To say that Starbucks Corp. has stirred up the coffee industry would be an understatement. Its...

  

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To say that Starbucks Corp. has stirred up the coffee industry would be an understatement. Its more than 4,500 outlets in North America continue to deliver profits and boast unparalleled customer loyalty. Many customers visit the store as often as 18 times a month. Not bad for a company that charges four to five times as much for a cup of coffee as the competition, does not advertise much, and sometimes refuses to give the customer what he or she wants. So what is Starbucks' secret? Howard Schultz, company founder, believes the brand is so strong because it was built from within. "I am concerned about the customers who pay for the coffee, but my primary concern is for the people who serve it," he says. "We built the brand by putting them in a position to win by recognizing that we wanted to build a company in which they were not left behind. Every single day, we want to exceed our customers' expectations. But we could not do that if we didn't first try, every single day, to exceed the expectations of our own people." "Delivering on a positive experience, face-to-face with someone in a store is probably a hundred times more effective than the best claim you could ever make in a piece of advertising," he says. According to Bedbury, personal interactions are more conducive to building emotional connections with consumers. He says emotional ties are the cornerstones of good brands, and that they require observing some of the conventions of marriage. "You have to be honest, you have to be loyal, you have to be committed and demonstrate that you're compassionate. I think a lot of brands have forgotten to make those investments both internally first, in terms of reminding the people who work inside the company of what the brand is all about, and then communicating that to consumers." Even so, Starbucks rolled out a new television campaign in the spring of 1997. The tagline of the campaign, "Purveyors of coffee, tea, and sanity," was chosen because of its simple and upscale nature. Starbucks and the ad agency wanted something that evokes the neighborhood coffeehouse where friends meet to relax and unwind. The image conveyed should be that of a friendly, intimate, neighborhood sort of place. The advertising campaign uses simple stick figures that are almost crudely drawn, and that do not detract from the focus on the coffee. In these ads, it's the coffee that performs. BUT, today, they have evidence that customer satisfaction is declining, its brand image is showing rough edges and its customer base is changing. The company plans to close hundreds underperforming stores around the world, in addition to the 600 it already planned to close in the U.S. "The closures could result in the loss of 6,000 in-store jobs. Starbucks also plans to lay off about 700 non-store employees. Revenue fell to $2.62 billion from $2.77 billion, while analysts had predicted revenue of $2.7 billion. Net income was $64.3 million, or nine cents per share-down from $208.1 million, or 28 cents per share a year earlier. There was a nine per cent decline in same- store sales, or sales at locations open at least a year, considered a key gauge of restaurant and retail performance. That dip was worse than the company's fourth-quarter decline of eight per cent." 1. 2. Using the terms "core", "tangible" and "augmented", explain the "marketing meaning" of the "product" offered by Starbucks. (You should keep in mind the first lecture when answering this question. If you missed the lecture, then you can benefit from pre-recorded lecture for day 1 - located in Module 1 on Brightspace.) How has Starbucks positioned itself? Make a hypothetical positioning map and explain the three key components of this map. (You should watch the pre-recorded lecture on Consumer Behaviour, before attempting to answer this question. ) To say that Starbucks Corp. has stirred up the coffee industry would be an understatement. Its more than 4,500 outlets in North America continue to deliver profits and boast unparalleled customer loyalty. Many customers visit the store as often as 18 times a month. Not bad for a company that charges four to five times as much for a cup of coffee as the competition, does not advertise much, and sometimes refuses to give the customer what he or she wants. So what is Starbucks' secret? Howard Schultz, company founder, believes the brand is so strong because it was built from within. "I am concerned about the customers who pay for the coffee, but my primary concern is for the people who serve it," he says. "We built the brand by putting them in a position to win by recognizing that we wanted to build a company in which they were not left behind. Every single day, we want to exceed our customers' expectations. But we could not do that if we didn't first try, every single day, to exceed the expectations of our own people." "Delivering on a positive experience, face-to-face with someone in a store is probably a hundred times more effective than the best claim you could ever make in a piece of advertising," he says. According to Bedbury, personal interactions are more conducive to building emotional connections with consumers. He says emotional ties are the cornerstones of good brands, and that they require observing some of the conventions of marriage. "You have to be honest, you have to be loyal, you have to be committed and demonstrate that you're compassionate. I think a lot of brands have forgotten to make those investments both internally first, in terms of reminding the people who work inside the company of what the brand is all about, and then communicating that to consumers." Even so, Starbucks rolled out a new television campaign in the spring of 1997. The tagline of the campaign, "Purveyors of coffee, tea, and sanity," was chosen because of its simple and upscale nature. Starbucks and the ad agency wanted something that evokes the neighborhood coffeehouse where friends meet to relax and unwind. The image conveyed should be that of a friendly, intimate, neighborhood sort of place. The advertising campaign uses simple stick figures that are almost crudely drawn, and that do not detract from the focus on the coffee. In these ads, it's the coffee that performs. BUT, today, they have evidence that customer satisfaction is declining, its brand image is showing rough edges and its customer base is changing. The company plans to close hundreds underperforming stores around the world, in addition to the 600 it already planned to close in the U.S. "The closures could result in the loss of 6,000 in-store jobs. Starbucks also plans to lay off about 700 non-store employees. Revenue fell to $2.62 billion from $2.77 billion, while analysts had predicted revenue of $2.7 billion. Net income was $64.3 million, or nine cents per share-down from $208.1 million, or 28 cents per share a year earlier. There was a nine per cent decline in same- store sales, or sales at locations open at least a year, considered a key gauge of restaurant and retail performance. That dip was worse than the company's fourth-quarter decline of eight per cent." 1. 2. Using the terms "core", "tangible" and "augmented", explain the "marketing meaning" of the "product" offered by Starbucks. (You should keep in mind the first lecture when answering this question. If you missed the lecture, then you can benefit from pre-recorded lecture for day 1 - located in Module 1 on Brightspace.) How has Starbucks positioned itself? Make a hypothetical positioning map and explain the three key components of this map. (You should watch the pre-recorded lecture on Consumer Behaviour, before attempting to answer this question. )

Answer rating: 100% (QA)

1 The marketing meaning of the product offered by Starbucks using core tangible and augmented terms Core product The core product offered by Starbucks is not just coffee it is the overall experience and emotional connection that customers get from visiting a Starbucks store This includes the ambiance the sense of community and the feeling of being a part of something bigger Starbucks has positioned itself as a place where people can gather relax and enjoy highquality coffee in a comfortable environment Tangible product The tangible product offered by Starbucks refers to the physical aspects of their offerings such as the coffee tea pastries and merchandise available for purchase It also includes the store layout design and decor that contribute to the overall atmosphere Augmented product The augmented product offered by Starbucks encompasses additional services and benefits that enhance the overall customer experience This includes free WiFi in stores the Starbucks Rewards loyalty program mobile ordering and personalized beverage customization Moreover the augmented product also includes the social status and image associated with being a Starbucks customer as it has become a recognizable and trendy brand 2 Starbucks Positioning Map and its key components In a hypothetical positioning map Starbucks can be positioned based on two key components Price and Customer Experience a ... View the full answer