Changing nature of marketing communications.

STARBUCKS

Group members:
Andi Achmad Fachruddin
Pimploy Bunbooraphong
Niyanuch Channgam
Yun-Hsuan Yang
Do Van Anh

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Submitted to:
Dr Chris Chapleo

MSc Management with Marketing

Bournemouth University
Marketing and Strategy
19 November 2012

Introduction
The purpose of this report is to analyse the IBM case study The end of advertising as we know
it which illustrated the change of advertising communication strategies from 2007-2012 to understand
the issues in ensuring effective brand communication and marketing tools. In order to complete the
marketing and strategy report, all of the particular information resources are based on an actual
company Starbucks, which is an international brand together with IBM case study and other secondary
research.
It shows a summary of the strategic use of marketing communication that IBM considered
would be happening in 2007, a prediction of advertising communication in the five year 2007-2012, an
analysis of Starbucks companys strengths and weaknesses with the application of strategic marketing
communication mix and the reflection of 4 drivers from the IBM case report. Lastly it forecasts the
use and trend of marketing communication in the next five years.

1. Summarise what IBM considered would happen to the strategic use of marketing
communications, particularly advertising, in 2007?
According to IBM global survey about control of advertising budgets, there are four key
market drivers will be shifted to new formats:
-

Attention :
Based on survey from IBM, the younger audiences prefer personal internet utilisation while
respondents above the age of 35 still adopted traditional channels. As audiences shift from
traditional television to internet services, this attention finally will be impacted to advertising,
subscription and transactional fees. Internet advertising will increase more sharply than
traditional one and advertising industries will lose their revenue if they do not follow alteration
of consumers into new devices.

Creativity :
Consumer survey demonstrates the trend of creative input from consumers, semi-professionals,
amateurs, and non-traditional players with lower-cost advertising content. About 26 percent of
U.S. respondents and 20 percent of U.K. respondents rapidly gain participation into social
networking sites. User-generated content (UGC) sites will become a popular destination for
finding and creating online video content. Furthermore, content owner and broadcasters are
collaborating with advertisers to create strategic marketing campaigns.

Measure :
Evolving technologies are driving transformation in measurement and associated advertising
business models. According to prediction and executive panels expectations, all media formats
will be common on individual- and micro- targeting and 20 percent of advertising revenue will
switch from impression-based to impact-based formats within 3 years. These new advertising
experiences will blur the boundaries between local and national advertising.

Advertising inventories :
The future inventory management systems will implicate a bigger number of smaller
purchasers and sellers and will become more open and transparent. Moreover, 30 percent of
advertising revenues will transfer from traditional proprietary sales models to proprietary
incumbents such as broadcasters within the next five years. Market power of the industry will
be open and customers will be able to be served by messaging across multiple channels.

2. To what extent do you think what the reports authors predicted has actually happened in the
five years 2007-2012? (c400 words)
According to IBM report, it is predicted that the four scenarios would happen from 2007 to
2012 are: Continued Evolution, Open Exchange, Consumer Choice and Ad Market Place, where each
scenario describes different hypothesises about the advertising industry and its players in details. In
comparison, until 2012 the advertising world has been changing rapidly, especially the growth of
digital advertising. As Mcstay (2010) believed in advertising platforms that the world of 30-second
commercial has passed and thus the internet would become the main advertising environment in the
future. However, the traditional advertising still appears in 2012 as Jenkins asserted (2006, p.56) that
Books never replaced the spoken word, cinema did not replace theatre and television did not replace
radio. Instead there is coexistence among media. Consumers are still exposed to television though the
usage of ad-skipping tools like DVR, Tivo1 have increased. Moreover, the current trend of traditional
advertising is the television digitalization which shows that television will be used proactively for
commercial services like banking and shopping (Fill, 2009); hence, advertisement is tailored to suit
with consumers preferences. Another technology has emerged is interactive television, such as
viewers can choose to select the angle of a football match they are watching, or television
synchronized with personal computer, mobile to surf websites or play games. Viewers can also interact
with the broadcaster for voting or conducting poll through their mobiles, which means that intrusive
advertising is screen out (Fill, 2009, p.743).
On the other hand, digital advertising takes the advantage of the era of Web 2.0 and appears to
dominate the advertising world. Social media like Facebook, Twitter, blogs like Tumblr, Wordpress
have pushed the growth of UGC (user generated content) which have been described as imagine
egocentric communities (Gangadharbatla, 2008, p. 6). Mcstay (2010,p. 64) asserted that Anything
that is contained with a users profile is material for targeting advertising which proves that social
network providers can offer to advertisers detailed information of users that they are targeting and
trends that are occurring within the site. Mobile advertising also emerges in different forms as short
message services (SMS) or WAP push services, QR code with its advantage of delivering direct
marketing messages to users .(Fill, 2009, pg. 741).
In conclusion, it can be presumed that the scenario Open Exchange is the most likely to the advertising
industry today, with the coexistence between traditional and digital media and the emergence of
consumers choice of selecting the advertising at their interests.

(1

): Tivo is a device to skip over ads when recording television programs (Fill, 2009)

3. Decide upon a contemporary example of an actual company or brand (This should ideally be
an international / global company or brand) Look at their strengths/weaknesses as a company
and discuss how you think they have adapted their strategic marketing communications mix and
to what attend it reflects the 4 driver discussed in the case report

The Starbucks Corporation is the global leader in coffee consumption. Arising almost
overnight from a market in Seattle, Washington, the company today provides premium quality coffee
with a superior level of customer service and at a premium price around the globe (Rebecca Larson,
2009) .Starbucks always believes in serving the best coffee possible .It is a goal for Starbucks
company to be grown under the highest standards of quality, using ethical sourcing practices. This
paper will address the strengths and weaknesses of Starbucks and how they adapted their strategic
marketing communication and how they reflect the 4 drivers in the report.
Strengths and Weakness
The first strength is that Starbucks has expanded their stores chain significantly; they have
appeared in more than 60 countries and over 15,000 coffee shops around the world (Starbucks
Company, 2012). Customers can find the stores everywhere. The retail stores accounted for 84% of
total net revenues in 2010 (Datamonitor, 2011).
Secondly, Starbucks attempts to strengthen in many different channels, such as the Starbucks
Company sells license to other famous coffee shops. For instance, Starbucks and Seattles Best Coffee
are partners; both of them research and develop the instant coffee and Seattle sells Starbuckss coffee
in their stores. (Datamonitor, 2011). Moreover, this firm also issues a Starbucks card which is a topup card as a convenient way for customers to purchase their products.
Thirdly, Starbucks Corporation always has innovative idea from their professional teams,
which includes the variety of products and good services from brewed coffee bean, coffee drink to
smoothies, ice-cream etc. Their creativity can be demonstrated by the name they use for their products
like Bold Pick of the day which is their flavourful brewed coffee, or Skinny Flavoured Latte.
Furthermore, in Starbucks, they offers free and unlimited Wi-Fi in the stores, so customers can relax
and use free wifi (Marketline, 2012).
By contrast, there are some weaknesses in this company. Even though it has diversified
products, however, the main product in Starbucks is coffee; they rely on it heavily. Moreover,
compared with other competitors, Starbucks provides the high priced coffee, which leads to
consumers choice over cheaper substitutes. For instance, McDonalds also offers a variety of
products, but provides low priced coffee so Starbucks lost their customers to McDonald.

Marketing Communication Mix

Starbucks is an excellent example of a company that succeeded in marketing strategy by using
high quality products. To illustrate, the Starbucks Corporation does not aggressively market the
company or their products. Instead, they are driving their sales through the companys image and
reputation. However, Starbucks sought new ways to increase revenues by expanding product offerings.
Howard Schultz, Starbucks Chairman said that We arent in the coffee business, serving people. We
are in the people business, serving coffee (Chief Global Strategist Fortune Magazine, Vol. 149 No.2).
Therefore, this company wants to be more than just a chain of coffee-shops, the company aims to be a
third place between home and work, where everyone can spend their time. All stores are designed to
make customers feel comfortable. Starbucks offer additional services to give customer more value.

Offering more services like the Visa card, wireless internet and customized DVDs will add more value
to Starbucks experience.
Starbucks achieved all of the reward using non direct marketing such as word-of-mouth
marketing, social media and website to promote their promotions and also make a consumer relation
via this kind of media. Therefore, the company spends very little on above the line marketing but
depends on word-of-mouth promotion. With the success of Starbucks it is hard to believe that the
company does not have direct advertising via commercials, advertising, or other forms of promotions.
Starbucks does only digital media such as Facebook , Twitter and Starbucks online community
through a website.
Moreover, Starbucks also creates some marketing strategy through partnerships .For instance,
Starbucks and i-Tunes, an alliance that has formed the song of the week program (Wolk, 2008).
Regardless of the success of music and food pairings, Starbucks asserts and firmly remains true to its
reason for existence: quality premium coffees and a quality customer coffee experience. In application,
Starbucks has understood, embraced, and profited from strategic alliances, both in positive marketing
and in profitability.
Starbucks also tries to build brand image to decrease some weaknesses which is high cost product
comparing with McCafe by placing customers at the centre of their activities and offering a high level
of value and satisfaction as known as customer-oriented philosophy . Hence, the company will focus
on customer developments in designing marketing strategy and customers. Customer orientation
consists of a set of beliefs that say the priorities of organization are customer needs and satisfaction
(Kotler.P, 2008).
Last but not least, Starbucks maintains their standard of products globally to attain customers
loyalty. By this, they have expanded the number of stores using Ansoffs Matrix in their marketing
strategy, which is Market Development. The consistency of product quality, brand image and
atmosphere has made Starbucks a global brand. Starbucks focuses on its supply chain mission of
delivering products with a high level of service at the lowest possible cost to its stores in the United
States and around the world. As Gibbons observes, "No one is going to listen to us talking about
supply chain strategy if we can't deliver service, quality, and cost on a daily basis (James A. Cooke,
2010).

4 Drivers
In this globalization era, social media has immediately integrated itself into our everyday lives.
Social networks rapidly replace traditional communities and this is what draws billions of people into
social networks and convinces them to spend most of time engaging in the social network. Therefore,
Starbucks uses social networks such as Facebook and Twitter to communicate with their customers. To
illustrate, Starbucks has their own Facebook and Twitter fan pages for posting and updating about their
new products and promotions. Moreover, people can visit Starbucks website to order Starbucks coffee
and also leave a comment and give feedback in the website. To some extent, it reflects the driver
Attention and Creativity where customers are involved in discussion and idea contribution proving the
increase of user generated content website like in Mystarbucksidea.com. The emergence of Mobile
advertising also applied efficiently in Starbucks, the company has Apple and Android application with
many features that either support information to customers but also attract them to participate more in
Starbuckss promotion program. In conclusion, people have changed way they watch media from
traditional media such as TV commercial to on-line media and Starbucks has applied it successfully.

4. Discuss what you think the next five years will hold for use of strategic marketing
communications?

Integrated marketing communication is one of the most powerful tools in marketing strategy but
the use of advertising and marketing communication in the future will hold more change and continue
evaluate than in previous years. In 5 years time, we will continue using marketing communication
strategy and it would become more powerful but it should be planned and evaluated carefully. Based
on IBM case study, Jim, the chief Marketing Officer of a consumer product company said,
Customers have increasing control and choice over how they interact with, filter and block marketing
message. It can be seen that in the near future, consumer will leap over traditional form of advertising
like television because it is becoming more commonplace and moving towards to a digital marketing,
new content sources and also direct marketing. The change of technology can generate and exploit
information, maintain and improve customer relationship.
Don Schultz, PHD., professor of integrated marketing communication, North-western University
said Advertising and marketing communication are changing rapidly so, marketing people should
deliver the right message at the right time in the right channel. In the future it is more important to
evaluate a marketing communication plan by developing an advertising strategy. Those are includes
external marketing, internal communication and brand building. The message that transmit through
any form of media should become a public content quickly and efficiently and also have ability to
reach the desired number of consumer in order to gain their attention, persuade, create brand
awareness and encourage people to trial services or products. Advertising message should translate a
companys objective into words, symbols and illustrations that are attractive and meaningful to the
target audience.
The new form of advertising should be creative and innovative to go beyond the traditional
advertising format for example buzz marketing by using ambient advertising to create excitement by
word-of-mouth. Public relation, press release and personal selling also are an important role of
marketing communication because the power of recommendation and word-of-mouth tend to be
increasing because consumer becoming trusted influencers. Digital marketing will become more
powerful and influences. In order to build brand awareness and reputation to the product and service
for the next five years, Advertisement should be more attractive and innovative than this decade.
According to Starbucks Company, in 2011 Starbucks announced that they have redesigned their
logo and for the future plan Starbucks will hold to use marketing communication strategy by using
campaign A look at the future of Starbucks. Starbucks will communicate the message to their
consumers by using digital marketing and if you have Starbucks membership, you will receive an
email before any other. Starbucks doesnt care much in public advertising, It is rare to find a Starbucks
advertisement on a billboard, newspaper or poster because Starbucks believe that letting the high
quality of their product and service speaks for themselves by using a new viral social media such as
buzz advertising to create word-of-mouth. Starbucks always creates and innovates ideas to add to its
product.

Conclusion
The study of IBM provides information about the prediction of advertising will shift from
traditional devices to interactive devices, involving 4 key drivers of advertising (attention, creativity,
measurement, and advertising inventories). Moreover, the evolution of industry in the future will be
influenced by two most disruptive variables such as marketing control and advertising inventory. The
industry will become an Ad-marketplace which means that consumers will reject all the traditional
advertising in favour of new instruments of advertising. However, in comparison between the four
predicted scenarios to the presence, the advertising industry still involves with traditional and digital
advertising which are more selective in customers preferences. In fact, these drivers are starting to be
implicated by Starbuckss marketing strategy. It tries to be more creative and innovative by using the
new platforms like partnerships and digital media to advertise its products.

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