Introduction
Starbucks is a multinational company with a presence in various countries around the world. The organization primarily deals with coffee, but in recent years, it has diversified its portfolio to become a food and beverage company. Over the years, the firm has introduced various growth strategies aimed at enhancing the organization’s competitive edge.
The five-year growth plan from 2014 to 2019 involved the development of new products, the opening of new stores, and the introduction of new services. The company also expanded into the tea business as a way of diversifying the products it offered to customers. The case study on Starbucks identifies various issues that have resulted from the introduction of the new strategy. This paper will critically evaluate the new occasion strategy, its challenges, and the differences between new and old customers using marketing frameworks and models.
Starbucks’ Growth Strategy
Customer Focus
The company’s strategy starts with its focus on customer experience. Starbucks ensured customers felt welcome and comfortable in its stores by creating a warm, inviting atmosphere (Sawhney, 2018). The stores were designed to be inviting and relaxing, offering comfortable seating and a diverse selection of food and beverage options.
The company also offered complimentary Wi-Fi and other amenities to make customers feel at home (Sawhney, 2018). Starbucks introduced a range of food and beverage options to appeal to a broader customer base. This includes snacks, sandwiches, salads, and specialty drinks such as frappuccinos and espresso-based beverages.
Third Place
Starbucks also leveraged its “Third Place” concept, which posits that Starbucks stores should serve as a space for customers to relax and enjoy their time (Sawhney, 2018). This aspect is reinforced by the company’s focus on offering customers a diverse range of food and beverage options, as well as providing a comfortable and inviting atmosphere (Wu, 2017). The business created a range of events and promotions that ensured the experiences were more enjoyable (Sawhney, 2018). This includes special appearances by celebrities, live music, and other events (Sawhney, 2018). These activities resulted in customers feeling like they were part of the Starbucks community, which helped to increase loyalty.
Mobile App and Digital Presence
Starbucks introduced a mobile app that allowed customers to order ahead of time, pay for their purchases, and participate in exclusive deals and promotions. The company utilized social media to connect with customers and foster engagement. Starbucks has established a robust online presence, enabling it to reach a broader customer base and drive growth (Sawhney, 2018).
The company utilized search engine optimization (SEO) to ensure that customers could easily find its website. Starbucks adopted email marketing to reach customers with special offers and promotions (Nair et al., 2021). The loyalty program allows customers to earn reward points for their purchases and access exclusive deals and promotions (Sawhney, 2018). This program has been successful in driving customer loyalty and increasing customer spending.
New Occasions Strategy
Starbucks’ new occasions strategy was designed to capitalize on the growing demand for convenience and customization in the lives of its customers. Through its focus on customer experience, Starbucks was able to create a strong and loyal customer base, driving growth by offering new dining occasions (Taecharungroj, 2017). The new occasions strategy included a range of new products and services, such as various food and beverage options, complimentary Wi-Fi, personalization through mobile ordering, and a range of customization options (Sawhney, 2018). The company also focused on creating an inviting atmosphere by introducing a range of musical playlists, comfortable seating areas, and extended store hours.
Promotion and Digital Marketing
The blue ocean strategy encourages firms to create uncontested markets and capture and create new demand. The red ocean strategy, on the other hand, is used to create ways to outmaneuver existing competition and capitalize on demand. The business employed various promotional activities, including loyalty programs, special discounts, offers, and exclusive memberships, to outperform its existing competition. Customers were encouraged to visit the store regularly by offering them rewards and discounts for their loyalty (Azriuddin et al., 2021).
The strategy encompassed a range of digital initiatives, including online ordering and delivery services, mobile apps, and social media campaigns, to further enhance the customer experience (Sawhney, 2018). The company entered into a range of partnerships with other businesses, including airlines, hotels, and universities, to further expand its reach to new customers (Sawhney, 2018). The partnerships enabled Starbucks to tap into new markets and offer customers a range of convenience and customization options.
Acquisitions and Partnerships
Starbucks acquired new companies as a means of entering new blue ocean markets. The purchases aimed to differentiate the company from its competitors by associating it with the best brands in each new category (Goh et al., 2020). The environment at Starbucks locations featured modern design elements, including natural lighting, comfortable seating, and an inviting atmosphere (Schepers & Nijssen, 2018).
The company introduced a range of interactive activities, such as art installations and music events, to provide customers with a unique and engaging experience (Ahluwalia, 2022). The business also established a range of partnerships with third-party vendors, such as Spotify, to provide customers with an even more immersive experience (Sawhney, 2018). Starbucks implemented various sustainability initiatives to enhance the way customers viewed the organization.
Business Ethics
In terms of corporate social responsibility (CSR), the business is committed to using only sustainable and ethically sourced materials in its stores. The business also sought to reduce its environmental impact through the implementation of energy-efficient lighting and water-saving technologies (Kee et al., 2021). The company also introduced a range of recycling initiatives, such as a dedicated cup recycling program, to reduce waste (Kang & Namkung, 2018). The organization implemented a range of initiatives to support its local communities, such as providing employment opportunities to local community members and donating a portion of its profits to charitable organizations.
Challenges
Brand Dilution
Implementing the new occasions strategy at Starbucks was challenging for the company. One of the main issues that the company has faced is brand dilution. With the addition of a wide range of food and beverage items, Starbucks risked diluting its brand identity and confusing customers.
Choice Overload
The second problem that Starbucks encountered after the changes was choice overload. With the introduction of numerous new items, customers became overwhelmed and needed assistance in making decisions (Dangelico & Vocalelli, 2017). This led to customers abandoning their purchases and leaving the store without making a purchase.
Operational Complexity
Starbucks also had to deal with operational complexity due to the introduction of various food and beverage items. Starbucks ensured that each location was adequately staffed and stocked to meet the demand. This is because the stores must handle the increased requests and ensure that all items are in stock throughout the day.
Solutions to Overcome Challenges
Starbucks implemented several strategies to address the challenges that came up as a result of the changes. One way was to create a more streamlined menu, which helped reduce choice overload and made it easier for customers to decide what they wanted to order (Melancon & Dalakas, 2018). Starbucks also applied several operational strategies to help manage the increased demand and ensure that all items are in stock. This includes hiring additional staff during peak periods and implementing better inventory management to ensure that all necessary ingredients are always available. Starbucks’ new occasions strategy positively impacted both new and old customers.
Value Proposition for New Customers
For new clients, Starbucks successfully fostered a welcoming ambiance alongside its selection of food and beverages. This was a way of creating a value proposition to ensure clients prefer Starbucks over competitors. Starbucks engaged new customers through digital marketing campaigns, loyalty programs, and other promotions. For instance, through the My Starbucks Rewards program, customers could earn points and rewards for their orders (Sawhney, 2018). Clients signed up for the Starbucks mobile app, which allowed them to order ahead, receive personalized offers, and find nearby locations.
Starbucks also created an inviting atmosphere for new customers by offering a range of seating options, including bar-style, lounge-style, and outdoor spaces. This allowed customers to choose their preferred setting and relax while enjoying their favorite drinks and snacks. Starbucks made its stores more inviting by offering a variety of complimentary snacks and beverages (Shirdastian, Laroche, and Richard, 2019). Customers had a wide range of items to choose from, which included brewed coffee, cold brews, espresso drinks, smoothies, and frappuccinos (Sawhney, 2018). Starbucks also provides customers with a range of seasonal drinks, such as pumpkin spice latte, peppermint mocha, and eggnog latte.
Loyalty Appreciation for Old Customers
Starbucks has maintained its loyalty to old customers by offering new dining occasions, such as breakfast and lunch. Starbucks has fostered a sense of community around its stores through events like the Starbucks Meetup (Sawhney, 2018). Through these actions, customers can interact with each other over a cup of coffee and discuss their shared experiences.
Starbucks has also engaged old customers through its loyalty program, allowing clients to earn points and rewards for their purchases (Sumara & Salim, 2020). Starbucks introduced a range of gift cards and special offers to ensure that customers can stay connected with the brand (Sawhney, 2018). Starbucks has created a range of exclusive products, including limited-edition mugs and tumblers, to enable customers to demonstrate their loyalty to the brand.
Market Segmentation and Diversification
Starbucks segmented its market into four segments: evening, afternoon, lunch, and morning. The morning market is essential for Starbucks as it is the most popular time for customers to visit their stores. To capitalize on this segment, Starbucks implemented several strategies that enabled it to maximize profits by attracting more customers.
First, Starbucks focused on creating a warm and inviting atmosphere. Customers feel comfortable and more likely to stay longer when the space is inviting (Munifa, 2022). Starbucks implemented comfortable seating options, a pleasant smell, and soft lighting in its stores (Bianco, 2020). This helped customers relax and enjoy their time while waiting in line and at their tables.
Starbucks diversified its food and beverage offering by creating new products and venturing into new areas such as tea. Starbucks maintained its stores’ cleanliness and organization to ensure that customers could quickly locate what they needed (Lee, Moon, and Song, 2018). This allowed clients to customize their orders and create a unique experience.
The organization developed a wide range of breakfast items, including sandwiches, bagels, oatmeal, and more (Hsu & Bui, 2022). The company also created a selection of coffee and tea drinks to meet different tastes and preferences.The presence of options helped to encourage customers to come back and try something new.
Digital Marketing
Starbucks leveraged its digital marketing campaigns and loyalty program to reach out to customers and engage with them.The organization developed a strong presence on social media, utilizing platforms like Instagram and Twitter to showcase its products and engage with customers. Starbucks can promote its products through these channels and gain a larger following (Larson, Jaworski, and Larson, 2021).
Starbucks focused on offering exclusive promotions and deals for morning customers to encourage them to come back. Starbucks has rolled out several deals, from free drinks to discounted menu items. These offers help to make Starbucks a more attractive option for customers looking to grab a quick breakfast before work or school.
Conclusion
Starbucks’ strategy of creating a “third place” has successfully driven growth and increased customer loyalty. The company has built an inviting atmosphere through various dining options, complimentary internet access, and other services. Additionally, Starbucks has been able to engage customers through its loyalty program, digital marketing campaigns, and special promotions. Furthermore, the business has successfully targeted the morning market by fostering a cozy and welcoming environment while providing a range of food and drink choices, utilizing digital campaigns, and offering exclusive deals and promotions.These strategies have helped Starbucks become a top global competitor and drive growth.
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