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STARBUCKS AND ITS MARKETING STRATEGIES 1

Starbucks and Its Marketing Strategies

by

Shengxin Sun

Journalism 7200
University of Missouri - Columbia
STARBUCKS AND ITS MARKETING STRATEGIES 2

Abstract

Starbucks got its beginnings in 1971 with a single caf in Seattles Pike Place

Markets and offered only roasted whole coffee beans. In 1982, it changed directions and

recruited Howard Schultz to lead the marketing and retail efforts. Today, it is one of the

most respected and well-known brands in the world. It makes its presence known with

over 22,000 stores in 67 countries and territories. Its success can be largely contributed to

its effective implementation of various unconventional marketing strategies. This paper

aims to identify and discuss some of the corporations key marketing tools.

Keywords: Starbucks, marketing strategies, word-of-mouth marketing, in-store

promotions, product placement, social media, wireless marketing


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Introduction

The story of Starbucks began in the spring of 1971, when three college friends

decided to open up a caf that offered premium quality roasted whole coffee beans to the

public. In 1987, Howard Schultz, a former employee of Starbucks, officially purchased

the coffeehouse chain. He had a vision to highlight ones coffee experience by modeling

his coffeehouses after coffee bars in Italy (Starbucks official website). He saw Starbucks

as a company that not only promoted the celebration of coffee and the traditions attached,

but also focused on establishing human connections through coffee drinking.

Starbucks has asserted itself into American culture as well as majority of other

cultures in the world faster than any retail company in history. It is one of the most

respected brands on earth. According to its website (2015), Starbucks currently has more

than 22,000 stores in 67 countries and territories. It plans to expand its business even

further within the next five years. The companys success is largely attributed to its

appropriate and effective marketing strategies. This paper intends to identify and examine

the dominant marketing strategies of Starbucks such as word-of-mouth marketing, in-

store promotion, product placement, social media marketing, and wireless/mobile

marketing.

Word-of-Mouth Marketing

Unlike the companys competitors such as McDonalds and Dunkin Donuts,

Starbucks hardly uses traditional media outlets when it comes to marketing its products

and services. Other quick-service coffee and food chains make substantial annual

investments in television, print, radio and roadside billboards. The cornerstone of

Starbucks marketing strategy is through the use of word-of-mouth, particularly when it


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launches new stores. The brands positioning is based on affordable luxury with an aim

of providing an atmosphere of a third place (Cobb, 2008). Third place is neither work

nor home, but a place where one can go to study, relax, or visit with friends over a cup of

coffee or tea for a period of time. Every Starbucks retailer is staffed with well-trained

baristas who are not only friendly but also enthusiastic about the products; the lighting is

warm and inviting; furnishings are centered on comfort; and no one can resist the aroma

in the air. As a result, customers are inclined to share their experience with family,

friends, and colleagues. The buzz about Starbucks quickly spread and its popularity grew

as people began to frequent the different locations. Between 1987 and 1992, Starbucks

opened 150 new stores, twenty percent more than the companys original prediction.

Another illustration of Starbucks word-of-mouth marketing lies in its usage of

Twitter (details of social media marketing will be discussed in a separate section). One of

Starbuckss several accounts on Twitter is handled by a former barista named Brad

Nelson. His responsibility is to act as a barista on the Internet to engage with core

customers and initiate and actively participate in conversations with disgruntled

customers to uncover reasons for their dissatisfaction with the brand. Starbucks relies on

Nelson to translate the Starbucks experience for the online community (York, 2010, p.

34). This type of interaction suggests that Starbucks is genuinely concerned with and

interested in its customers. The Starbucks brand is further promoted as Twitter users

tweet and retweet about their Starbucks experiences.

Product Placement

Product placement, or embedded marketing, is an advertising technique used by

companies to subtly promote their products through the significant placement of brands
STARBUCKS AND ITS MARKETING STRATEGIES 5

within films or television programs (OGuinn, Allen, Semenik, & Close, 2015, p. 74).

By employing this method, companies are hoping that customers will subconsciously

take note of their products and thereby establish stronger brand equity. There has been

research showing that product placement is most influential with low-involvement goods

and services that require little or no decision-making time from consumers (OGuinn et

al., 2015).

Starbucks has consistently partaken in product placement advertising over the

years by its association with major Hollywood films and popular television shows. For

instance, the contestants and the judges of the hit reality show The Voice were seen

holding Starbucks cups with the signature green siren logo whenever they appeared on

camera; Anne Hathaways character was forever running to Starbucks fetching coffee for

her coworkers and her boss in The Devil Wears Prada (20th Century Fox, 2006); and the

main characters from the classic romantic comedy Youve Got Mail (Warner Brothers,

1998) were both habitual Starbucks coffee drinkers. Joe Fox in the movie said: the

whole purpose of places like Starbucks is for people with no decision-making ability

whatsoever to make six decisions just to buy one cup of coffee. Short, tall, light, dark,

caf, decaf, low-fat, non-fat, etc. So people who don't know what the hell they're doing or

who on earth they are can, for only $2.95, get not just a cup of coffee but an absolutely

defining sense of self: Tall. Decaf. Cappuccino. Starbucks practice of product

placement is not limited to the market in the U.S. The entertainment industry has and will

continue to help the Starbucks brand claim its role in popular culture.

In-Store Promotions
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Starbucks has always maintained that the customers are the priority. To better

serve the customers, the company has focused on training and retraining employees.

Inside a Starbucks store, the employees are the best advocators from the companys

perspective. Each employee goes through an extensive training process paired with

ongoing evaluations and is encouraged to create a special relationship with each customer

(Talpau & Boscor, 2011). As the two-way relationship develops, customers gain trust in

their baristas and pushing a product becomes easier.

Another form of in-store promotions is the displays of Starbucks accessories

indoors. Customers can easily browse through the items for sale as they stand in line

waiting to be served. To them, Starbucks represents a desired lifestyle as well as a

positive social image. Combining wide array of the accessories and its social status, the

in-store displays serve as a silent yet effective promotional apparatus.

Starbucks offers free Wi-Fi in all of its locations. It is hoped that customers will

desire to spend more time at a Starbucks store through the free access to the Internet as

well as enjoy other perks of the Starbucks Digital Network. Starbucks partnered with

Yahoo to create the Starbucks Digital Network, a free news and entertainment web portal

to various premium publications such as The Wall Street Journal and The New York

Times; it also offers in-store customers exclusive iTunes downloads (Marketine, 2015).

To further improve the in-store experience, Starbucks worked with Google to provide the

next generation Google Wi-Fi to its customers. In the summer of 2014, Starbucks saw an

18 times increase in download speeds and a six times increase in uploads speeds

(Marketline, 2015).

Marketing via Social Media Platforms


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In todays digital age, the way in which people exchange information has been

fundamentally transformed. Chua and Banerjee (2013) referred to social media as a

collection of online services that supports social interactions among users and allows

them to co-create, find, share, and evaluate the online information repository (p. 239).

Many companies and organizations have shifted their advertising focus from traditional

media channels towards various social media platforms such as Facebook, Twitter,

Instagram, Pinterest, Tumblr and etc. Starbucks has been successfully executing its

marketing plan via social media.

Starbucks Facebook page currently has well over 36 million likes. The company

posts to the page to spread knowledge about its products and services and disseminate its

organizational culture. After the company promoted its Frappuccino Happy Hour event

through Facebook, it reported its stores selling one Frappuccino every fifteen seconds on

average (Warren, 2011). On free pastry day in 2009, consumers were informed that

they could download a voucher for free pastry from the Starbucks Facebook page. Chris

Bruzzo, Vice President of content and online, said he was amazed at the number of

people standing in line holding coupons they had printed out; he considered the outcome

as a representation of Starbucks volume of faithful followers (York, 2010). The

Facebook page also surveys customers to help the company better understand customers

preferences. Furthermore, Starbucks monitors user comments on its Facebook page to

garner knowledge about public opinions and feedback regarding the brand.

Starbucks utilizes tweets to promote its latest products, campaigns and events to

more than ten million of its followers on Twitter. It uses Twitter as an apparatus that

helps the brand acquire relevant information from its external public related to customer
STARBUCKS AND ITS MARKETING STRATEGIES 8

expectations, likes and dislikes about the company via tweets (Chua & Banerjee, 2013).

Starbucks is also extremely prompt in responding to tweets or retweets. A personal

example is my visit to the local Starbucks drive-thru about six weeks ago. I waited in

line for approximately fifteen minutes. When it was finally my turn to pull up to the pick-

up window, I was told that the store was out of soymilk for my order. It was suggested to

me to replace the soymilk with coconut milk. I left latte-less and dissatisfied. I then wrote

a tweet to Starbucks to express annoyance to the subpar experience that I just

encountered. Within minutes, I received a response from the Starbucks team apologizing

for what had transpired and provided me a link to talk to a team member to further

discuss ways that they could improve. The companys reaction to my tweet made me feel

valued as a customer. Twitter is also effective in helping the company to quickly put

rumors to rest and manage any misunderstandings among consumers. Ultimately, Twitter

helps to promote the Starbucks brand in a positive manner by engaging in instant two-

way communication with its customers.

Starbucks Instagram account has over 6.6 million followers still climbing.

According to Nitrogram, an analytics firm that provides statistics on how brands compare

on social apps, Starbucks ranked number two among 150 brands in terms of followers

and posts (OConner, 2014). The company understands the fundamentals behind

Instagram and the artsy aesthetic favored by the users. It succeeds at finding and re-

sharing photos posted by the fans, thus earning the company goodwill (OConner, 2014).

The photos align with the image created for the brand. The pictures function not only as

advertisements for the companys products, but also as a representation of the lifestyle

associated with Starbucks products and services. Additionally, the company also gives
STARBUCKS AND ITS MARKETING STRATEGIES 9

the followers a behind-the-scenes look at what it does, ranging from the harvest of coffee

beans in Panama to the grinding of coffee beans at 6 a.m. in a local Starbucks store. In so

doing Starbucks is able to enhance consumers satisfaction and better connect with them.

In July 2008, CEO Schulz launched MyStarbucksIdea.com as part of a

multifaceted marketing plan. The website served as a crowdsource platform where

consumers could voice frustrations, ask questions, post suggestions, and propose new

ideas. User ideas were categorized into product ideas, experience ideas, and involvement

ideas. Within the first two months of the launch, more than 41,000 ideas were contributed

by the public (York, 2010). Visitors were able to see the number of ideas that had been

submitted, considered, and implemented. The website promoted the concept of design

with customers (Sigala, 2012). Consumer ideas were revealed and evaluated publicly by

other customers; corporate executives would then review the most popular ideas. Ideas

that had been implemented in the past included the introduction of the Starbucks Card

eGifts system and the coconut-flavored blended beverages (Chua & Banerjee, 2013).

MyStarbucksIdea.com gives the consumers the impression that the brand cares greatly

about the customers and their idea contributions, thereby fostering brand loyalty. The site

was at once a crowdsourcing tool, a market research mechanism, an online community,

and an operational marketing apparatus.

Wireless/Mobile Marketing

The introduction of smart phones has further emphasized the role of technology in

peoples lives. Starbucks introduced its app for iPhones in 2011. The mobile application

allows customers to access their Starbucks card features, use the mobile payment

capability, and track their rewards (Marketline, 2015). The app also allows users to send
STARBUCKS AND ITS MARKETING STRATEGIES 10

mobile-to-mobile gifts. The company then introduced its app for Android phones,

offering consumers the fastest way to pay as well as manage ones Starbucks card on the

go.

In December 2014, Starbucks launched the Mobile Order and Pay program in

Portland, Oregon. The program lets customers place orders ahead of time and pick them

up at their desired Starbucks locations. Starbucks made the program even more attractive

to consumers by integrating the mobile ordering experience into its mobile app and its

rewards loyalty program (Marketline, 2015). After achieving success in all of the test

markets, the program now operates nationwide. Starbucks use of technology adds new

opportunities for the company to generate revenue, not only promoting itself to an

expanding customer base but also offering both employees and customers a more

convenient way of making transactions.

Conclusion

Since 1971, Starbucks has become one of the largest, most well-known, and most

respected corporations in the world. The companys efforts to stay away from traditional

media channels as a way of advertising were a big part of its success in the early years.

The brands continued presence in popular culture serves as a constant reminder of the

Starbucks intended brand image. In-store promotional efforts are important in making

direct sales as well as establishing special bonds with customers. Social media platforms

encourage engagement from users to better promote products and events, translate the

Starbucks lifestyle to the public, and set up for instant two-way communication between

the brand and its customers. Starbucks innovative use of technology with its mobile

marketing allows the brand to achieve new heights in expanding customer base and
STARBUCKS AND ITS MARKETING STRATEGIES 11

generating revenue. Finally, the Starbucks marketing strategies are best represented in the

words of CEO Howard Schulz, we are in the people business serving coffee, not the

coffee business serving people.


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us/company-information

Ephron, N. (Director). (1998). Youve got mail. United States: Warner Brothers.

Frankel, D. (Director). (2006). The devil wears Prada. United States: Twentieth Century
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Marketline. (2015). Company profile: Starbucks corporation. Business Source Premier.

OConner, C. (2014, February 13). Starbucks and Nike are winning on Instagram (and
your photos are helping). Retrieved from
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winning-instagram-and-your-photos-are-helping/

OGuinn, T. C., Allen, C. T., Semenik, R. J., & Scheinbaum, A. C. (2015). Advertising &
integrated brand promotion. 7th edition. Stamford, CT: Cengage Learning.

Sigala, M. (2012). Social networks and customer involvement in new service


development: The case of www.mystarbucksidea.com. International Journal of
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Talpau, A. & Boscor, D. (2011). Customer-oriented marketing a strategy that


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York, E. B. (2010). Starbucks gets its business brewing again with social media.
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