• Starbucks card

2a)How would you classify the Starbucks product using the marketing considerations for a Consumer Product?

b) What Individual Product Decisions has Starbucks made?

Consumer Product

Convenience

Shopping Specialty

Unsought

2a)

Reference: Kotler Textbook Page 223

Convenience Product

1. Distribution:Widespread at convenient locations In Developed Markets e.g.: Singapore / USA / Japan

• Majority of Starbucks sales (72.98%) from Developed Markets►perceive Starbucks products as Convenience Product

2. Consumer Buying Behaviour: Frequent purchase; Little

Planning Loyal Starbucks customers

3. Price: Low (relative)

4. Promotion: Mass promotion by the

producer Promotional Banner outside every outlet e.g.: Starbucks & Salvation Army (Singapore)

Convenience

Product c’td

S$1.00 S$5.50 S$11.90

2b) Individual Product Decisions

(i) Product Attributes

(ii) Branding

(iii) Packaging

(iv) Labeling(v) Product Support Services

Reference: Kotler Textbook Page 225 - 229

1. Quality – Quality consistency Training period Quality Control

2. Features – tools that differentiate product from competitors’ Make It Your Own Customology 101

3. Style – Pleasing Aesthetics Colourful / Simple

4. Design – Aesthetics: contribute to product usefulness & looks Stainless Steel Mug Extreme Tumbler Handy

For the BUYER:

adds value to the product helps identify the product hints about product quality

For the PRODUCER: Offers legal protection for unique product features (a) trademark / patent laws (b) license

Designing & producing:cup, mug, glass bottle, sleeves- Environmentally friendly

Creates instant consumer recognition

Simple tags / complex graphics – aids in product identification Same as brand logo

Offers support services that augment actual product

1. Interactive Website

2. Delivery Service

3. Starbucks Visa / Card

(v) Product Support Services

3) How has Starbucks dealt with issues of brand

equity, customer equity, and brand positioning?

Definition : The positive differential effect that knowing the brand name has on customer response to product or service.

The World’s Best Coffee- High quality coffee

- Rich, good taste

- Variety of choices

Setting- Comfortable and modern

- Perfect place to hang out for most occasions

Corporate Social Commitment- Communities

- Environment

- “Partners” (Employees)

Definition: The total combined customer lifetime values of all the company’s customers.

In order to achieve high customer equity, it is necessary for Starbucks to increase its customer perceived value and loyalty.

Customer Perceived Value =

- “ Make It Your Drink” personalized service

- High quality & Modern image

- Wide & Innovative Variety

- Comfortable Environment

- Excellent Customer Service

- Delivery Service

- Convenience

Total customer Value

– Total customer Cost

Loyalty - Highly Competitive Zone

- High Customer Satisfaction - Delivering above expectation

- Starbucks Card

Attributes

World’s Best Coffee Beans

Benefits

Rich and high quality coffee produced

Beliefs and Values

Extraordinary and finest coffee drinking experience

Past

- Attributes and Benefits

Recent years

- Focus on beliefs and values

4a) Is Starbucks a product or service?

b) How are the concepts of service marketing important to Starbucks, particularly in a region like Asia?

STARBUCKS: A PRODUCT OR SERVICE?

Physical Product Service

Experience

Services Marketing

Intangibility Inseparability Variability Perishability

Service Intangibility:

• “Signals” of service quality

• Making the service “tangible” in a way

Starbucks - “Third Place”

- Position themselves strongly

- Creating superior value during service encounters

- China: consumers rely more on word-of-mouth when purchasing services

How is it important to Starbucks in Asia

Service Inseparability:

• Simultaneously produced and consumed

• Provider-customer interactions

Starbucks - employees to show professionalism - market the service successfully

Service Variability:• Who provides the services, When, Where and How they are provided

Starbucks - Comprehensive health benefits

- "First Impressions." - Retail management courses

•Satisfied employees translates into greater profits in the long run.

Service Perishability:

• Cannot be saved, stored for reuse on a later date, resold, or returned

• Demand manipulated

Starbucks - Price Incentives

- Developing non-peak demand

- Creating reservation systems

5) From its Japanese experience, how has Starbucks dealt with the issues it faces in international marketing?

Q5) From its Japanese experience, how has Starbucks dealt with the issues it faces in international marketing?

What happened in Japan?

Issues faced in international marketing

How has Starbucks dealt with these

issues?

What happened?

Same store sales fell by 17% in 2003

Stock lost 2/3 of its value

between 2002-2003

WHY??

Too many stores

Fussy consumers

Fierce & Cheaper competition

Image problem relating to its food

Local rivals

What issues it faced in international marketing?? International marketing : application of marketing

principles across different countries

Diverse cultures

Different lifestyles and situations

Different tastes and preferences

(India VS Europe)

affect their willingness to pay and

their sensitivity to prices

How has Starbucks dealt with these

issues?

Stores designed to be architecturally friendly to the local landscape

Introduction of Starbucks Card

( serve as a ‘cash card’ internationally & a

loyalty card : to improve consumer equity &

hopefully increase their willingness to pay

Forms joint ventures or

licenses other companies to own

and operate Starbucks stores

6) From the Japanese experience, what marketing recommendations would you make to Starbucks as it continues its Asian expansion?

- 2nd most populous country in the world

- Indians generally prefer tea & plain milk to coffee.

- Per capita consumption of coffee is 0.33 cups against 1.77 cups for tea

- However, coffee performs well in the south, recording a share of 18%, the highest after tea at 45%

- Currently, there is no Starbucks outlet in India

- Starbucks has planned to enter India’s market by December this year but has deferred its entry in July due to FDI regulations.

Marketing Recommendations:

- India is a potential market since the population is large.

-Relevant market research to be done to understand the taste and preference of consumers.

- Indians’ preference of tea has been long standing, Starbucks can cater to them by blending tea and coffee.

- Expanding product width

- Create the homely atmosphere in Starbucks cafe

- Advertisement should also try to convey to the Indian consumers that Starbucks is the ideal place for family get together.

- Focus expansion in the more developed states of India

Limitations- Difficulty in changing consumers’ mindset

- Competition from tea and various cold drinks in India

-World’s largest population

- Similar to India, China is also a predominantly tea-drinking country

-Average coffee consumption is 0.8kg per capita

-There are over 200 outlets in 21 states of China

-Various coffee chain houses in China, like Blenz Coffee (Canadian coffee house) , Coffee Bean and Pacific Coffee

Marketing Recommendations

From the Japanese experience, we learnt that Starbucks should not open too many stores at one go. Instead, it should first determine if the market is saturated.

-Mobile coffee service can be provided in Beijing which offers free sample of Starbucks coffee.

-Serves as a mean of advertising

-If outlets in Beijing or other parts of China experienced an increase in sales, Starbucks should then decide if expansion is viable.

From the Japanese experience, Starbucks also learnt that competitors often pose a major threat to them. To gain market shares, Starbucks may differentiate itself from its competitors in the following ways:

-Building a positive brand image by committing to social responsibility

-Collaboration with Chinese property developers

-Smoking segregation

Limitations-Not possible to station mobile coffee service men everywhere

-Funds involved when carrying out such extensive projects