Question

2. Company and Marketing Strategy Partnering to Build Customer Engagement, Value, and | Relationships CHAPTER PREVIEW In the first chapter, we explored the marketing process by which companies create value for customers to capture value from them in return. In this chapter, we dig deeper into steps two and three of that process: designing customer value-driven marketing strategies and constructing marketing programs. First, we look at the orga- nization's overall strategic planning, which guides marketing strat- egy and planning. Next, we discuss how, guided by the strategic plan, marketers partner closely with others inside and outside the firm to engage customers and create value for them. We then examine marketing strategy and planning-how marketers choose target markets, position their market offerings, develop a marketing mix, and manage their marketing programs. Finally, we look at the important step of measuring and managing marketing return on investment (marketing ROI). First, let's look at Starbucks, a good company and a good marketing strategy story. Starbucks met with enormous early success by focusing not just on coffee but on the coffee-drinking experience. The company has since taken a bumpy ride from boom to bust and back to boom again. Along the way, it learned that good marketing strategy means more than just growth, sales, and profits. It means skillfully engaging customers and creating value for them. At its core, Starbucks doesn't sell just coffee, it sells "The Starbucks Experience." M STARBUCKS'S MARKETING STRATEGY: Delivering "The Starbucks Experience" ore than 30 years ago, Howard Schultz transformed drew a host of competitors. It seemed that every rival-from the coffee industry by bringing a European-style independent coffeehouses to fast-food restaurants—was ped- coffeehouse to America. He believed that people dling its own brand of premium coffee. needed to slow down-to "smell the coffee" and To maintain its phenomenal growth in the increasingly to enjoy life a little more. The result was Starbucks, founded overcaffeinated marketplace, Starbucks brewed up an ambi- with a whole new strategy for engaging customers and creating tious growth strategy. It opened new stores at a breakneck pace, customer value. seemingly everywhere. For example, one three-block stretch Starbucks didn't sell just coffee, it sold "The Starbucks in Chicago contained six of the trendy coffee bars. In New Experience"-"an uplifting experience that enriches people's York City, there were two Starbucks in one Macy's store. In lives one moment, one human fact, cramming so many stores so being, one extraordinary cup of Starbucks has become America's-the close together caused one satirical coffee at a time." Starbucks gave publication to run this headline: customers what it calls a "third world's largest coffeehouse by skillfully "A New Starbucks Opens in the place"-a place away from home engaging customers and delivering Restroom of Existing Starbucks." and away from work. At Starbucks, superior customer value. At its core, The company also blanketed the the smells, the sound of beans Starbucks doesn't sell just coffee. It sells country with Starbucks kiosks grinding, watching baristas blend "The Starbucks Experience." and coffee stands in everything and brew the brand's specialty cof- from Target stores and supermar- fees-all became as much or more kets to hotel lobbies, and service a part of the customer experience as the coffee itself. businesses from airlines to car dealerships proclaimed, "We Over the next two decades, customers flocked to Starbucks proudly serve Starbucks coffee." cafés. By 2007, some 15,000 Starbucks stores dotted the nation The more Starbucks grew, however, the more it drifted and globe, and the company's sales and profits rose like steam away from the core mission and values that had made it so suc- off a mug of hot java. However, Starbucks's enormous success cessful. The company's almost obsessive focus on growth for

1. Define Starbucks’ niche in the coffeehouse marketplace, both in its early days and today…
2. Discuss the factors that caused Starbucks' sales to stumble in the mid-to-late 2000s. If you were the CEO at the time, how would you have reversed this trend?
3. What comes next for Starbucks? What new marketing strategies might the company develop to remain relevant?

Answer 1

1) Starbucks Niche: The founder of Starbucks brought the European way of drinking coffee to the US. Before then US served mostly a "grab and go" culture however Starbucks sold an experience of coffee which included the smells and atmosphere of a quintessential Eurpean cafe which they called "The Starbucks Experience". Today Starbucks fuctions as a place not only for coffee which includes comfortable spots for working constantly reiventing themselevs with new product lines such as Teavana.

2) Starbucks went on a trend of purchasing and leasing more property than it needed. This growth push for an innumerable mount of coffee shops led to a decline in the true Starbucks experience. For instance In Chicago there were 6 Starbucks locations in a 3 block radius . This dilution of quality led to declining sales and fall in stock prices by 80%.

If I was the CEO at the time I would shut down the stores where there was saturation and spread out the number of stores across areas. Furthermore I would retrain barista's to help give customers the same experience that customers were originally attracted to. I would also focus on international expansiona as during the 2008 recession emerging markets were doing relatively well. So I would focus on expansion in emerging markets such as India and Brazil.

3) In the age of social media Starbucks has to leverage the power of influencer marketing. Paid influecers across Instagram and Youtubers are way more valuable than a nation wide advertising campaign. Since the audiences of influencers tends to trust them the enagenment metrics would be way higher than regular advertising.