Category: Service

Service Analysis at Starbucks Company

Posted on | by Laureen

Service Analysis at Starbucks Company

ntroduction

The service industry is key to most economies in the world. Several theories have been used to analyze the service industry. Based on the different challenges in management, a process matrix alongside empirical data would form the classification rather than simple observation. Despite empirical data forming the basis for classification in the service industry, misconceptions may occur (HSPH, 2014). A misconception in classification may occur when service industries share similar characteristics, as evidenced by the process matrix. This paper analyzes the professional service marketing at Starbucks with a focus on the nature of the service, the target population, customer behavior as well as a model to explain the components of service product.

What is the nature of the service using service classification theory?

Service may be classified based on the nature of the process and what is being processed. The processes in service include the customers and pricing category for the services. Service classification by customers includes their involvement while that of pricing consists of the financial cost and mental effort associated with the service. Furthermore, services may be classified according to tangibility. For instance, services directed towards the minds of individuals and those directed towards intangible assets. However, the matrix for the classification of service includes nine categories. Classification based on the effect of goods to individuals, temporary or permanent change attributed to the service, reversibility of the service, mental or body effects as well as the marketing characteristics (Guzman, & Iglesias, 2012). Starbucks is one of the companies that has established its market base on customers and ethical behavior as opposed to the investment of millions in advertisement forums that turn out with little or no benefit. At Starbucks, there is usually a high demand for coffee with individuals regularly visiting the cafes. However, the main challenge for Starbucks is to establish an effective customer retention strategy.

Under the marketing classification, service is further subdivided into tangible or intangible, relationship with customers, and whether it is formal, continuous or not, whether the service allows room for customization or not, the nature of supply or demand as well as the level of interaction between the supplier and the customer. However, personalization or standardization and the availability of goods are the main basis for the classification of service. Starbucks began in Seattle in the year 1971 and has since then grown from a single store to several stores (Jacoby, 1971). Starbucks has over one hundred and sixty thousand employees and is well known to serve clients globally with the best beverages, which includes coffee. Starbucks operates on a mission statement of inspiring one person with one beverage at a time while reaching out to the neighborhood. In the United States, over half of the youthful population spends more than forty million dollars on Starbucks beverages annually. Starbucks has always been competitive amidst competitors such as McCafe through innovative marketing strategies.

Who is the target market?

Success in business requires an effective marketing strategy to attract customers and establish a remarkable brand identity. Starbucks applies demographic market segmentation, whereby the main target group is that of the working class aged between twenty-five and forty years. The second target group is that of the richer population aged between eighteen and twenty-four years of age. On the other hand, mass marketing focuses on the wider public whereby the criteria for customer focus is a high salary or young age. Starbucks selects its target market based on the customer perception of the product or service. Service analysis enables Starbucks to decide on the type of product or service to sell and to whom. The company strives to provide high-quality coffee and other creative beverages to difficult customers as well as fresh, interesting beverages to the younger population while sustaining the image of the company (Turner, 2011). Most customers like to associate with Starbucks since its target is to offer high quality to the upper-middle class.

Customer behavior

There has been very little attention paid on the market positioning at Starbucks due to the tangible and intangible perceptions of the product. There is the risk of perception whereby customers believe that they are consuming the best quality and have developed a personalized experience which is enhanced through the trained staff. For instance, intangible service is evidenced by writing the customer’s name on the cup they would be served in. In this way, Starbucks has developed a brand name that beats all existing competitors. While Starbucks differentiates between the product and service, they gain a competitive advantage. Selling in a fast-paced world is common at Starbucks, where customers decrease social interaction and connect more with the staff. However, there are claims that despite Starbucks being a leader in hotel beverage service, there is a concern based on the personal approach to clients. Franchising of Starbucks has led to the loss of some of the glory and magic in beating the competition. Customers at Starbucks now feel neglected and treated similarly to any other fast-food regular customers. Starbucks is at the risk of losing its competitive advantage (Morriss, 2012).

What are the different components of the service product?

Ansoff or BCG matrix may be used. The BCG matrix enables Starbucks to have an idea of how its products are performing in the market. The matric enables Starbucks to not only focus on the market share but also avoid missing out on the opportunities for growth. Starbucks invests more in products that are doing well and less in those that are not. Some products that do not show any signs of improvement are phased off from the market. The BCG matrix is best applied in combination with the Ansoff matrix. Based on Ansoffs matrix, the strategic move for Starbucks would be product development through the introduction of evening coffee, which has become increasingly popular. Marketing at Starbucks includes market segmentation, targeting, position, and differentiation. Several activities occur at Starbucks to address the needs of the target market. The products at Starbucks are inclusive of Served food and beverages, take away coffee, and mugs. While beverages attract the most profit, the mugs on sale is a culture adopted worldwide that helps Starbucks develop a global identity (Starbucks Store, 2014). Also, customers enjoy packed coffee the same as for the one taking the coffee in the restaurant. Nevertheless, the customers at Starbucks are of the opinion that coffee in larger stores is of lesser quality, is less enjoyable and to some extent, it always feels that the aim of Starbucks was profit-making other than creating a friendly customer environment.

Starbucks is not only famous for its ideal locations but also present in large and small cities both in Europe and America. In smaller villages, promotion for Starbucks products is usually by personal interaction as opposed to mass media. The use of fidelity cards is also common. However, the main drivers for marketing at Starbucks include the social image, ethics, as well as effective relationship with the public on social media platforms (Porter, & Kramer, 2011). Customers like to associate with the code of ethics upheld at Starbucks. Another component of the service is the use of specific language for ordering store products which are unique to the company.

Moreover, summer campaigns inform customers on the different ways they can take coffee such as slushies, lattes, and milkshakes, which promotes organization sales. Furthermore, Starbucks employees are well trained to address the emerging challenges based on the set models. The staff is highly motivated to work since the social programs in place, enabling them to develop careers, and the work allows for flexibility of time. The staff is also entitled to a percentage of shares at Starbucks based on their position at work (Wood, 2011). Starbucks is a trusted brand since it allows for transparency and public accessibility among individuals to promote awareness of the origin of the coffee and other beverages in liaison with trade organizations that offer comprehensive reports. Another component of the service is the enhancement of the interior design making attractive to customers who pride in Starbucks.

A SWOT and PESTEL analysis for Starbucks creates an understanding of the internal and external factors affecting the success of the company, thus facilitates the formulation of an effective marketing mix. External factors are those that are out of control by the organization, yet they influence the success of the organization. External factors may include competitor companies or certain political factors associated with the growth of coffee beans. For instance, the existing regime may put to inquiry the conditions of the coffee workers or highlight issues on child labor. Besides, tariffs and additional taxation would affect the economic standing of Starbucks by decreasing its share of profit. Starbucks is also at the pressure to adjust to environmental laws. At the same time, there is a need for flexibility in the product where the youth resolve to take more tea than coffee. The development of new technology such as home coffee makers may also affect the customer preference for restaurant coffee. On the other hand, technology may be used constructively through the use of gift card in social media (Zapolski, 2010).

Conclusion

In conclusion, Starbucks has professional service marketing which relies on direct communication to clients, customer loyalty, and adherence to the code of ethics at Starbucks as well as community involvement. Both internal and external factors that affect Starbucks may be analyzed through an effective model such as PESTEL. Despite Starbucks as a renowned brand, several issues may put the organization at the risk of its competitors. The issues on tax and mass production may affect the brand image, thus discouraging clients from becoming loyal to Starbucks. There is a need for Starbucks to adopt effective service marketing strategies that focus on the specific needs of the customers.

References

  1. Guzman, F. and Iglesias, O. (2012) Challenges facing brand managers today. Bradford: Emerald Insight.
  2. HSPH (2014) ‘Coffee by the Numbers’, Harvard School of Public Health [Online]. Available at: http://www.hsph.harvard.edu/news/multimedia-article/facts/ (Accessed: 3 May 2014
  3. Jacoby J. (1971) ‘Brand Loyalty: A Conceptual Definition,’ American Psychological Association Proceedings, 6, pp. 655-656.
  4. Morriss, A. (2012) ‘How Starbucks Trains Customers to Behave,’ Harvard Business Review, 9 May [Online]. Available at: http://blogs.hbr.org/2012/05/how-starbucks-trains-customers/
  5. Porter M.E and Kramer, M.R. (2011) ‘Creating Shared Value,’ Harvard Business Review, January-February, pp. 2-17.
  6. Starbucks Store (2014) Cups & Mugs. Available at: http://www.starbucksstore.com/drinkware/cups-and-mugs,default,sc.html (Accessed: 3 May 2014).
  7. Turner, R.W. (2011) Supply Management and procurement. Ft. Lauderdale: J. Ross Publishing Inc.
  8. Wood, Z. (2011) ‘Starbucks staff offered £500 of free shares’, The Guardian, 26 January [Online]. Available at: http://www.theguardian.com/business/2011/jan/26/starbucks-offers-shares-to-staff (Accessed: 3 May 2014).
  9. Zapolski, J. (2010) Strategic Innovations in Product & Service Design [Online]. Available at: http://sva.isotope221.com/starbucks-primo.html