We live in a constantly evolving world. Well-known Moore’s law states “the number of transistors on integrated circuits doubles about every two years” (Poeter 2013, p.1). This rule strengthens the idea that technology is changing, and so does a business environment; thus, companies should be ready to embrace the change.
The Starbucks case study supports this claim. It shows that even companies that have been enjoying enormous growth are in danger of a constantly evolving business environment. Sometimes a drastic development might be company’s greatest threat. In this paper, I will analyze the Starbucks case study from the perspective of the introduction to marketing course.
Question One. By definition, market segmentation is “the process of defining and subdividing a large homogenous market into clearly identifiable segments having similar needs, wants, or demand characteristics” (Business Dictionary, n.d.). In the beginning, Starbucks used psychographic, benefits sought, and buyer’s characteristics to create market segments. The company focused on providing premium quality coffee, “third place” atmosphere, and personal assistance.
In my opinion, the Starbucks customer was the first one to change. The company was successful at each of the market targeting steps. First, it divided the market into smaller fractions, creating market segments. Starbucks focused on targeting the market, based on psychographic characteristics and benefits. Second, it chose company’s target market. Starbucks customer was a person, who enjoyed premium quality coffee, personal assistance, and a new, “third place” atmosphere. The value proposition followed. Having defined the target market, Starbucks started to position its targeted stores in the right places, creating the expected environment.
However, as the time passed by, the Starbucks customer began to change. It affected the Starbucks experience, in general. In my opinion, the relation between product’s value and market segmentation played a crucial role. People, who fell into a category of the company’s target audience, might have turned out to be wealthier and more educated than an average American. Thus, people who wanted to be associated with this superior fraction of the United States of America’ population, found it compelling to enjoy their activities – spend more time in Starbucks’s stores and become somebody to enjoy this experience. The more famous the coffee store became, the less of a unique and cozy place it was.
This one of ideas I have, which could help to understand the Starbucks phenomena. Despite the real reason, it is unique in a way that, even though, the company faced enormous growth, its popularity grew at a faster rate, which caused management some difficulties.
The new segmentation strategy of Starbucks allows it to get a bigger fraction of the market. The company differentiates its market in terms of benefits sought, product usage, buyer’s characteristics, psychographics, current purchasing situation, and geographic variables. Thus, the company’s customer is more diverse now.
First, Starbucks keeps its premium quality characteristics, which is still compelling to many of the company’s customers. In addition, it has increased a variety of drinks to be able to suit the most of consumers’ preferences. For example, the company has recently tested a new coffee drink, which has a taste of beer (Horovitz, 2014).
Second, the company provides coffee at different rates. It introduced a new Via instant coffee, which was a first step in its grocery store business. The appearance of new tastes, based on consumer preferences, available in the mall followed. Starbucks also became a competitor of brands like McDonalds and Dunkin Donuts by investing in its Seattle’s Best brand. In addition, the Starbucks customer started to save since the company introduced new, affordable meal plans. These strategies have been a success for Starbucks. They allowed the company to enter new markets with completely different lifestyles and consumer preferences. Moreover, these policies made a fast recovery possible for the Starbucks.
The company has undergone a tough way to its current position. However, even though it made some mistakes, the management was fast enough to innovate and recover.
Starbucks has all potential to reach and even exceed the level of growth it once enjoyed. USA remains company’s primary market. Even though it has achieved enormous success and profits in the United States of America, now it might be an excellent opportunity for the company to transfer its culture overseas. Since European lifestyle is very much similar to the one of United States of America, the new market might take the company to new heights.
Some cities in Europe have Starbucks. Unfortunately, many more do not. Globalized social media has made Starbucks a famous brand all over the world. The global marketplace is waiting for the Starbucks coffee; thus, its expansion and growth is not over yet.
It was very interesting for me to analyze the case study of Starbucks. This company has been indeed phenomenal in many aspects. It introduced a new coffee shop cult to the public. In addition, it expanded coffee’ awareness and popularity. Moreover, it has left an enormous impact on the development of Western culture.
Starbucks is the great example of a highly successful company. It is not perfect. The company’s success story has both its ups and downs. However, the Starbucks idea proves that it is possible to correlate financial wealth with social benefits. If one focuses on providing people with something of value, the money will follow. However, social goals must come first, not vice versa. The case of Starbucks is a great story, which will be taught over and again.
