Starbucks, a worldwide coffee sensation, was initially founded in 1971 in Seattle, Washington. Originating as a solitary high-quality coffee shop, it steadily grew throughout Washington during the 1980s. Currently, Starbucks has establishments in multiple countries such as the US and Canada. Surprisingly, despite lacking a significant advertising budget, Starbucks has successfully emerged as the leading global coffee company.
Starbucks utilizes news media and social media to enhance brand visibility, with a particular emphasis on advertising and public relations campaigns. Initially, the company relied on word of mouth for its success but has adapted to actively promoting their product in response to competition and a slight decline in sales. Despite now being widely recognized, Starbucks had humble beginnings; it was fueled by Gordon Bowker and Jerry Baldwin’s enthusiasm for Peets Coffee.
In 1971, Baldwin discovered Peets coffee in Berkley while studying in California. Intrigued, he introduced his roommate Bowker to the brand and together with their friend Zee Siegel, they opened a coffee store in Seattle, Washington. However, Starbucks experienced slow growth due to relying on word-of-mouth advertising. By 1981, Starbucks had only expanded to four stores and a roasting plant in Seattle. It was during this time that Howard Schultz, the current Chairman of Starbucks, began taking notice of the company.
Schultz, Baldwin, and Bowker came together, and Schultz fell in love with Starbucks Coffee. In 1982, Schultz became the company’s marketing manager and embarked on a business trip to Italy in 1983 to explore ways to promote Starbucks products. Inspired by his trip, Schultz conceived the idea of a coffee shop that would serve cups of espresso coffee. After extensive planning and development, Schultz put his idea to the test by opening a coffee bar at Starbucks’ newest store. The concept was a resounding success, with the store attracting 800 customers a day within just two months, three times more than their bestselling whole bean locations (Tuck, p. 2, 2002).
Schultz wanted to further capitalize on this success, but Baldwin preferred to focus on selling top-quality whole bean coffee. Nevertheless, Schultz received Starbucks’ blessing to join forces with Dave Olsen and launch the highly successful Il Giornale venture. In 1983, Baldwin and Bowker acquired Peets coffee and decided to sell Starbucks in 1987 in order to concentrate on roasting the best coffee beans rather than running a coffee shop.
Schultz successfully gathered investors and purchased Starbucks for 3.7 million dollars. Subsequently, Schultz transformed his three Il Giornale stores into Starbucks in order to benefit from the latter’s well-known brand recognition. In 1989, Schultz enlisted experienced management personnel to support the company’s growth. By 1991, Starbucks introduced mail orders, expanded into airports, and established a presence in other retail outlets. The next year, in 1992, Schultz made the company publicly traded on the New York Stock Exchange (NYSE) with the symbol (SBUX). As a result of this significant event, Starbucks rapidly grew its operations by opening numerous stores across the United States, Canada, Japan, and other countries.
Starbucks has experienced impressive growth since generating an astonishing annual revenue of 3.5 billion in 2002 and establishing over 5800 locations worldwide. Presently, Starbucks operates a network of over 18000 locations in different countries. Moreover, Starbucks provides products in supermarkets like bottled drinks, ice cream, and roasted coffee beans. These bottled drinks encompass various versions of the beloved Starbucks Double shot such as Energy Vanilla, Mocha, Strawberry Lemonade, and Frappuccino.
The Starbucks lineup of drinks includes brewed coffee, chocolate beverages, espresso beverages, Frappuccino, smoothies, and Tazo teas. Each group of products offers various flavors. Starbucks has collaborated with Dwyer Ice cream to offer their own branded coffee ice cream at its stores. In an effort to stay competitive, Starbucks started selling food items to complement their coffee drinks. The food menu is divided into bakery items, Starbucks petites and Bistro boxes, hot breakfast, sandwiches and Panini wraps, and ice cream and fruit and yogurt.
Starbucks prioritizes offering healthy choices rather than fast food options. The food menus are created using high-quality ingredients, similar to their coffee. Despite the challenging economic conditions, Starbucks experienced an 11% increase in annual earnings in 2012 (Sanburn, 2012). Their revenue for the fourth quarter reached $3.4 billion. Additionally, Starbucks’ shares in the stock market have consistently risen, leading to expansion and the opening of new stores. The table below displays a summary of Starbucks’ net income over five years according to marketwatch.com:
2013 Year | 2008 | 2009 | 2010 | 2011 | 2012 |
The table shows the consistent increase in Starbucks’ net income over the past five years: 315.5M, 390.8M, 945.6M, 1.25B, and 1.38B. If this trend continues, it is expected that Starbucks’ income will continue to rise in the next year due to new store openings and market exploration. According to Wikinvest.com in 2013, Starbucks plans on expanding its US locations to 20,000 and global locations to 40,000; this expansion could have a positive impact on Starbucks’ revenue growth. Other coffee shops specializing in coffee, doughnut shops selling coffee, and restaurants are among Starbucks’ main competitors.
Starbucks dominates the specialty coffee industry with its 11,500 stores in the USA (Wikinvest. com, 2013). Caribou Coffee, on the other hand, poses little competition to Starbucks as it only has 414 stores. Starbucks faces competition not only from independently owned coffee shops but also from fast food giant McDonald’s, which introduced McCafe in select stores to offer espresso and cappuccinos (Wikinvest. com). While McDonald’s may pose a greater threat to Starbucks in terms of selling regular cups of coffee for a lower price ($1-4 compared to Starbucks’ $7 per cup), it does not serve specialty coffee like Starbucks. Meanwhile, Dunkin’ Doughnuts, an older company with a loyal customer base since the 1940s, offers significantly lower prices than Starbucks and is another strong competitor.
Starbucks continues to experience a growth in business, surpassing its competitors. Like any other company, Starbucks possesses its own set of strengths and weaknesses. Among its strengths, Starbucks holds dominance in the market, demonstrates consistent expansion, and boasts a strong brand image. Much like McDonalds’ Golden Arches, Starbucks is swiftly becoming a symbol of America. Financially sound, the company continues to expand its presence globally. However, Starbucks also faces weaknesses such as consumer preferences, high pricing for their premium coffee, and stiff competition.
There are varying consumer preferences regarding coffee. Some individuals have expressed dissatisfaction with Starbucks coffee, claiming it is over roasted and lacks flavor. On the other hand, there are those who appreciate its well-roasted taste. Nevertheless, the expensive cost of their premium offerings is causing hesitation among certain consumers. Additionally, Starbucks faces competition from various coffee shops, restaurants, and even within its own chain.
II. Historical Overview of advertising & Public Relations Efforts
During the early stages of the Starbucks company, advertising was minimal and primarily relied on word of mouth. However, when Howard Schultz joined the company in 1981, which already had 11 stores and 100 employees after a decade in operation, he took on the role of marketer and started promoting the brand. As part of his initial efforts, Schultz traveled to Italy to study their coffee marketing strategies. One notable initiative from those early days was Schultz’s concept of opening a café in downtown Seattle.
Before this time, Baldwin and Bowker were solely focused on selling high-quality roasted coffee beans primarily for home use. They had no interest in operating cafés like Starbucks. Schultz was able to develop his concept of the coffee bar in 1987 after acquiring the Starbucks trade name. Instead of a public relations strategy, Schultz’s efforts to shape the brand focused on expansion. He implemented a strategy to select a major city as a central hub, opening up to 20 stores in that city before expanding to surrounding suburban areas (mhhe.com).
Starbucks is dedicated to expanding and establishing its brand. According to Schultz, Starbucks had a limited advertising budget and preferred to build its brand gradually. One notable advertising campaign was a Christmas advertisement in 1991, sent to mail-order customers. The ad featured an illuminated igloo in the morning, surrounded by snow. The caption read “Enjoy to the world, Starbucks for the holiday” while below it, a bag of Starbucks Coffee was shown with dark beans pouring out. This simple yet memorable ad encouraged people to enjoy Starbucks during the holiday season. Over time, Starbucks has expanded its advertising efforts to include various media platforms, including mainstream and social media.
Current advertising and public relations efforts by Starbucks cover a wide range of media categories. According to Belch, a well-developed website should encompass elements such as context, commerce, communication, connection, content, and customization. Starbucks.com is an effective website that provides ample content through pictures and information about its projects.
The Starbucks website features a shopping icon in the top left corner which allows users to access an online store for purchasing Starbucks products. The website is well-organized and user-friendly, with convenient links to social media platforms such as Facebook, Twitter, and Pinterest. Transactions on the website can be completed using PayPal. The layout of the website resembles that of physical stores, and customers can reach out to representatives via email for assistance. Overall, Starbucks.com provides a sense of community and support.
When it comes to advertising, many companies prefer online commercials due to their lower costs. Starbucks utilizes various social media platforms including YouTube, Facebook, Twitter, Pinterest, LinkedIn, MySpace, and Vimeo for advertising purposes (Belch 2012). These social networking sites allow for easy sharing within networks. With over 29 million followers on its Facebook page alone,SStarbucks frequently runs campaigns featuring games and prizes to encourage engagement (Waldman 2012). Additionally,Youtube serves as a promotional platform for Starbucks with ads that accumulate hundreds of thousands of views
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Back in 2008, a YouTube ad promoted voting by offering a free Starbucks coffee. The campaign’s catchphrase “you and Starbucks, it’s bigger than coffee” drew in over 600,000 viewers. Furthermore, the ad gained traction on Facebook and Twitter as well. With an extensive presence on various social media platforms, including LinkedIn with over 1.6 million followers, Starbucks offers diverse content and ample opportunities for communication.
Starbucks utilizes their LinkedIn page to post job opportunities, showcasing their technological savvy and understanding of their customers. They have a strong presence across multiple social media platforms, including Pinterest. On Pinterest, Starbucks promotes their products through visually appealing advertisements in various categories such as coffee, ice cream, and sandwiches. These advertisements aim to connect with customers on a deeper level, beyond just their craving for coffee. By appealing to people’s intellect, interests, and desires, Starbucks achieves great success. In terms of traditional advertising (TV, magazines, print), Starbucks has not invested as heavily as its competitors. However, in 2009, they launched a campaign to inform consumers about their new line of products.
Starbucks uses billboards as part of their marketing campaign to promote new products. The slogan “If it’s still not perfect, you must not be in a Starbucks” is prominently featured on these billboards (Miller p.1 2009). They also use traditional media like newspapers, magazines, and television for advertising. In one magazine ad, they highlight the meticulous process of roasting coffee beans that sets Starbucks apart from competitors. Furthermore, Starbucks sponsored a 60-second commercial on Saturday Night Live to encourage voting and offered a free cup of coffee as an incentive (Miller 2009). This advertisement gained widespread attention and became highly viewed on YouTube. It’s worth noting that Starbucks often gains publicity through charitable giving and corporate social responsibility commitments. Forbes Magazine ranked them as the 10th American company with the highest contributions to charitable causes in 2012.
Starbucks demonstrates its commitment to social responsibility through charitable contributions, initially focusing on funding literacy programs in the US and Canada but now expanding efforts globally. The company’s foundation aims to support coffee-producing communities through education, agricultural and financial training, health and nutrition training, and water sanitation. This involvement reflects Starbucks’ dedication to fulfilling its social responsibility. Additionally, Starbucks extends its social responsibility initiatives to China by supporting education programs and providing access to clean water in underdeveloped countries. In its hometown of Seattle, Washington, Starbucks proudly sponsors various events and entertainment including sports, festivals, fairs, causes, and the arts. According to Belch (2012), event sponsorship serves as an effective integrated marketing communication tool that helps build brand equity. From the beginning, Starbucks has actively supported arts and entertainment endeavors.Starbucks excels in advertising through various methods, including sponsoring events such as “Hot Java Cool Jazz” at the Paramount Theatres in Seattle, Washington, the Little Big Show, the Family 4th firework display, the Fifth of July cleanup, and Bumbershoot. Additionally, Starbucks effectively promotes their products on all digital platforms to maximize their reach and impact.
Webisodes are short featured films created by advertisers (Belch p. 504, 2012). A specific webisode by Starbucks called the VIA road trip webisode review showcases two individuals who were sent on a road trip from Washington to New York. The webisode starts with the participants walking past a Starbucks store, prominently displaying the brand name and logo. Throughout the webisode, various highlights of the trip are showcased, with the participants expressing their reliance on Starbucks for the road trip.
Starbucks utilizes various means, such as webisodes, mobile apps for smartphones, and a collaboration with iTunes, to promote its offerings. Belch asserts that mobile media is experiencing rapid growth in the United States, and Starbucks has harnessed this trend by developing its own mobile app. Through this app, customers can conveniently connect with their accounts, make payments for their coffee using their smartphones (Waldman p. 1 2013), earn reward points, and recharge their accounts.
Every time a customer uses the Starbucks app to buy coffee, they accumulate points that unlock better rewards. The app also allows users to easily find nearby Starbucks stores by tapping on the “stores” icon, which shows up on a Google map. This serves as a great public relations tool for Starbucks, as it helps cultivate long-term loyalty among customers. Another mobile media tool offered by Starbucks is iTunes, where they frequently provide consumers with a card for a free song.
Customers can enter the code on iTunes and download their songs, which serves as a great PR tool for Starbucks to build long-lasting customer relationships (Waldman 2013). Additionally, Starbucks advertises on billboards both domestically and internationally. A notable billboard ad features a cup of Starbucks coffee with the caption “Better coffee faster”. However, this ad may detract from the overall ambiance of Starbucks due to the cultural association of faster with cheaper.
Another billboard, with the caption “the last good cup for miles,” was compared to this one. Starbucks lovers seem to prefer this billboard because of its taste and appeal. Although Starbucks has not focused on mainstream media, they have invested a significant amount of money in other forms of media such as billboard advertisements. “Billboards have continued to innovate through technology” (Belch 2012). Just like technology, Starbucks has evolved alongside these mediums. Starbucks has also partnered with celebrity Lady Gaga. Marketers believe that celebrities have the power to draw attention to advertising messages in a crowded media environment” (Belch 2012, p. 187). The collaboration between Starbucks and Lady Gaga may seem unusual, but it has certainly captured the public’s attention. While Starbucks coffee claims to cater to everyone, it is more targeted towards working professionals, whereas Lady Gaga is appealing to a younger and more outgoing generation known for partying. So, what could be the reason behind Starbucks teaming up with Lady Gaga? Some speculate that it may be related to her new album title “Born This Way”.
Starbucks prides itself on being “Born this way” by carefully choosing only the top 3% of coffee beans for roasting, ensuring that their product is naturally exceptional. One key factor contributing to the effectiveness of Starbucks’ advertising and public relations (PR) efforts is their strategic media planning. With their already established household name and strong brand visibility, Starbucks continues to strategically advertise through sixty-second single-run ads at specific times, such as during elections. Additionally, they employ integrative media strategies to minimize advertising costs while effectively spreading their message.
Starbucks gains publicity primarily through their market dominance and PR initiatives, including providing free coffee on Election Day. With a Starbucks location on nearly every street corner, they essentially promote themselves. Their strategic approach to expansion serves as a strong foundation for their PR endeavors. They initially establish numerous stores in major cities and subsequently expand to surrounding regions. This tactic proves effective as individuals from these surrounding areas often visit the city and become acquainted with Starbucks. Once they experience the taste of Starbucks, they develop a desire to have a nearby store in their own neighborhood.
Starbucks enhances its brand through various PR endeavors, including its continuous backing of the arts and entertainment scene in its hometown of Seattle, Washington. Such support reinforces the image of Starbucks as a philanthropic company. Both its advertisements and PR campaigns contribute to the preservation of an already robust brand. The primary strength of Starbucks lies in its product, which essentially sells itself. On the other hand, traditional advertising and celebrity endorsements represent the weakness in Starbucks’ Ad/PR strategies. While they advertise more in print media like magazines, television promotions are relatively scarce.
Starbucks could increase their sales by advertising more on television, as they are already famous. However, their choice of celebrity endorsement is ineffective as they do not select celebrities that align with their brand. Having Lady Gaga endorse their coffee would be an unwise decision, as she does not exude confidence and credibility. Starbucks’ advertising and public relations efforts also lack product placement and integration in TV shows and movies. By utilizing these channels, Starbucks can enhance their sales and reputation.
Their expensive price for a cup of coffee is a weakness as consumers are trying to save money. Some cost-conscious consumers may choose to go to Starbucks’ competitors for a cheaper cup of coffee. Despite this, Starbucks maintains its success as a specialty coffee company, living up to its vision of delivering high-quality coffee products and excellent customer service.
Starbucks primarily relies on word-of-mouth for their early advertising and PR, which has proven highly effective in selling their brand. Despite minimal advertising efforts, Starbucks remains successful in delivering high-quality coffee products. However, they have adopted premium pricing to stay competitive, especially during challenging economic periods. To retain their loyal customers and attract new ones, Starbucks must seek solutions to lower the cost of their coffee.
