Starbucks is a coffee sensation that is sweeping the world by storm. It all began in 1971 when the first store was opened in Seattle Washington. Starbucks started out as a single coffee shop that sells high quality premium coffee beans. In the 1980’s they expanded their locations but remained in the state of Washington. Starbucks has now expanded its locations all across the US and Canada and many other countries around the world. Starbucks has managed to become the number one coffee selling company in the world without utilizing a huge advertising budget.
Starbucks advertising and public relations campaigns consist mainly of news media and social media efforts to get their brand in the spot light. Starbucks rise to fame began slowly and by word of mouth. They generally try to avoid traditional media but have in recent years begun to promote their product due to competition and a minor decline in sales in some stores. Starbucks is a household name today but it did not begin that way.
Starbucks rise to fame came about because of Gordon Bowker and Jerry Baldwin’s love of Peets Coffee.
It all began in 1971 when Baldwin, discovered Peets coffee in Berkley while attending school in California. Baldwin introduced his roommate Bowker to Peets coffee. The two men then partnered with a friend named Zee Siegel to start up a coffee store in Seattle Washington. The company grew but very slowly because advertising mainly consists of word of mouth. In 1981, ten years later, Starbucks had only grown to four stores and one roasting plant in Seattle. It was about this time that the present Chairman, Howard Schultz began to take note of the company.
Schultz met with Baldwin and Bowker and immediately fell in love with Starbucks Coffee. Schultz became the marketing manager for the company in 1982 and went to Italy on a business trip in 1983 to research news to market Starbucks products. This business trip gave Schultz new idea of creating a coffee shop that serves espresso coffee by the cup. After many years of planning and development Schultz idea was put to the test at Starbuck’s newest store where Schultz opened up a coffee bar. Schultz’s idea was highly successful. The concept was a hit and within 2 months that store was serving 800 customers a day, three time as many at their bestselling whole bean locations” (Tuck, p. 2, 2002). Schultz wanted to continue the trend of success but Baldwin was more inclined to selling top quality whole bean coffee. With the blessing of Starbucks Schultz joined forces with Dave Olsen and launch the Il Giornale venture which was very successful. Baldwin and Bowker bought Peets coffee in 1983 and by 1987 they decided to sell Starbucks in order to focus their attention on roasting the best coffee bean rather than running a coffee shop.
Schultz managed to pull together a group of investors and buy Starbucks for 3. 7 million dollars. Schultz then converts his three Il Giornale stores to Starbucks because Starbucks was a well-recognized brand compared to Il Giornale. In 1989 Schultz acquired experienced management personnel to help build the company. In 1991 Starbucks began doing mail orders, airports and other retail stores. By 1992 Schultz took the company public by trading in the New York stock Exchange (NYSE) under symbol (SBUX). After this Starbucks took off like a wildfire and began opening stores all over the USA, Canada, Japan and other countries.
By 2002 Starbucks grossed a whopping 3. 5 billion in annual revenue with over 5800 locations in many different countries. Starbucks continues to expand until Starbucks now has more than 18000 locations around the world. Starbucks provide a huge line up of products such as hot and cold drinks food. Starbucks also sells products in supermarkets such as bottled drinks, ice cream and roasted coffee beans. These bottled drinks include many varieties of the Starbucks Double shot, such as Energy Vanilla, Mocha, Strawberry Lemonade, Frappuccino etc.
The lineup of Starbucks drinks includes brewed coffee, chocolate beverages, espresso beverages, Frappuccino, smoothies, and Tazo teas. Within each group of products are different flavors of sub products. Starbucks has partnered with Dwyer Ice cream to create Starbuck branded coffee ice cream in stores. In trying to keep up with the competition began to sell food items to go along with their coffee drink line. Starbucks food menu is broken down into groups of items such as bakery items, Starbucks petites and Bistro boxes, hot breakfast, sandwiches and Panini wraps, ice cream and fruit and yogurt.
Starbucks focus on providing healthy choices rather than fast food style selections. Their food menus are prepared from top quality ingredients just like the coffee they serve. Starbucks annual earnings from the 2012 shows an eleven percent increase despite the bad economy (Sanburn, 2012). There fourth quarter revenue was reported at 3. 4 billion dollars. Starbucks shares one the stock market has also increasing and they are expanding and building new stores. The table below represents a five year look at Starbucks Net Income observed on marketwatch. com. 2013 Year | 2008| 2009| 2010| 2011| 2012|
Net Income | 315. 5M| 390. 8| 945. 6M| 1. 25B| 1. 38B| According to the table Starbucks income has steadily increase over the past five years and if the trend continues it is expected to increase more in the next year as new stores are open and new markets are tapped. According to Wikinvest. com 2013, Starbuck is aiming to increase its US location to 20000 and it global locations to 40000. This could increase the upward revenue trend for Starbucks. Starbucks top 3 competitors are other coffee shops that sells specialty coffee, doughnut shops that sells coffee and restaurants.
Starbucks is the leading specialty coffee supplier in the coffee industry; it is followed by Caribou Coffee who is hardly a competition for them because Caribou Coffee has only 414 stores in the USA compared to Starbucks 11,500 stores (Wikinvest. com, 2013). Starbucks also receives competition from independently own coffee shops, and other fast food restaurant such as McDonalds. “McDonalds introduced the McCafe to select stores, where customers can purchase espresso and cappuccinos” (Wikinvest. com). In the area of serving up cups of coffee McDonalds may be roviding more competition for Starbucks because they are selling their coffee for less than Starbucks. McDonalds cup of coffee are sold for $1-4 compared to Starbucks $7 per cup of coffee. However, McDonalds is not serving specialty coffee so their price is naturally lower. Dunkin Doughnuts is another competitor for Starbucks. Dunkin Doughnuts has been around since the 1940’s so is a much older company than Starbucks and has a loyal customer base. Their prices are also significantly lower than that of Starbucks so they make great competition for Starbucks.
Business for Starbucks continues remained increase among its many competitors. As with any company or firm Starbucks hast its own strengths and weaknesses. Some of Starbucks strengths are, market dominance, expansions, and strong brand image. Starbucks is rapidly becoming an icon of America like the Golden Arches of McDonalds. The company is financially strong and continues to expand throughout America and the world. Some of Starbucks weaknesses are consumer preferences, premium high price for a cup of coffee, and competition.
Some consumers prefer different kinds of coffee. Some consumers complained that Starbucks coffee is over roasted and therefore has lost its flavor. Other consumers love the taste of the well roasted coffee, but the high price for the premium products is turning some consumers away. Competition is another weakness for Starbucks. As noted before some competitions are coming from other coffee shops, restaurants and there are cases where Starbucks shops compete against each other. II. Historical Overview of advertising & Public Relations Efforts
In the early days of Starbucks company there was little to no advertising. Advertising was mostly word of mouth. When Howard Schultz joined Starbucks in 1981, they had been in business for over 10 years with 11 stores and 100 employees (Loy, 2002). Schultz became the marketer for Starbucks and began to promote the brand. One of Schultz first Public Relations effort was to travel to Italy to learn about how they market their coffee products. Some efforts that have defined the brand back in the early days were Schultz idea to open a café in downtown Seattle (Lyod, 2002).
Prior to this time Baldwin and Bowker were only focused on selling a quality roasted coffee beans to consumers primarily for home use. They had no desire to run café’s the likes of what we know today as Starbucks. Schultz was left expand his idea of the coffee bar in 1987 after acquiring Starbucks trade name. Schultz effort that defined the brand was his expansion strategy rather than a PR strategy. Schultz expansion strategy was to select a large city to serve as its hub, Schultz would then open up, as many as 20 stores in the city then he would move to the suburban areas (mhhe. com).
Starbucks continue on this path to expand and build a name for it. Starbucks advertising budget was very meager according to Schultz they prefer to build their brand “cup by cup”. (mhhe. com 2012) One of Starbucks memorable ad tactic was its 1991 Christmas advertisement to its mailed order customers. This one page ad features an igloo that is illuminated by light on the inside it appears to be early morning with snow covered ground. The caption read “Enjoy to the world. Starbucks for the holiday” and the below caption was a fresh bag of Starbucks Coffee opened with dark little beans coming out of it. Melody, 2011) This ad is memorable and simple. Just enjoy Starbucks for the holidays. Starbucks has since expanded their advertising tactics into many other avenues such as the mainstream media and heavily into social media. III. Current advertising & Public Relations by media Category Website According to Belch the factors that lead to a well-developed website are; context, commerce, communication, connection, content, and customization (P. 496, 2012). Starbucks. com is an effective website because it offers a great deal of content in the form of pictures and information of its project.
Commerce is also a big part of the Starbucks website because there is a shopping icon at the top left hand corner of their web page. Once the user clicks on it then a whole new online store of Starbucks products opens up. Starbucks website communicates well because there information is organized and easy to find. There is connectivity to various other websites such as Facebook, Twitter, and Pinterest. After a purchase is made customers can then connect to PayPal to complete their transaction. In terms of context the layout and design of the website appears similar to the design of the hysical stores. Stsarbucks. com also enables user to user communication by allowing customers to email representative. Overall Starbucks. com is an excellent website that provides community and support and much more for its customers. Online Press/Media room Almost every company is looking for a less expensive way to advertise so many are turning to online commercial. Some companies have even used both online and traditional media to ensure their target market is covered. According to Belch, “online commercials are appearing more and more on the net,” (Belch, 2012 p. 04) this is because online commercial are cheaper way to get the word out. Starbucks is using every online tool possible to advertise their products (Waldman 2012). Starbucks ads can be viewed on YouTube, Facebook, Twitter, Pinterest linked in MySpace and Vimeo. Social Media According to Belch, “Social networking sites allow users to share ideas, activities events and interest within their individual networks,” (p. 504, 2012). Starbucks has its own Facebook page with over 29 million followers. On their Facebook page they frequently run campaigns which include games and prizes. This campaign not only allows consumers to interact with Starbucks brand, but also offer a clearer incentive that shows Starbucks understands its customers. ” (Waldman p. 1 2012) `On Twitter Starbucks is racking up their amount of followers too, currently there are over 2 million followers for them on Twitter. Starbucks uses Twitter to connect with its customers not just for games and prizes but also to maintain great customer service. Another social media that Starbucks utilizes to advertise its product is YouTube. Starbucks has many ads posted on YouTube and these ads are viewed hundreds and thousands of times.
One notable ad in 2008 that was posted on YouTube encouraged people to go out and vote they would receive a free cup of Starbucks coffee. The slogan for the campaign was “you and Starbucks, it’s bigger than coffee” this ad gained more than 600000 viewers and was share on Facebook and tweet about on Twitter. Starbucks is making waves in every social media network they also have their own LinkedIn page which accumulated over 1. 6 million followers. (LinkedIn. com, Starbucks, 2013) Starbucks linked in page is a full serviced website in terms of content, context, and communication.
Starbucks post job opportunities on their LinkedIn page. This goes to show that Starbucks is technologically savvy and know their customers well. Starbucks is present in every sphere of social media. Pinterest is another website that Starbucks has harnessed as one of their publicity tools. Starbucks has advertisement in picture form in various categories posted on Pinterest. com. They feature each product separately from coffee to ice cream and sandwiches. One advertisement on Pinterest for their sandwiches read “think inside the box” another reads “keep calm and love Starbucks. Starbucks is appealing to more than consumer appetite for coffee. Starbucks is trying to connect with their customers in much more meaningful way. They appeal to people’s intellect to people interest and desires. This is one of the reasons why Starbucks is so highly successful. Traditional Advertising (TV, Magazine and Print) In traditional advertising Starbucks has not spent as much as its competitor. According to Claire Miller, a journalist for the NY Times, Starbucks created a campaign in 2009 to tell consumers about their new line of products (P. 1, 2009).
In this campaign Starbucks employs the use of billboards to help spread the word about their new products. The slogan was, “If it’s still not perfect, you must not be in a Starbucks. ” (Miller p. 1 2009) In this campaign Starbucks Uses the traditional media such as Newspaper and magazine and television. Starbucks magazine ad featured a full page ad that focus on how Starbucks roast its coffee. Starbucks wanted consumers to know what set their coffee apart from other coffee competition. Starbucks did not stop there with their advertising efforts, they went on to television, by sponsoring a single 60 second commercial on Saturday Night Live. Miller 2009) This was a huge step for Starbucks who generally seem to avoid mainstream advertising. The 60 second ad was to encourage people to go out and vote and Starbucks would give people a free cup of coffee. This ad was highly successful because people continue to tweet about it, and it became one of the most viewed ads on YouTube. Charitable giving/Corporate Social Responsibility Starbucks seem to garner most of its publicity from charitable giving and their social responsibility. Starbucks was ranked 10th among American companies that give back the most in 2012 by Forbes Magazine.
Starbucks charitable contribution was a whopping 30. 5 million. Starbucks created its own charitable foundation which supports its social responsibility as a company. The foundation was started in 1997 to fund literacy programs in the US and Canada but has since expanded to other countries. (Starbucks. com, 2013). One of Starbucks foundations major goal is to live up to their social responsibility by helping the communities that produce their coffee. In this project they provide education, agricultural training, financial training, health and nutrition training, and water sanitation (Starbucks. om) “Many corporations enhance their public image through involvement in the local community” (Belch p. 581. 2012). Starbucks gets involve with the community they serve and the community that serves them. Starbucks continues to be socially responsible by fostering education programs in China providing access to clean water to under developed countries. Event, Entertainment, & Sports Sponsorship Starbucks is a proud supporter of event, and entertainment in their home town of Seattle Washington. Event sponsorship includes, sports, entertainment, festival, fairs, events causes and the arts. (Belch, p. 92. 2012). According to Belch sponsoring events can be an effective IMC tool and a platform to build equity (Belch p. 592. 2012). Starbucks has been supporting arts and entertainment since their inception, one way they are doing this is sponsoring events such as “ Hot Java Cool Jazz: in paramount theatres, Seattle Washington, Little Big Show, Family 4th (firework display ) Fifth of July cleanup and Bumbershoot (music and arts festival in Seattle). Digital Media Starbucks strong point of advertising is digital media. Starbucks is using every digital media available to promote their products.
One such digital media is Webisode. “Webisodes are short featured films created by the advertisers”(Belch p. 504. 2012). One of their webisode is about Starbucks VIA road trip webisode review, in which Starbucks sent two people on a road trip all the way from Washington to New York. At the start of the webisode, the two people walked past a Starbucks store clearly introducing the Starbucks brand and logo on the front of the store. The Webisode went on the show different highlights of the trip and each time the participants would say they could not have made the road trip without Starbucks.
This webisode is only one of many that Starbucks uses to promote its products. Mobile Media Starbucks mobile media includes mobile apps for smartphones and a partnership with iTunes. According to Belch Mobile media is the fastest growing medium in the United States: (Belch 2012) and their apps are endless. Starbucks has tapped into this medium by creating its own mobile app which allows consumers connect with their account and pay for their coffee from their smartphones (Waldman p. 1 2013). This app also helps consumers to earn reward points and recharge their account.
Every time someone uses the Starbucks app to purchase their coffee they earn a point and the more point they earn the better the rewards are. This app also helps uses to easily locate Starbucks stores by touching the icon “stores” and every store close to the users geographical location pops up on a Google map. This is an excellent PR tool for Starbucks which will help to build loyal customers for life. Another mobile media tool form Starbucks is iTunes. Starbucks often provides consumers with a card for free song from iTunes.
Customers then enter the code on iTunes and download their songs (Waldman 2013). This integration of mobile media is yet another great PR tool for Starbucks to help build customers for life. Out of Home Advertising As noted earlier, Starbucks advertises on billboards across the United States and around the world. One famous billboard ad is simply a cup of Starbucks coffee with a caption that read “Better coffee faster”. This ad may take away from the ambiance of Starbucks because we live in a culture where faster means cheaper.
Another billboard as was compared with this caption read “the last good cup for miles” Starbucks lovers seem to love this billboard better because it has taste and appeal. While Starbucks has shied away from mainstream media they have spent considerable amounts of money on other form of media such as billboard ads. “Billboards continue to remain innovative through technology. (Belch 2012) As these media continue to evolve with technology, so does Starbucks. Celebrity endorsement Starbucks has partnered with Celebrity Lady Gaga. Marketers think that celebrities have stopping power because they draw attention to advertising message in a cluttered media environment” (Belch 2012 p. 187). The marrying of Starbucks and Lady Gaga seem odd but it nevertheless it got the attention of the public. Starbucks coffee, although claim to appeal to everyone, is more geared toward the working professional while Lady Gaga is more appealing to a different generation, younger more outgoing and the partying type. So what could cause Starbucks to team up with Lady Gaga? Some say it’s the new album title “Born this way”.
Starbucks like to think of themselves as “Born this way” because they select only the top 3% of the best coffee grains for roasting so their product can claim to have been born naturally good. IV. Assessment of Effectiveness of Ad/PR Starbucks strength of their ad/PR efforts is their strategic media planning. Starbucks is already a household name and their brand is highly visible and strong. They continue to advertise strategically with sixty second single run ads at particular times of the year such as election times. They use integrative media to cut back advertising cost while getting the word out.
Starbucks publicity comes mostly from Market dominance & PR efforts such as free coffee on Election Day. There is a Starbucks on almost every corner so they are practically advertising themselves. Their strategic method of expansion is a source of strength in their PR efforts. They locate a major city often up many stores and then branch out to surround regions. This is effective because many people come to the city from these surrounding areas and are introduced to Starbucks. After having a taste of Starbucks they want to have one in their neighborhood as well.
Other PR efforts that offers strength to Starbucks brand is their ongoing support of the arts and entertainment in their hometown of Seattle Washington. Their ongoing support of events, give Starbucks the appearance of a philanthropic company. Starbucks ad and PR efforts help to maintain an already strong brand. Starbucks greatest strength is its product it practically sells itself. The weakness of the Ad/PR efforts of Starbucks is their utilization of traditional advertising and celebrity endorsements. Starbucks advertises more in print such as magazine but seem to mostly avoid television.
Starbucks although famous could boost sale by advertising more on television. Their choice of celebrity endorsement is also poor because they do not seem to choose celebrities that endorse their brand. Lady Gaga should endorse anything but Coffee. This kind of celebrity can be a risky venture for Starbucks because this type of Celebrity is not speaking of confidence and credibility. Another area of weakness for Starbucks Ads/PR efforts is product placement and integration in TV and movies etc. Starbucks can garner more sales and recognition if they begin to utilize these channels.
Their high price for a cup of coffee is another source of weakness because consumers are facing hard times and are looking for ways to cut back spending and save money. Some of these cost conscious consumer may opt to go to one of Starbucks competitors to get a less expensive cup of coffee. Conclusion Overall Starbucks is highly successful specialty coffee company. From their humble beginnings in Seattle, Washington to a worldwide fame Starbucks live up to its vision of providing its customers with top quality coffee products and world class customer service.
Their early advertisement and PR efforts consist mostly of word of mouth and today with very little advertising efforts the brand is practically selling itself. Starbucks continues to deliver premium coffee products but their prices have also become premium prices in order to stay ahead of their competition and keep up with tough economic times Starbucks needs to find a way to reduce the price of their coffee in order to keep their loyal customers and appeal to new ones.
Cite this Starbucks Casestudy
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