How Starbucks Manage Their Service Provision - Case Study Example

Name: Students ID: Word count: (2,131) Task: how a product or service (which you can choose) delivers value to customers through the 4Ps of marketing (product, place, price and promotion) Executive Summary The concept of customer value is increasingly becoming popular in management and marketing as many companies and organizations seek to have an upper hand in products and service quality thus acquiring a competitive advantage and securing a long-term success of the company. In the modern world, markets have become very competitive. This has increased the bargaining power of customers as they can switch from different companies or retailers at their will. In response to this companies are keen to develop and maintain long-term relationships with customers through creation of superior customer value and satisfaction. For a business to be in a position to attract new customers it must be able to retain its old customers (Czinkota et al, 1967). Successful and leading companies are more customers centered aimed at providing the best prices and a pleasant shopping experience so as to retain their existing customers. A clear understanding of this concept of consumer value is crucial for the success of many organizations. This in turn enhances customer loyalty. This paper looks into the positioning of the company in regard to adding value to its customers since its establishment, it’s targeting and how its marketing mix supported and supports that positioning. Since a target market is made up of buyers who share a common need or characteristic that the company intends to avail, a company must carefully study its target market so as to understand the requirements and needs of the specific target. The paper also looks at how to deliver customer value through a pleasant shopping experience and how starbucks manage their service provision to ensure value is delivered to their target customer. It is important for a company to put into consideration customer value when developing a marketing strategy. TABLE OF CONTENTS Title Page…………………………………………………………………………………………………1 Executive Summary……………………………………………………………………………………..2 Introduction……………………………………………………………………………………..............4 Marketing Mix elements & Customer Value …………………………………………………………..4 Starbucks Marketing Mix………………………………………………………………………………..6 Price………………………………………………………………………………………………………..7 Promotion……………………………………………………………………………………………….…7 Product…………………………………………………………………………………………………….8 Place…………………………………………………………………………………………………….…9 Conclusions/Recommendation .………….……………………………………………………………9 References……………………………………………………………………………………………….11 Introduction The Starbucks Coffee, Tea and Spice Company was founded in 1971 by jerry Baldwin, Gordon Bowker and Zev Siegel. The company aimed at educating and informing consumers about fine coffee (Stanley, 2002). The company was taken over by Howard Schultz in 1987 and from then its expansion kicked off. Ever since, the company has grown from a small business into an international power house in the coffee industry through purchasing good quality coffee and a pleasant store experience to its customers. The company has grown such that, according to its 2008 annual report the company had nearly 17,000 stores in 49 countries. The company logo is as shown below; Companies in the modern world understand that there are various methods through which they can make their products more appealing to potential as well as the established customers, and adding value to them without necessarily making changes in the products (Jobber, 1995). This is made possible through a detailed study of all the marketing mix elements so as to align them with the company’s mission and vision in fulfillment of customer satisfaction and adding value. It also calls for a company to establish what can be changed as well as identify the effect of such changes on the company’s earnings as well as the market targeted ( Dibb et al, 1994). The company demonstrates the effectiveness of effective marketing and added value to customers through its strategies. Maintaining high quality standards of its products and services upheld their close relationship with customers. Through the paper one can see how marketing mix elements were incorporated to support the positioning of the company Marketing mix elements and How the Company Adds value to its Customers through its products. Due to the changing and competitive marketing environment, Shimp (1997) notes that, the application of marketing mix elements must be able to meet the needs of the targeted market as well as the company’s objectives. This is greatly affected by the consumer’s behaviour which plays a great role in determining how these elements are changed from time to time by marketers. Starbucks has a strong marketing team which is behind its marketing strategies as shown by the chart below; In the modern world, preferences by customers has become more diversified and have changed adversely hence becoming an important factor in making marketing decisions. (Ramesh, 2008). For instance, most individuals nowadays prefer online shopping as opposed to physically visiting the stores. According to Sandhusen (2000), marketing mix elements are the basic foundation of any marketing strategy as they assist the marketer in establishing a link with the target group. Boyd & Walker (1990) indicates that Marketers are able to formulate marketing strategies based on consumer behaviours since they link up all the market mix elements in any given environment. Consumer behaviour comes about as a result of a decision making process within the social environment they are in which as well exerts group pressures on them. This leads to consumers adopting certain buying behaviours as a result of certain factors which affect their thinking (Ramesh, 2008). The success of the company can be attributed to its strong brand as envisioned by its founders. This was achieved by making the customer the focus of their business. The success of the company is basically attributed to its customer centered approach aimed at adding value to their customers through quality assurance and strategic mix of the marketing mix elements to achieve its aim. Some of the ways this has been achieved include; Atmosphere; in developing the idea, Starbucks was designed to be a place where individuals could interact socially, relax and take time by themselves in a cool atmosphere (Stanley, 2002). This was driven by the need to transform the perception of its customers from just buying coffee as a drink but also enjoy the experience of having coffee at Starbucks. The quality of the coffee was high and the company wanted to have full control of the supply chain so as to maintain quality assurance and consistency. This was done through interacting with growers and putting in place coffee standards. This strategy was significant in delivery of value to customers inform of quality. Stanley (2002) notes further that, workers and partners of Starbucks were trained well on how to handle customers and enhance a pleasant customer experience. The skills taught included how to interact with the customers through contact of the eyes, smiling and greeting the regular customers by their names. This enhanced a friendly environment for the customers who felt special and satisfied. Target market; in the early 1990’s the company targeted primarily the affluent, well educated individuals. To keep this target group satisfied the company ensured provision of superior service and consistency in service delivery. Starbucks Marketing mix of Price, Promotion, Place and Product A good marketer is the one who focuses on the different generations and their specific needs. Understanding the differences between different generations is vital in marketing to the various generations. This is because such understanding enables a firm or marketer to create better products that fits with the generation he targets (Brassington & Pettit, 2000). According to Kottler (1986), It is important for marketers to learn and understand how individuals under a market segment perceive themselves so as to base their marketing on these perceptions. A widely used demographic variable for measuring the consumption behaviour of a market segment is age. There is also the need to prioritize the market mix elements at times because some of them may turn out to be important than others at some point. This however does not advocate for concentrating too much on some elements and ignoring others since they are all important. Priority is given according to the picture created from assessing the targeted consumers (Kanji, 1996). The four P’s of the marketing mix are; Price Price is the only element among the marketing mix elements that can change and also the only element that can generate income. Product and quality of a product are basic measurement of a product’s value (Dalrymple & Parsons, 1986). High priced products are perceived as high quality by customers. Starbucks prices were relatively high initially. However, the company constantly pursued to deliver the quality and value as expected by the consumers. They used high quality inputs, trained their staff with the appropriate skills and created a cool atmosphere to enjoy coffee while relaxing or talking to friends. All this complemented the higher prices hence supporting its positioning. The price of the company’s products in the modern day is regulated in accordance to the response given by customers. Coffee is available in varying sizes that are short, tall, Grande, Venti and trenta hence putting in consideration customers according to their budget. Promotion According to (George & Barksdale, 1974), an effective promotion as a marketing mix element should be fully informative to the customers, one that is persuading and also that reminds them about the product as people are likely to get carried away in their daily schedules hence forgetting. Perception, attitude and motivation, plays a role in promoting the business. This is because some consumer behaviours are also influenced by group concepts such as family and friends in choosing a brand or an outlet depending on the price and the appeal created emotionally by such groups. (Ramesh, 2008). This means that if a customer is impressed with the services of a company, he or she is most likely to spread the word by word of mouth to friends and relatives which is also a form of promotion (Kottler & Armstrong, 2004). If a customer is dissatisfied he or she is most probably going to pass on the message to friends and relatives as well which might impact badly on the business. Its therefore important to ensure that customers are satisfied by providing high quality products and services that add value to the customer. Some of the ways used by the company to promote its products was organizing a massive community event before opening a new store. The company also designed art works that were crafted on mugs and T-shirts. The company has incorporated information technology in its operations more so in promotion through the use of electronic media advertising. The company also attracts customers through their seasonal induction of items while also availing gift cards on beverages which also boosts sales. The company has also retained most official customers due to its free delivery of coffee to offices regardless of the cup size. Product The company positioned itself as providers of a premium product by enhancing high standards, producing innovatively and exceptional service delivery. Coffee being perishable, quality control needed to be of top notch, hence the production was closely followed at every stage. The company also adapted total quality management whereby all the employees were involved in improving the quality of the product. The company offers its products in different ranges such as drip brewed coffee including whole bean coffee and espressso. They also serve a number of beverages which include hot and cold drinks. Their products at all the company’s outlets have the company’s logo (Stanley, 2002). This is as shown by the picture below; Place The company always went for open and highly visible stores which were opened as a network which was significant in managing the increased traffic and maintaining their competitive advantage. The company was distinct in the market and maintained high quality services as a result of effective and efficient management of their human resource. This was through training and innovative strategies in management. The company has many stores from which their products can be accessed. The company has its presence in over 50 countries around the world. Below is an image of a starbuck’s store; Conclusions/Recommendations Before a company decides on its target market it first needs to consider market factors that might affect how it meets and satisfies the customer’s needs as well as adding value to them. Such factors include; competitive factors, political, social and environmental factors. They also include barriers to trade, bargaining power of customers and suppliers. The company’s primary targets were office workers with middle to high incomes who desired to purchase premium products hence the need to be very cautious with their quality control so as to meet the high expectations by customers. It is important to note that, each of the marketing mix elements must be coordinated with the others so as to create an effective blend and come up with a strategy that is most appealing to the customers and still competitive in the market. For instance, one cannot spend time and resources promoting a product whose prices are not affordable to consumers as well as competitive with those of close competitors since despite the promotion the ultimate objective would not be achieved. The marketing strategy agreed upon should be evaluated so as to measure the extent to which the marketing objectives have been achieved within a specified period of time. If the objectives have not been met then the marketing mix elements should be blended again in such a way as to meet the intended objectives. To be in a position to deliver superior customer value, companies must closely monitor and try to find out what matters to customers and focus their energies towards delivering the value according to customer expectations. References Boyd, H., & Walker, O. (1990), Marketing Management: A strategic Approach. Boston:Irwin. Brassington, F., & Pettitt,S. (2000), Principles of Marketing (2nd ed). Harlow: Prentice Hall. Charles, W. & Lamb, J., F. (2008). Marketing. Cengage Learning, 2008. Czinkota, M., Kotabe, M., & Mercer, D. (1967). Marketing Management: Text and Cases. Massachusetts: Blackwell Business. Dalrymple, D., & Parsons, L. (1986). Marketing Management: Strategy and Cases (4th ed.) New York: John Wiley & Sons. Dibb, S., Simkin, L.. Pride, W., & Ferrel. O. (1994). Marketing Concepts and Strategies (2nd European ed.). Boston:Houghton Mifflin Company. George, W., & Barksdale, H. (1974) Marketing Activities in the Service Industries, Journal of Marketing, 65-70. Jobber, D. (1995), Principles and Practice of Marketing. London:McGraw-Hill Book Company. Kanji, G. (1996). Can total quality Management Help Innovation. Journals Oxford Ltd, 7 (1), 3-9. Kottler, P. (1986) Megamarketing. Havard Business Review, 117-124. Kottler, P., & Armstrong, G. (2004), Principles of Marketing (10th Ed.).New Jersey: Prentice Hall. Ramesh, K. (2008). Conceptual issues in consumer behaviour the indian context. India: Pearson Shimp, T. (1997), Advertising, Promotion, and Supplemental Aspects of intergrated marketing Communications (4th Ed.). Fort worth: The Dryden Press. Stanley, A. (2002), Starbucks coffee company. Harvard Business review. 1-28 Sandhusen, R. L. (2000). Marketing Business Review. Barron's Educational Series. Read More