Introduction
Goal of the Study and Questions
This study is an analysis of Starbucks, an international beverage coffee brand. It analyzes the marketing strategies applied by the company to ward off the effects of the lockdown necessitated by the COVID-19 pandemic. In 2019, a global pandemic struck the globe, leading to massive deaths and infections. Various governments took steps to ensure that their citizens were protected from the highly contagious disease. Amongst these measures was a lockdown that involved the restricted movement of people within a specific area. All sectors were affected, including businesses, religious activities, social gatherings, and education. Many companies, especially food and beverages retail businesses, were affected. The restrictions in movement massively affected their revenue and business operations in general. The questions this case study seeks to investigate is the impact of the pandemic to business and the importance of marketing in recovery of businesses.
Approach
This essay provides a background of Starbucks Company as a leader in the coffee beverage sector. The next section is an analysis of how Starbucks was affected by the pandemic. The following part analyzes the marketing strategies Starbucks has employed to overcome these effects and the impact these strategies have had on the company this far in the market. The final part of this paper provides recommendations and a conclusion of the case study.
Company Background
Starbucks was founded in 1971 as a single coffee house in Seattle by Jerry Baldwin, Zev Siegl, and Gordon Bowker in Washington. Later on, the company was sold to Howard Schultz who was committed to growing the company into an international beverage coffee seller. In 2011, the company invented its ethical coffee sourcing guidelines and Starbucks cards for its clients. The management of the corporation began a Farmers Support Centre in Costa Rica, its source of most of their coffee, for better relations. In 2021, it acquired a tea company, Teavana, to expand its operations (Starbucks, 2021). The company has gradually grown over the years, boasting about 30,000 coffee stores across the globe and with over 80 markets. The mission statement of the company is, “to inspire and nurture the human spirit – one person, one cup, and one neighborhood at a time.” This restates their commitment to providing high-quality coffee and positively impacting lives.
Impact of the Lockdown on the Company
The lockdown affected Starbucks massively as fewer customers visited their premises. The restrictions on movement caused widespread fear across the globe, and especially in the US where the company is mainly based. Decreased visits to the restaurants caused decreased coffee sales and diminished profits (Starbucks Reports, 2021). The ability of the company to retain its staff was also impaired due to the diminished workloads. Stores that previously hired many workers were left with only a few employees to run the restaurants daily. Starbucks experienced a 4.9% reduction in its total net revenues from 2019 to 2020 owing to the pandemic (Starbucks Reports, 2021). The total net revenue for 2019 was $ 7,097.1 million and decreased to $ 6,749.4 million in 2020.
The total operating income also decreased from 1,219.8 million in 2019 to 913.5 million in 2020, indicating a 25.1% decrease in the figure. This was due to the decreased sales and activity at the stores that were caused by the lockdown. The net earnings attributed to Starbucks also decreased from $ 885.7 million in 2019 to $ 622.2 million in 2020, demonstrating a 29.8% decrease (Starbucks Reports, 2021). The lockdown also tampered with plans by the company to expand its operations in various new markets. The lockdown meant that there was increased difficulty in obtaining workers to construct and design the new outlets. The financial capacity of the company was also strained and it was unable to effectively fund its planned expansion projects. Diminished incomes meant the management of the company had to prioritize ensuring ongoing operations were uninterrupted at the expense of opening new stores.
Core Marketing Strategy
Segmentation
In response to the COVID-19 pandemic that saw the company make massive losses and a decrease in its business operations, the company adapted a variety of marketing initiatives in 2021. The company has hastened its integration of digital technology in its operations. Starbucks increased the friendliness of its user interface on its application to ensure its young and technologically adept customers had a premium experience. They can make their orders more easily and experience the convenience that the company is famed for. The online orders ensure that customers have minimal waiting times when they arrive to pick their coffee, favoring the affluent members of society who make the majority of Starbucks customers.
Extended Marketing Mix
Starbucks introduced a promotion campaign that encourages their customers to consume their coffee more. The marketing initiative is indicated in their application and offers stars to their customers based on the amount of products they consume from the store (Starbucks Rewards, 2021). These stars are valuable and equivalent to products inside the stores, and can be redeemed when deemed sufficient. The customers can use the stars to request for more coffee or other delicacies within Starbucks.
Starbuck’s Positioning
Delivering the coffee to the customers where they are has been effective in fanning the reputation of the company as a luxury brand dedicated to efficiency. An additional marketing strategy adopted by the company is the revolutionary drive-thru feature. The serving areas are positioned along pavements that are accessible by cars. Customers who would want to purchase various beverages, including coffee, but not consume them at the premise can do so. These customers can purchase their coffee in the comfort of their cars, without stepping out hence increased efficiency. These drive-thru stations have been vital for customers who are apprehensive of getting infected with COVID-19 if they sit at restaurants to enjoy their coffee (Nair et al., 2021). They can still access the quality coffee offered by Starbucks and still get to choose their preferred site to drink the beverage.
Marketing Environment Analysis
External Factors
The marketing environment analysis will focus on the external factors as the internal factors have been discussed in the core marketing strategy. External factors include increased social media use by competitors and integration of cashless payments due to COVID-19. The company has increased attention to its cashless payment platforms as a means of easing payments. The COVID-19 pandemic’s transmission involves physical contact with cash that has been transacted by many people. This means that the handling of cash has generally reduced across the globe. The cashless focus has been accelerated to ensure that the company continues to offer convenience. Vigorous campaigns through social media platforms such as Twitter, Facebook, and Instagram have been vital in increasing the visibility of the brand (Aryani et al., 2021). The social media management team at the company has increased its presence in social media to attract new prospective customers and retain the company’s loyal customers. The use of social media has been informed by the increased relevance of this means in modern business practices and increased embrace by competitors.
4 Ps Assessment
People
The company also offers its customers birthday treats during this special day to enable them view the enterprise as a caring entity. The sentimental value of birthdays is the main marketing aspect of this promotion (Starbucks Rewards, 2021). More customers view the company as a brand that holds their lives in high regard.
Promotion
The efficiency of the Starbucks reward systems has also provided immense exposure and marketing for the corporation (Bertels & Desplaces, 2021). More customers have become regulars at the premises, motivated by the possibility of the rewards guaranteed after a certain limit is achieved. This marketing initiative has borne success for the company, as it reported positive turnovers for the third quarter.
Place
Additionally, the corporation hastened its delivery of coffee and other beverages to varied locations to ensure their customers choose the venue they enjoy their beverages. The drive-thru stations also means that customers can spend limited time at the stores whenever their time is limited (Nair et al., 2021). This ensures convenience at the venue, an aspect the company is renowned for as a luxury brand.
Price
Starbucks has also invested in days when the customers can earn twice the stars they earn on normal days by buying the same products. This feature is dedicated to some days of the week and the customers have to be on the look-out to ensure that such days do not pass them (Starbucks Rewards, 2021). During days like this, the company enjoys higher sales and higher profits. The clients are usually aiming for their stars to achieve required limits quicker for redeeming.
Conclusions & Recommendations
In conclusion, Starbucks is an effective model of a well-managed company that understands its customers and needs. The company has gradually grown from a local coffee shop to an international brand that is dedicated to offering luxury and convenience to its customers. Starbucks has centralized itself as a household brand that makes the drinking of coffee desirable, increasing the consumption of the beverage. The company also makes customers feel part of the broader efforts of the corporation to meet their needs. Starbucks was affected by the pandemic alongside other businesses due to the restriction on movement imposed by various governments to protect the health of their citizens. The company experienced disruptions to its business structure, including decreased net profits and increased laying off of workers. The efforts of the company to expand into newer markets were also altered due to a shortage of funds and human capital logistics. Efforts towards restoration have included marketing campaigns through social media, drive-thru stations, the embrace of cashless payment, increased deliveries, and reward systems.
Recommendations for the company to integrate into its practices that can promote marketability include further expanding its menu. While Starbucks is renowned for the coffee it provides, the outlets could become bigger destinations if they provided popular meals for their customers. The meals of choice can be determined through market surveys that assess customer preferences. Starbucks can also benefit more from revising its employment policy to ensure that its staff is friendly and appropriate for their customers. This includes integrating employees who speak various languages to overcome the language barrier and enable the company to serve clients better. Starbucks can also theme their outlets with material associated with various parts of the world and various populations. They could incorporate Indian-themed paintings and art within stores with predominantly Indian customers, for example. This is bound to boost familiarity and act as a marketing tool that attracts specific target markets to an outlet.
References
Aryani, D. N., Singh, P., Liew, Y. W., Kee, D. M. H., Li, Y., Li, J., Lim, C. Y., & Arif, W. (2021). How Brand Reputation Influences Customer Satisfaction: A case study of Starbucks, Malaysia. International Journal of Tourism and Hospitality in Asia Pasific (IJTHAP), 4(3), 60–72. Web.
Bertels, H. M., & Desplaces, D. (2021). Starbucks in China: What lessons can Starbucks learn from Luckin?. The CASE Journal.
Nair, R. K., Sinha, R., Crasto, S. G., Kian, K. W., Kee, D. M. H., Abdullah, S. A. B., Zaidi, S. N. N., En, T. S., Jain, A. K., Valecha, P. M., & Ganatra, V. (2021). The effect of Starbucks marketing campaigns on consumer buying behaviour. Asia Pacific Journal of Management and Education (APJME), 4(1), 72–81. Web.
Starbucks. (2021). Starbucks Company Timeline. Starbucks Coffee Company.
Starbucks Reports. (2021). Starbucks Reports Record Q4 and Full Year Fiscal 2021 Results. Investor.starbucks.com.
Starbucks Rewards. (2021). Starbucks® Rewards. Starbucks.