Unit 2 Marketing Principles – Starbuck Coffee
Explain how products are developed to sustain competitive advantage
No matter how big or popular a brand has become, it will always face the competition in the market from the new products and from the new companies in the market. But there is always a competitive advantage of an established rand is that company does not have to put much effort to gain the confidence of the customers as they are already happy with the previous products of the company. In case of Star Bucks, company has the trust of the customers, but even then, when a new product is developed, company has to define a strategy to sustain the competitive advantage (Thorson & Duffy, 2011). Company has the competitive advantage but the new product of the company should be developed to sustain that competitive advantage. For example, when a customer tries the new coffee product of the Star bucks, he should feel that it’s even better than the earlier products of the company.
Hence, the improved quality of a new product while developing that product is always essential to sustain the competitive advantage. Star Bucks also has to make sure that the previous feedbacks of the customers are considered and implemented during the development of the product. As discussed above that Starbuck’s store in Japan is a good example of competitive advantage. When Starbuck has decided to open its store in Japan then it focus only on the non-smoking zone to gain the competitive advantage as no other company started its chain in non-smoking zone. The Starbuck has got the huge brand recognition from here. And in Taiwan also, to beat the competition it has launched first ready to drink coffee.
3.2 Explain how distribution is arranged to provide customer convenience
A distribution channel is the way in which the company product reaches to the end user. A typical distribution channel of any product is provided in the below figure.
It is clearly seen that the distribution starts at the highest level, i.e. at the manufacturer and finish at the customer, i.e. end user. But in between these 2 levels there are many other levels such as the broker, wholesaler, retailer and home delivery salesman. This is kind of a chain and every product has to go through this distribution channel. Although, there is a new distribution channel, which is redefined by the e-commerce or online shopping. In this kind of distributor channel, customer is directly connected to the manufacturer and buys the product directly from the company through online shopping which is delivered to the customer at his home either by the company agents or courier service.
The distribution strategy adopted by Starbuck to provide the customer conveniences are as follows:
- At first time, Starbuck opened its first store at airport (very prominent location) for a reason that the consumer can taste the coffee while waiting for flight.
- After that Starbuck went to shopping mall to give enjoyment to customer while they are shopping, and then force the customer to get the coffee only by a click that means online.
- Starbuck choose the location where it can get the most of the customer and the customer can get Starbuck so it opened its stores near colleges, office and posh area of cities.
3.3 Explain how prices are set to reflect an organization’s objectives and market conditions
Most of the people would say that the prices of a product are set by the manufacturer of the product, but this is not entirely true. It is really the customer and the competition in the market which sets the prices of Star Bucks products. Since, Star Bucks is a big brand, it allows company a bit advantage while setting up the price of a particular product. The company could sell a product on the higher price than their competitors are charging for the same product (Hawkins & Mothersbaugh, 2009). The reason again is the brand and the customer’s trust and loyalty to the brand. But it does not mean that company could set the prices much heavy to earn the extra profit. In this case, the customers would like to try the product of other company and if he likes it and the price is very cheaper than the Star Bucks’ product, company will definitely loose the customer. This is why Star Bucks has to be very cautious while setting up the prices of their products. The pricing strategy which Star bucks use in setting up the prices is the premium pricing strategy. In this business strategy , Starbuck set the price of the product high as it is perception of the targeted market that the high price means high value and quality of product. The premium pricing also increases the competitive advantage and brand awareness for the company.
3.4 Illustrate how promotional activity is integrated to achieve marketing objectives
Promotion activities are of great importance for every product in the company, but when it comes to an established brand like Star Bucks, the promotion becomes easier as there are people who already know the brand and when go to a store for shopping, they ask the product by its name. But still, Promotion is required as company keeps launching new products and to make the customers aware of the new product promotion is required. Starbuck cafe is one of those organisations which use the quality of its products as it promotion. Starbuck offers the best quality of product and believe in mouth to mouth publicity. They believe that the best promotion of the product is done by its customers. Even for new country and new stores they never use any international campaign and even construct the store very fast and do the promotion with the help of this store “Starbucks everywhere” (Yu, 2013).
3.5 Analyse the additional elements of the extended marketing mix
The marketing mix is a 7 P’s process:
- Physical environment
The first 4 Ps of marketing are already discussed in the previous sections of the paper and now the additional three will be explained which are People, Process and Physical Evidence.
People: Although the people are not directly involved in the marketing mix, but somehow they affect the marketing process. For example, the employees of Star Bucks represent the brand of the company and wherever they go they leave a trail of the brand. How these employees behave and how the other people, i.e. the customers are affected by their attitude helps the company in marketing.
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Process: The process of marketing mix is very critical and it also includes different sub processes. How a strategy of marketing is planned and implemented through a smooth process defines the brand. Not only the process of marketing but also the process of product development, its delivery to the customer also affects Starbuck marketing campaign. As Starbuck cafe is known for its quality of the coffee and the services offered by the staffs. So, Starbuck cafe regular checks the process of how the employees are offering the services.
Physical environment: The physical environment is mainly related to the environment of Starbuck’s stores and outlets. The ambience in which people sit and enjoy the coffee is very important. If a person is able to relax while sipping the coffee, it’s definitely a positive point for the marketing process.