Starbucks: Segmentation, Targeting, and Positioning

Starbucks is a renowned American based company that specializes in making and selling the coffee drinks. Just like any other company around the world, Starbucks utilizes the modern marketing approach of segmentation, targeting, and positioning (STP) strategy. The use of STP strategy enables Starbucks to create products that resonate well with the specific needs and desires of their customers in the market. Some of the major types of segmentation under Starbucks include demographic, behavioral, and psychographic one. In addition, the company has capitalized on the usage of advertising as a promotional strategy of its products. The advertising techniques that Starbuck exploits include television commercials and the utilization of different social media platforms. Starbucks pricing strategy is predominated by the premium pricing approach that targets clients that are willing to pay more for their products. Thus, by using this pricing strategy, Starbucks attains significant profit maximization over its major competitors. The combination of these strategies has enabled the company to enter and grow in major markets in the world. What is more, Starbucks has managed to attain a leadership position in the sale of coffee because of its impressive utilization and manipulation of segmentation, pricing, distribution, and promotional strategies.

Starbucks has used region criterion to map out some of the major geographical segments around the world. In addition, the company has managed to penetrate markets in the leading regions of the world including the United States, Canada, the larger Latin America, the Middle East, the Asian region and Africa as well. In the United States, Statista demonstrates how Starbucks has succeded to attain a dominant market share of up to 39,8%, becoming the biggest and the leading player in the market. Second to Starbucks is Dunkin’s Brands Inc. with a market share of 21,9%, while the rest of the stand at 38,3% of the total. There are 27,339 retail stores distributed around the world. Knoema reveals that the American segmentation has taken up the biggest share with 5,943 stores, making it the greatest geographic segmentation in the world. The dominance of the American region can be explained by the fact that Starbucks is an American-based company that was established in Seattle, Washington State in 1971. After impressive growth and expansion in the US market, it started venturing out into the global market and has continued to demonstrate impressive results in Asian markets, especially in China and South Korea.

In addition to geographic segmentation, Starbucks has also established demographic and behavioral one. As explained by Dudovskiy, in demographic segmentation, Starbucks utilizes the aspects of gender, occupation and age. Firstly, under the age criterion, the company is known to focus on clients between the ages of 22 and 60 years. Secondly, under the occupation criterion, Starbucks targets the students and professionals. The company is compelled to adjust prices for these different groups within the larger demographic segmentation. Thirdly, under behavioral segmentation, Starbucks measures the degree of loyalty and the regularity of use. Based on two above-mentioned criterias, Starbucks has mapped a section of its consumers as hard-core loyal and regular users. Therefore, according to this information, the company has three major segments that include geographic, behavioral, and demographic segmentation. Some of the suggestions that would improve the output from this segmentation include increasing penetration and presence in the current emerging markets, mainly that of China. In this country Starbucks only has about 800 stores. If the number of stores was increased, the company would benefit a lot from all three segmentation, considering the population and economic growth of China.

There are different pricing strategies that companies can use in the marketing of its products. On close examination, it is evident that Starbucks utilizes a premium pricing strategy. According to Greenspan, the company strategically applies the premium pricing strategy that involves selling products at a higher price compared to the expected and the prevailing prices in the market. Therefore, the premium pricing enables the company to take advantage of the behavioral tendencies of people to buy products that have a slightly higher price. Before using the premium pricing strategy, Starbucks takes into consideration the aspects of different segmentation in the market. For instance, the premium pricing strategy is usually effective with professional clients especially those in the middle and high-income categories. These are categories of people that are willing to pay more for any product in the market. Further, because of the strength and the popularity of its brand, Starbucks capitalizes on the use of premium pricing strategy, as the potential consumers feel a sense of prestige associated with products, whose brand image ranks high in the market. The other pricing strategy that Starbuck can use is the penetration pricing one. It works greatlyin the new markets. Penetration pricing is more suitable for such markets, where the products have just been launched. It is usually followed by the return to premium pricing strategy after brand awareness has increased in the market.

The promotional strategy that Starbucks takes advantage of includes the use of television commercials and ads on the internet. As revealed by Pratap, the company has invested up to $350 million in advertising and marketing, which mostly involved the use of television commercials. In addition to that, Starbucks also utilizes print media and other digital platforms such as publication of ads across different sites on the internet. Another promotional strategy that the company applies includes the use of different social media platforms. One of the above-mentioned social mediais YouTube. Specifically, there are over 500 videos promoting Starbucks products and especially coffee. Interestingly, the company launched an animated series aimed at promoting Starbucks’ goods. In Tweeter, the brand actively engages with its clients. Therefore, it has managed to make over 87,000 Tweets, which have attracted up to 11,8 million followers. Although Starbucks has already been utilizing social media platforms, I believe that the potential of this strategy has not yet been exploited fully. Some of the platforms such as Facebook and Instagram have not been utilized well, while they also hold enormous potential for promoting Starbucks products and especially coffee.

The company has succeeded to join the larger global beverage market and seize a significant share of it. The regions where Starbucks has managed to gain market shares include the Americas, the Asian region, Europe, the Middle East, and Africa. As such, it is clear that the company has shown impressive progress in geographic spread and penetration into the major markets around the world. Nonetheless, the North and South America stand as the biggest strategic regions for Starbucks. The company utilizes direct distribution strategy, which allows it to sell its products directly to the customers. Specifically, Starbucks has managed to open several stores that are evenly distributed across these regions. The Americas take the leading position with the highest number of stores that are strategically spread among major urban centers. What is more, to improve the efficiency of distribution and selling of its products, Starbucks has launched a mobile application that customers can use to order coffee for delivery. Further, by using the application, consumers can choose different ways they want their products made. For instance, coffee can be served in different variation depending on the preferred taste. Meanwhile, statistics show that Starbucks has successfully entered the Asian market. The company should focus its efforts on increasing the number of stores in the region, especially in the larger Chinese market. The distribution strategy that Starbucks can use as an alternative includes the use of merchandising program. Under this approach, the company allows individuals to sell their products under their trademarks, business logo and recipe. The merchandising has been identified as the one standing behind McDonald's success and growth around the world. As a result, the strategy is effective as it reduces the cost of opening and operating an outlet for selling Starbucks’ products.

Starbucks main competitors in the market of coffee drinks include Costa Coffee as the biggest one. It is followed by McDonalds McCafe, with Dunkin Donuts at the fourth place. There are different strategies that Starbucks can utilize to gain and increase its competitive advantage in the market. For example, one of the approaches includes using another pricing strategy apart from the premium one. Starbucks predominantly uses the premium pricing strategy in the sale of its products, which makes its coffee more expensive compared to its competitors products. Consequently, there is a need for Starbucks to consider using other pricing strategies, such as skimming and economy pricing methods. According to Maguire, skimming pricing strategy means that the company charges a relatively high price for a product and waits until the competitors lower their prices. While using the economy pricing strategy, the company tends to lower its other costs, such investments in advertising, thus decresing the costs of production. Therefore, one of the ways, through which Starbucks can gain a competitive advantage over its competitors, is by considering to usage of other pricing strategies instead of relying only on the premium pricing one.

The application of data analysis is becoming increasingly important for the companies in a business environment. One of the areas where Starbucks can use data analytics is the improvement of its marketing strategies. Chrisos explains that data driven marketing assists companies in perfecting their marketing strategies by enabling them to reveal the moves that resonate well with customers. In addition, those actions usually havea higher return on investment. As a result, by effectively using data analytics, Starbucks will save money, whichwould have been wasted on ineffective marketing strategies otherwise, and focus on those efforts that may show better results. Further, data analytics is known to support in gaining a clear understanding of the needs and expectations of clients. Thus, the collected information provides evidences that through data analytics companies manage to profile the consumption and preference trends of different customers. Such an understanding enables companies to be specific in their advertising strategies targeted at different segments. Moreover, getting a profile for every client is important in understanding the specific tastes and preference of a customer. The portrait of every potential customer is created using one’s activities in different Internet sites. Therefore, information that is acquired through data analytics is crucial as it helps in the improvement of marketing strategies.

In conclusion, it is clear that Starbucks employs a wide range of strategies, which have enabled it to attain and maintain a leadership position in the global market, especially in the production and distribution of coffee drinks. Starbucks strategically applies the segmentation and positioning marketing approach. The three major segmentation sthat Starbucks uses include geographic, demographic, and behavioral ones. The application of segmentation enables Starbucks to specifically focus on meeting the unique needs and expectations of potential clients. The promotional strategy that the company has used includes the taking advantage of television commercials and social media platforms, mainly Twitter and YouTube. It is evident that the use of a premium pricing strategy has also enabled Starbucks to increase its revenue generation in the market. However, to maintain and increase its competitive advantage, the company should consider applying data analytics and improving its marketing strategies.

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