- Contents
- Introduction
- Positioning
- Segmentation
- Brand merchandise and marketing tactics
- Ethical brand
- Investment in advertising
- Social Media marketing
- Marketing Strategy main points
Starbucks Marketing Strategy
About Starbucks: An Introduction
Starbucks, the largest coffee chain in the world was founded in 1985 and operates across 83 markets. The company has achieved significant international growth since its foundation. Its leading market is the USA.
However, Starbucks has also significantly grown its footprint in China, another leading market for coffee and other beverages. The company sells several types of high quality coffees, handcrafted coffees, tea and other products through both company operated and licensed stores.
Starbucks also sells its coffee products through its global coffee alliance with Nestle. The other brands in its portfolio include Teavana, Seattle’s Best Coffee, Evolution Fresh, Ethos, Starbucks Reserve and Princi.
As of September 2020, the number of Starbucks stores operational worldwide was 32,660. The company had 16,637 company operated stores operational in 2020 and 16,023 licensed stores.
Its total net revenues declined in 2020 compared to the previous year mainly due to the impact of the pandemic. The company’s net revenues were down to $23.5 billion in 2020 from $26.5 billion in 2019.
Starbucks is a highly popular premium coffee brand, which has achieved significant growth worldwide driven by mainly its focus on product quality, customer service and a unique approach to marketing.
Its superior brand image is also a key driver of growth for the brand.
In this post, we will analyze how Starbucks’ unique marketing approach has helped the company achieve a superior competitive edge and achieve an industry leading position.
A Unique Marketing Strategy that Starts from Premium Quality Products
Starbucks has a unique marketing strategy that starts right from its products. The world’s best coffee brand has utilized quality-based differentiation to differentiate itself from rivals.
From its humble origins in Seattle, Starbucks has spread throughout the world to become the number one coffee retailer. It’s a multinational brand and the latest chapter in its international growth story is the Asian market.
Starbucks has used the formula of quality based product differentiation to achieve higher popularity and customer loyalty. However, its marketing strategy is not limited to just products but Starbucks is equally great and unique in other aspects of marketing and promotions.
Product quality can be considered the central pillar of its marketing strategy. Great quality has several advantages. It is a time tested formula used industrywide by the leading brands.
First of all, it strengthens the brand image and reputation. Great taste and superior quality mean higher brand recognition and popularity in the industry and market.
As a brand, Starbucks has built a great reputation over time for the quality of its products, its large assortment of unique flavors, and for unequaled customer service.
A lot of marketing takes place inside the Starbucks stores and through its brand merchandise. Great customer service has also strengthened the brand’s positive reputation.
In recent years, increased investment in marketing and promotions has resulted in higher sales and improved brand awareness.
Positioning:
Starbucks has positioned itself as a premium coffee brand offering a premium coffee experience. Apart from great quality coffee, the brand’s value proposition also includes a great and unequaled customer experience.
Other factors that differentiate it from rivals are store design and ambience. It offers its guests premium space to relax and enjoy their coffee.
Customers get good quality coffee and the space they need to relax and shake fatigue and stress away. In this way, Starbucks ahs positioned itself as a customer oriented, quality focused and ethical brand.
Segmentation and Target Market:
Starbucks is a premium coffee brand; its customers are mainly from the upper economic segment or the upper middle class and upper class. The brand targets people who want a peaceful space to drink coffee and lose stress.
These are mostly the higher wage-earning professionals, business owners, or other higher-end customers in the 22-50 age group. People with a fast-moving lifestyle want good quality coffee and some space to relax after a hectic day.
Starbucks offers all these privileges at a single place. The target market of Starbucks includes both male and female customers, and a large group of these customers is mainly in the 25-45 age group.
The average age of Starbucks customers was 42 years, and the average income $90,000 and above in 2018. These are the urban, health-conscious, and class-conscious consumers.
The company is using digital technology to target the modern, tech-savvy generation. It is using social media for promotions and customer engagement.
Excellent Brand Merchandise and Unconventional marketing Tactics
Brand merchandise also plays an important role in the promotion of a brand as well as customer retention and customer satisfaction. Starbucks logo is printed on all the company merchandise.
Attractive and pleasant looking merchandise adds value to a brand’s products and customer service. A perfect cup of coffee is more perfect in a perfect looking cup.
This is a strategy most of the customer-focused brands employ.
Starbucks has also employed unconventional techniques for marketing its brand. Traditionally, Starbucks has not relied on conventional marketing and advertising methods.
It did not advertise its brand as others in the food and beverage industry do. Beverages and fast food brands use billboards, posters, and outdoor advertisements in plenty apart from media advertising.
However, Starbucks was able to generate a high level of publicity and popularity without running elaborate marketing campaigns.
It has enjoyed strong word of mouth and higher loyalty because of its focus on every minor detail that affects customers’ choice of a coffee store from product quality to store design and the merchandise.
An Ethical Brand
To market itself as a responsible brand, Starbucks focused on its long term branding as a quality-focused, customer-oriented and ethical business.
Apart from great looking stores where customers can sit comfortably and enjoy a great cup of coffee with excellent service, Starbucks has focused on the other parts of its business operations to create a unique and strong brand image.
Ethical sourcing is also an important part of its business strategy. Starbucks sources 99% of its coffee ethically from suppliers around the world.
This strengthened the ethical image of Starbucks which has proved favorable in terms of marketing. It also drives higher customer loyalty.
The image of an ethical and accountable brand can be a major advantage for a business in an industry marked by heavy competition. Customers are generally more loyal to brands that are environment-friendly and socially responsible.
Customers also notice how businesses treat other stakeholders like suppliers and vendors. Starbucks has maintained strong relationships with its suppliers and invests in their welfare.
Now Investing in Advertising
Till some years ago, Starbucks was known for its zero investment in marketing. All the marketing was based on its brand image and the fame it had earned by offering premium quality products and superior customer service.
In recent years, Starbucks made some changes to its marketing strategy and raised its investment in advertising. Now, its ads are visible on television, print media and on digital channels too.
In 2020, it invested $258.8 million in marketing and advertising. Its TV commercials highlight the latest and most romantic flavors available at the Starbucks stores.
However, advertising and paid promotions are not a central focus at Starbucks. Compare its marketing budget with other celebrity brands like Coca Cola or Nike and you will see its marketing budget is a small fraction of theirs.
Till 2006, its focus was to spend more on having talented people on board and sourcing only good quality raw material than on using advertising gimmicks to achieve enormous growth. Its 2006 annual report stated it clearly –
“When we set out to become the world’s leading purveyor of fine coffee, we didn’t put all of our focus on how large we’d become or just how much profit we intended to make. Intuition told us that our ultimate success would depend less on clever advertising gimmicks than it would on the special individuals we’d bring on board, one by one, as we worked to make our dream a reality”.
Starbucks Annual Report 2006.
That’s how things happened inside Starbucks until some years ago. In recent years, the company has started spending on marketing and advertising.
However, the budget has never touched even half a billion. Starbucks has always kept its marketing budget under control. The level of competition in the market has increased, which has led to beverages brands investing more in marketing.
Customer preferences have also changed over time and so have the channels utilized to target customers across the globe.
Check how Starbucks’ marketing budget has grown in recent years.
STARBUCKS ADVERTISING COSTS AND MARKETING BUDGET 2007-22 (MILLIONS)
| YEAR | ADVERTISING COSTS ($ MILLION) | MARKETING ($ MILLION) |
|---|---|---|
| 2007 | $103.5 M | |
| 2008 | $129 M | |
| 2009 | $126.3 M | |
| 2010 | $176.2 M | $198.7 M |
| 2011 | $141.4 M | $244 M |
| 2012 | $182.4 M | $277.9 M |
| 2013 | $205.8 M | $306.8 M |
| 2014 | $198.9 M | $315.5 M |
| 2015 | $227.9 M | $351.5 M |
| 2016 | $248.6 M | $378.7 M |
| 2017 | $282.6 M | |
| 2018 | $260.3 M | |
| 2019 | $245.7 M | |
| 2020 | $258.8 M | |
| 2021 | $ 305.1 M | |
| 2022 | $416.7 M | |
| Year | Advertising Costs ($mn) |
In 2020, the advertising expenses of the company grew to $258.8 million compared to $245.7 million in the previous year. Until now, the company spent the highest on promotions in 2022. In 2022, its advertising expenses reached $416.7 million, while it had spent only $305 million in 2021.
Apart from growing competition, increased focus on customer engagement and global expansion into new markets have caused Starbucks’ advertising expenses to grow faster in last two fiscals.
The chart above shows the advertising expenses of Starbucks from 2010 to 2022. Its advertising expenses in 2022 reached above $400 million but compared to leading players in the food and beverages industry, it is still very low.
Social Media Marketing
Apart from the methods outlined above, Starbucks markets itself from social media platforms. There are more than 500 interesting and engaging videos of Starbucks brand and products on YouTube.
It has released videos related to its products, supply chain, and various other aspects of its business operations. The coffee brand started an animated series with cute characters about life inside a Starbucks store.
This animated series is named ‘first and main’. The series was very popular among the Starbucks’ audience. Twitter has also become a favorite social media channel for marketers.
Companies can reach a large audience of fans and followers in real-time without spending a penny. Starbucks has made more than 87,000 Tweets and has more than 11.8 million followers.
From its new products and inside the store stories, the brand shares all the exciting things happening at Starbucks in its Tweets. Even its CSR achievements and all the critical milestones it has achieved are shared on Twitter regularly.
A critical thing that Starbucks has achieved over time is its millions of fans and followers. They also share updates about Starbucks all the time.
Brands that have invested in brand equity earned real value from it in terms of marketing and it is worth learning from them for others. Starbucks has also proved that to make a real difference you must be focused on customers and do things that matter for them.
Starbucks Marketing Strategy main points:
- Quality based differentiation – premium quality tea and coffee.
- Excellent customer service.
- Consistent brand experience.
- Use of unconventional techniques for marketing and branding.
- Image of an ethical brand.
- Excellent brand merchandise.
- Customer orientation.
- High brand equity.
- Unconventional social media techniques of establishing consumer connection.
- Creating real customer value.
- Near no or less use of traditional methods for marketing (till some years ago; now it is using a mixed strategy).
- Good quality products and customer service – higher word of mouth marketing.
- Investment in advertising for last 4-5 years.
- Sources:
- Starbucks investors website
- https://s22.q4cdn.com/869488222/files/doc_financials/annual/2006/StarbucksAnnualReport06.pdf
Abhijeet Pratap is a passionate blogger with seven years of experience in the field. Specializing in business management and digital marketing, he has developed a keen understanding of the intricacies of these domains. Through his insightful articles, Abhijeet shares his knowledge, helping readers navigate the complexities of modern business landscapes and digital strategies.