Strategic Marketing Management: Starbucks' Frappuccino

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RUNNING HEAD: Starbucks Frappuccino
Strategic Marketing Management: Starbucks Frappuccino
Matthew Dietrich
Chelsea Fleming
Heather Kelley
Roddena Kirksey
Dorothy Lucas
Mark Zeeff
Liberty University
BUSI 520
Strategic Marketing Management
March 7, 2013
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Background Information
Provide a description of your product/service and a brief history of the firm that produces
your product/service.
Starbucks began in 1971 as a simple coffee retailer in Seattles Pike Place marketplace.
In 1983, Starbucks began offering specialty coffee drinks. Starbucks eventually expanded its
menu to include handcrafted beverages, pastries, food and merchandise. Starbucks also defined
the American coffeehouse experience by becoming a daily routine activity for many customers
and by creating inviting stores where many customers gather to work or socialize. Over the past
42 years, Starbucks has also created a strong brand portfolio of six different brands (Starbucks:
Our Company). Starbucks mission statement is to inspire and nurture the human spirit one
person, one cup and one neighborhood at a time (Starbucks: Our Company).
In 1995, Starbucks started serving the Frappuccino, which is a cold coffee beverage that
is made by blending ice, coffee milk and flavored syrup and then topping the mixture with whip
cream. For many years, Starbucks offered six Frappuccino flavors; however, in 2010, the
company evolved the product again by offering customized Frappuccinos (Helliker, 2010). The
however-you-want-it Frappucino marketing campaign accompanied the new product offering.
This marketing campaign utilized the holistic marketing concept, which recognizes that the
efforts of internal marketing, integrated marketing, performance marketing and relationship
marketing are interdependent and seeks to synchronize these efforts (Keller & Kotler, 2012). For
example, the campaign engaged in relationship marketing by emphasizing the individual
customization option. Simultaneously, the campaign included integrated marketing through its
integrated communication strategy which heavily targeted online and mobile advertisements
while continuing the message with in-store signs and artwork.
Describe and discuss (broadly speaking) the 4 Ps associated with your product/service.
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Old 4 Ps Product, Place, Promotion, Price
The marketing mix consists of four dimensions: product, price, place, and promotion,
with each dependent on knowing consumers (Kotler & Keller, 2012, p.25). All of the
dimensions are controllable factors that can be altered by marketers to solve problems (Kerin,
Hartley & Rudelius, 2009). Having this advantage allows Starbucks to make necessary changes
within the dimensions at any time to make the product successful.
Product dimension refers to the product variety, quality, design, features, brand name,
packaging, sizes, etc. (Kotler & Keller, 2012, p.25). Considered as the most important of the
four dimensions by Professor Anne Stringfellow, she states a company is doomed from the
start if a product is produced that consumers do not want (Thunderbird School of Global
Management, 2010). Frappuccinos need to be introduced as another great product that Starbucks
offers. Offering the Frappuccinos in various flavors and sizes including a bottle version allows
consumers to integrate the need for Frappuccinos into their lives.
Along with the product, the price dimension establishes a price that consumers will be
willing to pay and includes discounts, allowances, payment period, and credit terms (Kotler &
Keller, 2012, p.25). Determining an accurate price is essential to the success of the product.
Starbucks has a value based pricing concept in which good service and quality goes into the
pricing of their products instead of cost mark ups (Shepard, 2010). The promotion dimension is
sales promotion, advertising, sales force, public relations, and direct marketing (Kotler &
Keller, 2012, p.25). Under this dimension Starbucks uses paid advertisements and word of mouth
to get Frappuccinos known. The final dimension, place, consists of channels, coverage,
assortments, locations, inventory, and transport (Kotler & Keller, 2012, p.25). The placement of
the products can vary from taking products directly to consumers such as the Internet or through
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retail outlets and distributions (Thunderbird School of Global Management, 2010). For
Starbucks, making the Frappuccino available in a variety of locations makes buying it easily
accessible for consumers.
New 4 Ps People, Processes, Programs, Performance
In addition to marketings traditional dimensions, product price, promotion, and place,
there are four dimensions that expand the marketing mix to be more reflective of evolving
business landscape. As Kotler and Keller (2012) noted, the new dimensions of the modern
marketing mix are people, processes, programs, and performance. The people dimension
recognizes that the marketing process is dependent upon people. According to Kotler and Keller
(2012), to be truly effective, marketers must have an in-depth knowledge of their consumers.
Cespedes and Wong (2010) assert marketers must now recognize the importance of multicultural
marketing in the growing ethnic markets in the United States. For example, Starbucks may
utilize ethnic demographics to create new Frappuccino flavors that appeal to particular ethnic
markets.
Processes are the creativity, discipline, and structure brought to marketing management
(Kotler & Keller, 2012, p.25). One facet of Starbucks processes would encompass the role of
top-management in strategically planning to position Starbucks as the premier provider of
specialty coffee-based beverages, such as the Frappuccino. Program dimension refers to an
organizations behavior that is customer-oriented (Kotler & Keller, 2012). This dimension also
includes the elements of the traditional marketing mix. Under this dimension, Starbucks would
consider developing products that would appeal to consumers and how to effectively distribute it,
i.e. selling Frappuccino in Starbucks stores or selling bottled Frappuccino through third-party
retail outlets.
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Performance refers to the need for evaluating marketing efforts, and is determined by a
variety of measures including financial, non-financial, and external impact (Kotler & Keller,
2012). Organizations have a growing interest corporate social responsibility (CSR), another
performance measure. According to Luan and Ailawadi (2011), CSR programs increases
customer loyalty when program initiatives have a direct impact upon the consumer. Starbucks
customers may be more willing to pay a premium if CSR initiatives improve employee work
conditions or the lives of coffee bean growers in developing countries.
Describe and discuss the demographic trends associated with your product/service.
A trend reveals the shape of the future and can provide strategic direction (Kotler &
Keller, 2012). Business leaders, marketers, and advertisers can glean valuable insight from
demographic trends (Hauter, 2010). Identifying the latest demographic trends can help
organizations to identify existing and emerging markets for their new product and services
(Hauter, 2010). Business decision-makers can identify changing needs to the marketplace and
adjust to help evaluate customers and prospected customers. Demographics help to improve
marketing by helping businesses to target new customers with the right approach and can tell
how many people can combine work and a coffee break.
Starbucks mission is to inspire and nurture the human spirit-one person, one cup and one
neighborhood at a time (Starbucks, 2012). Starbucks Corporation (NYSE:SBUX) is an
international coffeehouse that has built one of the worlds most powerful and recognizable
brands of high-quality coffee and the unique Starbucks Experience (Hauter, 2010). Over the
past two years, Starbucks has expanded aggressively, adding 3,500 stores, often within eyesight
of existing stores (Hauter, 2010). In 1994 Starbucks launched a new product by the name of
Frappuccino; after Starbucks purchased Coffee Connection, they made Frappuccinos global. In
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its first full year on the market, Frappuccinos accounted for $52 million in revenues or about 7%
of the company total (beveragestory, 2010). Frappuccino was the most popular coffee in the
United States in 1998.
Describe and discuss the current economic trends and the influences they will have on the
sales of your product/service.
Economic trends are changes that happen in the economy, and they can have an
uncontrollable effect on a business. Economic trends include the effects of a recession, the type
of product being produced and the number of other businesses producing similar products.
Businesses are mostly concerned with trends that relate to finances. Finance trends include
evaluating revenues, expenses, margins and profits of the business. These trends can help the
managers as well as investors with situations and problems that the business might encounter in
the future.
Starbucks is the leader of the coffee industry domestically and internationally.
According to the textbook, The 2008-2009 recessions had an impact on all businesses (Kotler &
Keller, 2012, p.78). The recession affected businesses by increasing operational costs and
lowering profit margins, and consumers by raising prices while unemployment remained high.
(Bureau of Labor Statistics, 2011). In 2008, consumers started cutting back on spending by
finding more inexpensive places to buy products similar to what they were accustomed to.
However, according to an article by Moreno, the US still drank the same amount of coffee, 3.3
cups per day on average, but simply opted for the lower cost options (Larson, 2008). The
stabilization and enhancement of the global economic situation will lead to a rise of gourmet
beverage consumption among extreme consumers. Economic conditions greatly affect higher
cost coffee consumption, because as the economy recovers, high cost coffee consumption rises.
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In the early days of coffee, Starbucks competed against small-scale retailers. Today,
Starbucks competes with locally owned coffee shops, and corporate franchises like McDonalds
and Dunkin Donuts, who recently invested in new high-end coffee product lines. Although
growth in the high-end coffee market has slowed, competition has become fierce (Larson, 2008).
Starbucks largesse is partially due to their tendency of setting the trend. However, that largesse
is why Starbucks shut some its stores down. Market saturation caused Starbucks to close many
of their stores between 2008 and 2010 (Trefis, 2012).
Describe and discuss the technological changes that have affected consumer acceptance of
your product/service.
Marketers should take account of the accelerating pace of technological change, opportunities
for innovation, varying R&D budgets, and the increased governmental regulation brought about
by technological change (Kotler & Keller, 2012 p. 92). Technological change refers to the
process by which new products and processes are generated. When they include entirely new
products, the change is referred to as product innovations. Technological change spurs economic
growth and general well-being by enabling better utilization of existing resources and by
bringing about new and better products
The process of technological change is uncertain in that there is no guarantee of whether,
when, and at what scale the innovation will occur. There are four types of uncertainty connected
with technological lack of information, lack of knowledge, eventual users and market acceptance
and government regulatory action. Starbucks speed of change shows that they have been trying
to reduce the waiting time for customers and they are focused on quality, not quantity. Starbucks
sells Italian style espresso beverages, pastries, confections and coffee related accessories and
equipment. They also sell ice creams and premium teas. Starbucks has made cause-related
marketing and word-of-mouth an important part of their marketing program. Firms must monitor
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six major forces in the broad environment: demographic, economic, social-cultural, natural,
technological, and political-legal (Kotler & Keller, 2012 p. 74). Explosive population growth
(demographic) leads to resource depletion and pollution (natural), which leads consumers to call
for more laws (political-legal), which stimulate new technological solutions and products
(technological) that, if they are affordable (economic), may actually change attitudes and
behavior (social-cultural). Major new technologies stimulate the economys growth rate (Kotler
& Keller).
Describe and discuss the consumers taste and preferences for your product/service.
According to Kotler and Keller, people acquire beliefs and attitudes through their
experiences and what they learn, which later influences their buying behavior. An attitude is a
persons enduring favorable or unfavorable evaluation, emotional feelings, and action tendencies
toward some object or idea (Kotler & Keller, 2012). A persons attitudes shape their tastes and
preferences towards products and brands. Consumers know what they like and what they want.
When buying products, the consumers intentions are to buy products that will provide the
greatest level of satisfaction to them. Preferences are difficult to change and therefore a
company is advised to fit its product into existing attitudes rather than try to change attitudes
(Kotler & Keller, 2012).
With Starbucks, the consumers tastes and preferences are central to providing good
service. There are a variety of options that a consumer can choose from like hot coffee, cold
coffee, as well as different flavors. If a consumers preference changed over time, Starbucks
would have a product that could satisfy their evolving taste. Starbucks is also a social place,
away from work and home that attracts consumers of all ages. Starbucks has extended their
experience to all customers by recognizing and responding to their unique preferences and needs
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("Starbucks", 2011). The reliability of the Starbucks experience is the key to winning over
customers taste buds and loyalty.
Market Analysis
Describe and discuss the cultural factors that have the most influence on consumers
purchasing your product/service?
There are three major factors that influence how consumers select and buy products:
cultural, social and personal. Of these factors, cultural factors exert the broadest and deepest
influence (Kotler & Keller, 2012). Kotler & Keller further describe culture, saying Culture is
the fundamental determinant of a persons wants and behavior (2012). A consumers culture is
influenced by ones family, school, and local and national communities. A culture can contain
several subcultures, which divide members into more distinct categories including nationalities,
religions, racial groups, and geographic regions (Kotler & Keller, 2012).
For the Starbucks Frappuccino, a consumers nationality and geographic location are the
most influential cultural factors. A consumers nationality tells a company important
information about how they grew up and can shed light on what type of coffee and coffeehouse
experience they expect. For example, Starbucks has defined the American coffeehouse
experience (Alderman, 2012), so an American consumer is more likely to choose Starbucks over
other coffee alternatives. While a consumers geographic location heavily influences whether or
not theyll choose the Starbucks brand, it will also dictate which type of specialty coffees (if any)
they desire. Consumers living in places where the seasons change often change their taste
preferences with the season, which is why the Frappuccino is more popular during the summer.
Describe and discuss the social factors that have the most influence on consumers
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Social factors that affect consumer buying behavior include reference groups, family,
social roles and social statuses (Kotler & Keller, 2012). A reference group is a group that has
influence, whether direct or indirect, on a consumers buying behavior (2012). Reference groups
expose a consumer to new products, affect a consumers attitude and can even pressure
consumers to buy certain products and brands (2012). Reference groups include family,
friends, neighbors, coworkers and religion (2012). Of these reference groups, family is the
most influential (2012). As members of reference groups, consumers have defined roles and
statuses. Consumers also have roles and statuses they aspire to attain that greatly influence a
consumers product choices (2012).
Social status is a major influence on Starbucks Frappuccino consumers, and Starbucks
has masterfully made coffee a symbol of social status (McIntyre, 2009). In 2009, economists
predicted that Americans would drastically cut discretionary spending, but Starbucks profits
were only down 5% in the following year (McIntyre, 2009). Economists were wrong about the
fate of Starbucks because they didnt account for how Starbucks had become a status symbol for
the middle class (McIntyre, 2009). Starbucks has been successful in remaining as a pervasive
daily product. More than 110 million Americans drink [coffee] and total national consumption
is more than 300 million cups a day (McIntyre, 2009). Starbucks has tapped an extremely large
consumer basis and has become the brand of choice for that group.
Describe and discuss the personal factors that have the most influence on consumers
Personal factors include age and stage in the life cycle, occupation and economic
circumstances, personality and self-concept, and lifestyle and values. Often viewed as the most
challenging factors to understand by marketers, personal factors cause trouble when determining
why buyers do what they do (Bhasin, 2010). Because personal factors have a direct impact
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on consumer behavior it is crucial for marketers to follow them (Kotler & Keller, 2012, p.155).
The two personal factors that have the most influence on consumers are age and stage in life
cycle, and personality and self-concept.
Age and stage in the life cycle refers to the consumers taste in food, clothes, furniture,
and recreation, as well as the passages consumers go through in their lifes (Kotler & Keller,
2012, p.155). As consumers mature, gain experience, and gain income, Hitesh Bhasin states
consumer attitude and behavioral tendencies evolve (2010). For the Frappuccino, focusing on
the consumers age and stage in life is what matters most. However, following the change in the
consumers life is important to continually attract them. Starbucks target market is married
couples ages 25 to 54 that have children (123HelpMe.com, 2013). The big range in age allows
the company to market to a large number of people, as well as to children of the adults because
they too can consume the coffee free beverage.
The second most influencing factor is a consumers personality and self-concept, which
is primarily based on personality. Personality is often described as self-confidence dominance,
autonomy, deference, sociability, defensiveness, and adaptability (Kotler & Keller, 2012,
p.156). Starbucks uses their store environment to persuade their target market to sit down and
socialize over coffee (MBA Notes World, 2011).
Describe and discuss the psychological factors that have the most influence on consumers
Psychological factors include motivation, perception, learning, and memory (Kotler &
Keller, 2012, p.160). Motivation refers to the drive that leads the consumers towards buying a
product or service (Callwood, 2012). This paper will focus on three theories of human
motivation that were made by Sigmund Freud, Abraham Maslow, and Frederick Herzber (Kotler
& Keller, 2012, p.160). Using Maslows theory of Hierarchy of Needs, Starbucks can motivate
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consumers into purchasing their Frappuccinos by convincing consumers that satisfying thirst
should be done before moving on to the next need (Kotler & Keller, 2012).
Perception is the process that consumers select, organize, and interpret information
inputs to create a meaningful picture of the world (Kotler & Keller, 2012, p.162-163).
Consumers perceptions are based on prior experiences and knowledge (Callwood, 2012). As
Starbucks has the reputation of selling higher priced coffee, consumers perceptions are that they
are going to get a quality product and would be upset if they received anything less. Much like
perception, the third factor learning is determined by the changes in our behavior arising from
experience (Kotler & Keller, 2012, p.163). Consumer experiences, positive or negative, are
what consumers use to decide whether or not they will return (Callwood, 2012).
Which aspects of consumer behavior should your product or service emphasize in their
marketing plan and why?
Consumer behavior attempts to explain the psychological, social, and economic factors
that influence consumers as they make purchasing decisions. As Kotler and Keller (2012) noted,
buying behavior is affected by cultural, social, and personal influences. Culture is the basis of
the social and personal factors (2012). Consumers are also influenced by personal factors, like
personality, needs, learning processes, and other psychographic determinants (Kotler & Keller,
2012). The marketing plan will emphasize a connection to the Starbucks experience and the
convenience of the ready-to-drink Frappuccino. Additionally, the Frappuccino will be marketed
toward Starbucks retail store customers, who are familiar with the Starbucks experience. The
marketing plan will also emphasize personal customization of Frappuccinos.
Marketers must also be aware of consumer perceptions regarding the Frappuccino and the
Starbucks brand. Consumers will purchase Frappuccinos if they believe it offers value over other
alternatives. Consumers are also loyal to brands they can identify with and with whom they
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form a relationship. Likewise, marketers must understand how the Frappuccino fulfills
consumers needs. The Frappuccino fulfills social and esteem needs as described by Maslows
hierarchy of needs (Kotler & Keller, 2012). It assists consumers as a socializing tool when they
gather with friends and family in Starbucks stores. Moreover, consuming Frappuccinos can
provide customers with a sense of esteem and self-actualization. Beattie (2012) notes that
Chinese consumers purchase Starbucks products to symbolize socioeconomic success.
Furthermore, marketers must understand social factors that affect consumer behavior. Social
factors that influence the Frappuccinos success in China are the target markets coffee drinking
habits and the perception of coffee as a feminine beverage (Beattie, 2012).
Which variables should your firm use to segment its target markets?
As Kotler and Keller (2012) illustrated, there are many variables marketers take into
account to segment target markets. Target markets are primarily segmented according to
geographic, demographic, psychographic, and behavioral characteristics (2012). These broad
segmentation categories can be further parsed down to segmentation variables (2012). The
variables Starbucks should utilize to segment its target markets for the Frappuccino are income,
social class, density, geography, age, and behavioral occasions.
Since the Frappuccino is not a necessity, consumers must have discretionary income they
are willing to utilize. Therefore, the ideal target market is the middle to upper-upper class.
Starbucks therefore needs to position itself in locations where it can have access to this
demographic group. Those in this economic group often reside in upscale urban areas and in the
suburbs. As a multi-national corporation, Starbucks offers the Frappuccino across many
geographic areas. However, products are tailored to local taste preferences. For instance,
Starbucks developed a Strawberry Soy Frappuccino to appeal to Chinese consumers (Beattie,
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2012). Starbucks should also attract consumers who will identify with its trendy and modern
image (2012). Consumers who are most likely to identify with and purchase Starbucks trendy
Frappuccino are millennials, or 18-24 years old.
How can your firm evaluate the attractiveness of each identified segment?
Five forces that determine the intrinsic long-run attractiveness of a market or market
segment are industry competitors, potential entrants, substitutes, buyers, and suppliers. Two
factors to consider: the segments overall attractiveness and the companys objective and
resources. Determine the marketing attractiveness by answering the following questions (1)
what is the size of this segment, what potential does it have to grow and how competitive is it?
(2) Can I reach the segment I am targeting? (3) Does this segment assist one in achieving my
company objectives? Business objectives like shows of the market you want, revenue you are
seeking, where do you want your place to be in the market and what image do you want for your
brand. (4) Do I have the resources to market this segment? You must determine whether you
have the resources to meet the needs of that segment given the competitiveness in the market
segment and the ease with which you are able to reach and engage the customers in the segment
(Unknown, 2010).
Five main factors influence the attractiveness of a segment: (1) segment size-it must be
big enough to be worth targeting. (2) Segment growth-segments with good long-term growth
prospects (3) segment profitability the segment should be capable of delivering profits of the
right value, as can be marketed to effectively (4) current and potential competition- the strength
of existing and potential competition is a key deciding whether to target and enter a segment (5)
business capabilities does the business have the capabilities (e.g. brands, product knowledge) in a
segment (Riley, 2012).
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Should your firm pursue full market coverage, market specialization, product
specialization, selective specialization, or single-segment concentration? Why?
According to the text, marketers have a range of possible levels of segmentation that can
guide their target market decisions (Kotler & Keller, 2012). Starbucks coffee should choose a
single-segment concentration when it comes to target market decisions. In a single segment
concentration the firms market to only one particular segment (p. 234). Starbucks generally
focuses on gourmet coffee drinkers, and provides a wide array of coffee products. With the
single segment concentration the company gains well-built knowledge of the segment desires
and attains a strong market presence.
Many businesses are going deeper into market targeting and focusing on niche marketing.
A niche is a very narrowly defined market. Niche marketers aim to understand their customers
needs so well that customers happily pay a premium (Kotler & Keller, 2012). Starbucks niche is
that they sell gourmet coffee, giving their consumers the perception of high quality. Starbucks
positioning strategy is customer base, which means giving the customers more than what they
expect. Starbucks has reliable research regarding consumers needs and wants, and has
developed a distinctive market position for their products. Starbucks tries to make everyone feel
welcome by conversing with consumers in-store, and having a wide variety of products makes
the consumer feel more like an individual.
What are your firms target market(s)? Explain.
According to Keller & Kotler (2012), firms segment purchasers and potential purchasers
of products and services by identifying similarities in needs and wants. The marketing team then
decides which segment is most likely to yield the greatest profit to the firm and targets it for a
marketing campaign, thereby creating a target market. For Starbucks Frappuccino, it appears
that their prime target market is millennials, (Rosales, 2012). Millennials spend an average of
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$24.74 per week on coffee related drinks, whereas people over the age of forty-five spend only
$14.15 per week (2012). Millennials are more likely to see a firms advertisements on the
internet, rather than television (2012). To catch the attention of millennials, Starbucks offered a
$10 gift card for $5 in 2012 through the Living Social website, which became Living Socials
best-selling offer ever (Novellino, 2012).
Once the millennial crowd goes to a Starbucks store to redeem their gift card, they will
find that Starbucks has expanded their Frappuccino brand in their stores by offering over 35,000
flavor varieties (Baker, 2011). This extreme amount of variety caters to millennials
psychological need for expressing their individuality. They also have the option of selecting
other options, like different of types of milk, quantity of coffee added, or sugar substitutes.
What specific needs does your product/service address for each target market? Be specific
and creative.
Abraham Maslow sought to explain why people are driven by particular needs at
particular times (Kotler & Keller, 2012). This theory is known as Maslows Theory of
Hierarchy of Needs, and is divided into five sets of needs. Physiological needs include food,
water and shelter. Safety needs include security and protection. Social needs include a sense of
belonging and love. Esteem needs include self-esteem, recognition, and status. SelfActualization needs include self-development and realization.
The Starbucks Frappuccino is marketed in an attempt to meet the self-esteem needs in
millennials. A perception among millennials is that buying a Frappuccino elevates ones social
status. Millennials generally are not plain coffee, they enjoy the sweetness of the drink, and
perceive that their identity among their peers is lifted when others see them with a cup with the
Starbucks logo. Millennials are very conscientious of how others perceive them.
Positioning/Competition/Branding
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What is an appropriate positioning statement for your product/service? Explain the
statement.
Positioning is one of the three foundational pillars of marketing strategy. After selecting a
market segment to target, a company then positions its [product] so the target market recognizes
the companys distinctive offerings and images (Kotler & Keller, 2012). Positioning is an effort
to market a product in a way that makes the product distinctive in the minds of the target
market (2012). To guide how a company should position its product, the company normally
develops a positioning statement. A positioning statement is a sentence or series of sentences
that define what the [product] is, what makes it unique and why it is relevant to the audience
(Texas Tech University Glossary of Terms, 2006).
An appropriate positioning statement for the Starbucks Frappuccino would be: A
Frappuccino is an ice-blended coffee beverage that comes in many flavors. It is unique because
its cold whereas coffee drinks are traditionally served hot. The Frappuccinos temperature
difference is even more unique because its not just iced coffee. Starbucks marketed a whole
new iced coffee product by blending the ingredients together into a milkshake consistency. The
Frappuccino is also unique because it can be customized to the customers preference (Starbucks,
2013). The Frappuccino is relevant to its audience for several reasons. First, its a comfort
coffee beverage that can be enjoyed when the weather is too warm for traditional hot coffee
beverages. Second, it appeals to consumers who appreciate coffee that goes beyond the
traditional brewed coffee beverages, like espressos, lattes and cappuccinos. Therefore, an
appropriate positioning statement is: The Starbucks Frappuccino is an iced-coffee beverage that
can be customized to the customers taste, enjoyed on warm summer days and still provide the
comfort that Starbucks beverages are known for.
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How is your product/service positioned in the market place? Provide examples and a
detailed explanation.
Positioning is the process by which your business creates an image or identity in the
minds of your core market for your product, service, or brand (DiFrisco, 2009-2011).
Designing a distinctive position is critical to the success of a product to first distinguish from
competitors, but secondly to give a strategic advantage in the market place. According to Kotler
and Keller, good positioning requires marketers to look not only in the present, but in the future
so the brand has room to grow and improve (2012, p.276). Brand positioning success does not
stop at marketers everyone in the company must know and understand it (2012, p. 276).
Starbucks positions Frappuccinos with its quality, convenience, and product range. The
Frappiccino also comes in a unique bottle shape to intrigue more consumers to buy on the go
(HornallAnderson). Also, to keep consumers interested in new flavors, Starbucks designs some
flavors to be available for a limited time only.
Which firm is the market leader in your industry, what are its strengths and weaknesses?
According to Kotler and Keller (2012), the characteristics that define a market leader are
possession of the largest market share, leadership in price changes, new product introductions,
distribution coverage, and promotional intensity (p.299). Starbucks Coffee Company is the
market leader of the specialty eateries industry (Yahoo!, 2013). Starbucks market capitalization
is valued at $41.9 billion, and Panera Bread Company, Starbucks nearest competitor, is valued
at $4.7 billion (Yahoo!, 2013). Kotler and Keller (2012) notes market leaders try to increase
their market share by expanding total market demand. One method used to expand total market
demand is to attract new customers. Starbucks has been able to gain new customers by selling its
whole bean coffee through supermarkets, designing ready-to-drink products, such as bottled
Frappuccino, creating premium ice creams, and offering premium tea products (2012).
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Additionally, Starbucks has recently purchased Teavana Holdings, a specialty tea retailer, to
expand its dominance (Benoit, 2012). Starbucks contends that The acquisition of Teavana
supports our growth strategy to innovate with new products, enter new categories, and expand
into new channels of distribution (Benoit, 2012). Additionally, Howard Schultz, Starbucks
chief manager, believes the acquisition will complement Starbucks Tazo Tea brand and offer the
opportunity to develop a two-tiered market position (Benoit, 2012).
As a market leader, Starbucks possesses several strengths that contribute to its success.
Starbucks chief core competencies are its prime real estate locations, design and store
operations, customer loyalty, and its ability to leverage new media landscapes (Benoit, 2012).
What brand elements would be most useful for differentiating your product/services
brand from the competition?
The American Marketing Association defines a brand as a name, term, sign, symbol, or
design, or a combination of them, intended to identify the goods or services of one seller or
group of sellers and to differentiate them from those of competitors (Kotler & Keller, 2010).
The different components of a brand, like names, logos, symbols, package designs, are brand
elements. Brands are valuable intangible assets that offer a number of benefits to customers and
firms and need to be managed carefully. A brand is also the source of a promise to the consumer
(Lake, 2012). The key to branding is that consumers perceive differences among brands in a
product category (Kotler & Keller, 2012). A brand element that would differentiate
Frappuccinos is that it is like coffee, but different enough to attract non-coffee drinkers.
Logos are visual icons with two meanings. They can be an identification or marker and
help differentiate between products. The color scheme is another important part of a brand
element, sometimes you can tell a product by the color of the wrapper or box. Branding is
endowing products and services with the power of a brand. The objectives a good brand will
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achieve include delivering the message clearly, confirming credibility, connecting target
prospects emotionally, motivating the buyer, and solidifying user loyalty. There are always
considerations other than price and product functionality in the buying decision. The challenge is
to define them, because when you do that, you are defining your brand (Singularity, 2002).
What is the brand promise for your product/service? If there is a similar brand promise
that another product/services uses please discuss.
The use of brands gives consumers the opportunity to associate products with a certain
organization or distributor. According to the textbook, a brand promise is the marketers vision
of what the brand must be and do for consumers (Kotler & Keller, 2012, pg. 245). The brand
promise is the most important aspect of a brand, it is what the company wants to be remembered
for, the distinctiveness of the company. A companys brand promise shows buyers how the
company is different from its competitors. Having a purpose for a brand helps consumers
recognize what the brand stands for and helps associates of the company know why they are
there. A company that looks at its brand and asks what purpose it serves, to its customers and its
shareholders, and brings this purpose to life through every customer experience will be the
company most likely to beat its competition (Adamson, 2009).
The brand promise of the Frappuccino is about providing high quality, delicious beverages,
and Starbucks allows its consumers to be self-assured and consistent with the products that it has
to offer. Brand promises are necessary because they allow for consumers to know what the
company standards are, and what they can expect when they come into the business. Starbucks
consumers also know what to expect when visiting the business. Having a promise that can be
fulfilled again and again is what makes loyal consumers. Good brands are attentive when it
comes to consumers. They pay attention to feedback and make sure the brand promise is
Kirksey: 21

delivered. In order for a brand promise to bring great value to a company it must suggest a
persuasive benefit, be a genuine and believable promise, and it must be consistent.
What are the attributes and benefits of your product/service? How do they relate to your
target market?
According to Keller and Kotler, attributes are the tangible and intangible features or
characteristics of a product (2012). Benefits are that which the consumer experiences (actual,
or perceived) after using or buying the product (2012, p. 326; 329; 332; 577). And a target
market is a market segment that shares similar wants or needs, and is targeted by a firm because
it has the most potential for increasing the firms sales (2012).
Starbucks currently lists more than twenty popular Frappuccino flavor combinations on
their website (Starbucks, 2013), but the possible personal flavor customizations range into the
tens-of-thousands (Goudreau, 2011). The attribute of flavor customizability was recently added
to the Frappuccino line of beverages because it is an attempt to attract a target market,
millennials (Helliker, 2010). The benefit of customizable Frappuccinos for millennials lies
partly in the fact that they are said to have a desire to be more individualistic. Naturally then,
they would want to design their own flavor of Frappuccinos so that it reflects their individuality
(2010).
Flavor is not the only difference in the new Frappuccino line. Because high-caffeine
energy drinks are so popular among millennials (Aeby, et. al, 2007), Starbucks also offers the
option of additional shots of espresso in Frappuccinos (Starbucks, 2013). This attribute gives the
millennial consumer the real or perceived benefit of having more energy than if they had not
consumed the beverage. According to Aeby, et.al, millennials report that they use energy drinks
to help recover from hangovers, to stay awake extra late for studying, and staying awake while
driving (2007).
Kirksey: 22

How can your firm use packaging and labeling to support its brand image?
According to Kotler & Keller (2012) packaging consists of designing and producing a
container for a product. The three aspects of packaging include primary package, secondary
package, and shipping package (2012). Packaging must also help to identify the brand, covey
information, and allow the product to be transported safely (2012).
The name on the package has to be appealing and it helps to have a picture of the product
for visual appeal. Starbucks chose to use a clear plastic cup with a clear lid to package
Frappuccinos because the customers can see how good it looks. The Starbucks logo was also
placed on the cup, which caters to those who perceive value in the Starbucks brand and helps
advertise to others.
Services/Pricing
What support services do buyers of your product/service want and need?
Support services are the services a company provides in conjunction with the sale of a
product (Keller & Kotler, 2012). Traditionally, support services accompany technical and
manufacturing products; however, companies now offer support services for a growing number
of products. Companies offer support services to gain a competitive advantage for a product
(Keller & Kotler, 2012). Conversely, those with good products and bad service are less
competitive (2012). A major support service for any product is customer service that focuses on
satisfying customer needs (2012).
Starbucks strives to do everything possible to satisfy every customer need. Customers
are loyal to the Starbucks brand because they know they can count on genuine service
(Starbucks: Our Company). This genuine service does not end when the employee hands the
Frappuccino to the patron. Starbucks offers a no questions asked, no hassle exchange policy for
Kirksey: 23

any cup that doesnt measure up to the customers standards. This return or exchange service is
the main support service that Starbucks provides with its Frappuccino. Starbucks also sets itself
apart by working to correct any customer dissatisfaction because it knows that remarkable
things will happen [if they] demonstrate some patience and confidence. [Starbucks has]
confidence that if its customers are treated well they will come back, even if [Starbucks] is not
the cheapest cup of coffee in town (Hanft, 2005).
What support services does your firms main competitor offer? How do those efforts affect
their sales?
Although organizations aim to provide products and services that exceed customers
expectations, there are instances where the delivery of products and services fail. When a
product or service fails, it is extremely important for an organization to respond through service
recovery. As Kotler and Keller (2012) noted, addressing service failure can result in increased
revenues and profits in contrast to organizations that do not possess a systematic service recovery
process. Customer complaints are an invaluable resource as organizations seek to continuously
improve their service delivery. Ashley and Varki (2009) found customers that were loyal to an
organization were more likely to inform an organization of service failure. Additionally, loyal
customers are more satisfied with service recovery efforts than non-loyal customers due to the
relationship the customer has formed with the organization (Ashley & Varki, 2009). As a result,
loyal customers are the least likely to engage in negative word-of-mouth testimonials, remain
loyal to the organization, and continue to advocate upon the firms behalf to family, friends, and
acquaintances (Ashley & Varki, 2009). When a service failure occurs, an organization that is
committed to resolving the failure and ensuring a smooth and interpersonally pleasant recovery
experience can improve customer satisfaction. At Starbucks, Frappuccinos can be exchanged
because of any shortcomings perceived by the customer.
Kirksey: 24

What post-sale service arrangements must or should your firm provide to handle
repairs/services?
Post sale services are customer service departments, repair and maintenance services
(Kotler & Keller, 2012). A service is any act or performance one party can offer to another that is
essentially intangible and does not result in the ownership of anything (2012). The way to get
and keep a customer is to carry products they like. If a customer is dissatisfied with the product,
the firm has to have a policy to correct the problem.
There are five categories of offerings in the service mix: pure tangible goods, tangible
goods with accompanying services, hybrid, major service with accompanying minor goods &
services and lastly, pure service. Services can be equipment based, people based, and different
processes to deliver their service, services that need clients presence. Some services meet a
personal need, business need, different objectives and ownership (Kotler & Keller, 2012).
Strategic concept, top management commitment, high standards, profit tiers, monitoring
systems and satisfying customer complaints are strategic concepts that all companies use.
Reliability and failure frequency, service dependability and out-of pocket costs are specific
worries that influence customer decisions. A buyer takes all these factors into consideration and
tries to estimate the life-cycle cost, which is the products purchase cost plus the discounted cost
of maintenance and repair less the discounted salvage value (Kotler & Keller, 2012).
How will repair/service efforts affect customer satisfaction?
A company never wants a customer to be dissatisfied, because they will most likely go to a
different company that can meet the needs that the first company failed to meet. The things that
customers worry about the most when purchasing a product are reliability, downtime, and out-ofpocket cost (Kotler & Keller, 2012). Customer satisfaction has a consistent positive effect on
retention of customers. Starbucks products are made to order so there is little worry about repair
Kirksey: 25

and service efforts. If the product that the consumer received is incorrect, it can be replaced at
that time at no cost to the customer, and with little to no downtime. Starbucks also has additions
to their products that can be purchased for a fee.
What price adaptations should your firm include in its marketing plan? Be specific.
According to Kotler and Keller, price adaptations for products and services occur because
firms must constantly change to adapt to a wide variety of market conditions (2012). For the
Frappuccino, price adaptations, including time pricing and seasonal discounts, have contributed
to past success and should continue to do so in the future. Time pricing occurs when firms vary
their prices by season, day, or hour (Kotler & Keller, 2012). Starbucks CEO Howard Schultz
has said that Starbucks avoided sluggish sales towards the end of 2012 by offering coupons on
the purchase receipt, known as treat receipts, to morning customers (Jargon, 2012). These
receipts would give the customer a discount on Starbucks beverages like the Frappuccino if they
came back in the afternoon of the same day. Incentives like these that induce repeat intraday
customers can help add additional sales of Frappuccinos that otherwise may not have occurred,
so Starbucks should continue to issue treat receipts.
Seasonal discounts are price reductions for those who buy services or merchandise out
of season (Kotler & Keller, 2012, p. 404). Starbucks has used this pricing adaptation in the past
to help sell Frappuccinos in the summer, when hot beverage demand is lower (Starbucks, 2012).
Starting in mid-May, from 3 p.m. to 5 p.m. local time in your nearest store, Starbucks offered the
Frappuccino to customers at a 50% discount (Starbucks, 2012). Having the price reduced in this
way can help Starbucks gain new customers and allow existing customers to increase their
consumption by trying new flavors and increasing their amount of visits to Starbucks daily.
Describe and discuss any changes your team would make in the pricing of your product. Be
specific and provide examples where applicable.
Kirksey: 26
The current pricing of the Frappuccino is strategic and is serving Starbucks well. Ranging from
$3.50 - $6.00 per Frappuccino, Starbucks is making profit from this product while providing
value. Starbucks is sensitive to the demand for the Frappuccino and lowers the price during the
afternoon when demand is less. Starbucks also introduces seasonal flavors to keep demand high
to support their current pricing structure.
Promotions/Marketing
Describe, discuss and analyze all of the various Integrated Marketing Communication
(IMC) mix components your product/service uses.
Integrated marketing communications is defined as a planning process designed to
assure that all brand contacts received by a customer or prospect for a productare relevant to
that person and consistent over time (Kotler & Keller, 2012, p. 495). Each communication
forum and message can be strategically integrated to provide clarity, consistency, and maximum
impact (p. 495). Integrated marketing communication maximizes the effectiveness of a
products marketing by ensuring that each new marketing effort compliments existing efforts
(2012). This produces stronger message consistencybuilds brand equity and creates greater
sales impact (2012).
Starbucks first step in its integrated marketing communications was developing a
consistent brand (Ruiz, 2012). The brand makes every logo, storefront and store presence all
have a familiar look and feel (Ruiz, 2012). In addition, Starbucks has consistent
communications which support and reflect the Starbucks brand of personal consumer
engagement, product specialization and eco-friendly business practices (Ruiz, 2012). These
consistent communications are now integrated across multiple channels including direct mail,
websites and mobile technology (Ruiz, 2012). The marketing strategy for Starbucks brand is the
Kirksey: 27

same for its Frappuccino. First, Starbucks markets the Frappuccino to support personal
consumer engagement by writing each consumers name on the cup, just like they do for the rest
of their products. Second, the Frappuccino marketing campaign How I Like It supports the
Starbucks brand effort of product specialization. The Frappuccino is also marketed through
direct mail, websites and mobile technology. The message that comes across each of these
forums is that a Frappuccino will be specialized to the consumers tastes.
Describe, discuss and analyze the internet marketing possibilities for your product/service.
Internet marketing has become a necessity for companies to effectively get their products
or services known to millions of potential new consumers. Its possibilities are highly selective as
to where they are shown and offer interactive capabilities within them for consumers (Kotler &
Keller, 2012, p. 513). Another advantage that comes with internet marketing possibilities is they
are relatively a low cost for companies to make.
According to Starbucks, the experiences you have online can translate to rich offline
experiences" (York, 2010). Starbucks is using internet marketing by getting their consumers
excited about Starbucks Frappuccinos website Frappuccino.com. The site allows consumers to
make personalized Frappuccinos online and gives them access to make multiple and very unique
combinations (Starbucks, 2012). Consumers can also mix their own music on the site while
customizing their Frappuccino.
Starbucks also hosts events like the Frappuccino Happy Hour where consumers can get
Frappuccinos half off and try limited time flavors (Starbucks, 2012). Leading up to the happy
hour events, consumers get updates from the Frappuccino Twitter and Facebook pages as well as
pictures on Starbucks Frappuccino Instagram. Starbucks also gave prizes to consumers who
hash tagged about the event or who took pictures of their favorite beverages (Starbucks, 2012).
Kirksey: 28

Describe, discuss and analyze the use of social media in marketing your product/service.
Social media are described as a means for consumers to share text, images, audio, and
video information with each other and with companies and vice versa (Kotler & Keller, 2012, p.
546). Social media facilitates continuous dialogue between consumers and organizations. When
organizations utilize social media, they are presented with an opportunity to establish and
maintain deeper relationships with consumers. Starbucks utilizes several social media platforms,
including Facebook, Twitter, YouTube, Pinterest, and Instagram, to engage its consumers.
Starbucks also has a Facebook page and a Twitter feed dedicated to the Frappuccino. These
platforms allow customers who love Frappuccino products, to discuss the product and share their
experiences, photos, and more. Finally, the social media channels are integrated, which promotes
synergy and brand reinforcement.
Surveying the current promotional efforts for your product/service, what specifics could
you provide that show your firm is delivering value for their customers? Remember, value
is what customers get in return for paying the retail price for the product. Customers are
not buying features and benefits!
Each Frappuccino that Starbucks makes delivers the value that the customer paid for.
The customer can custom-order their Frappuccino, pay the retail price and receive what they paid
for. Starbucks sometimes runs a promotion for half priced Frappuccinos between 2 p.m. and 4
p.m. This promotion effort delivers the same value to the customer but for a substantially lower
price. For the Frappuccino, the value to the customer is whether or not the drink meets or
exceeds their taste expectations. Starbucks ensures it delivers value by promising to remake and
drink that does not meet the customers satisfaction.
What examples could you provide of firms (any firm, in any industry) that successfully
engaged in socially responsible marketing?
According to Kotler & Keller (2012), socially responsible marketing occurs when
Kirksey: 29

marketing managers consider the ethical, environmental, legal, and social context of their
roles and activities. The organizations task is thus to determine the needs, wants, and
interests of target markets and satisfy them more effectively and efficiently than
competitors while preserving or enhancing consumers and societys long-term wellbeing (p. 22).
Since the Deepwater Horizon oil spill in 2010, BP has been subject to a substantial
amount of negative press from many countries criticizing their effectiveness in ensuring the
safety and cleanliness of the environment in which they operate (BBC, 2010). In an effort to
redesign their image, BP has been advertising their investments into more clean energy research
and companies (BP, 2013). Since 2006, BP has invested over $150 million in clean energy
research and companies (2013). With these types of investments, BP is trying to reconnect to its
more environmentally minded consumers, like the 763,000 people on Facebook who have
publicly agreed to boycott BP over their oil spill fiasco (Facebook, 2013). Firms may also be
attracted towards environmental marketing because it can save on various costs and make the
firm eligible for tax breaks (Grant, 2006).
In the last seven years, Toms shoes has sold over two million pairs of shoes (Toms,
2013). Toms founder Blake Mycoskie attributes this success to the pairing of business and
charity, which is used to attract more socially minded consumers. Mycoskie was inspired by a
visit to Argentina where he noticed many children do not have shoes at all. Wanting to help, he
created a company that would match each shoe purchase with a donation of a pair to Argentinian
children. Mycoskie also believes that people who buy Toms shoes are more likely to share their
experience with friends, thereby giving Toms free word-of-mouth advertising (Forbes, 2012).
What specific suggestions could you provide for your firm to follow in order to be more
socially responsible?
Kirksey: 30

According to Entrepreneur.com, social responsibility means acting with concern and
sensitivity, aware of the impact of your actions on others, particularly the disadvantaged (2013).
Starbucks currently offers a variety of programs that demonstrate their degree of social
responsibility. Some of their programs are designed to improve the environment, local
communities, personal health, and support of ethical sources for their products (Starbucks, 2013).
Critics of Starbucks ethics often cite the sources for Starbucks coffee beans, and how Starbucks
may be treating them unfairly. According to Dan Welch, co-editor of Ethical Consumer
Magazine, just because the box says fair trade does not necessarily mean that it was a fair deal
(2011). Being the market leader, Starbucks is widely suspected of being able to force bean
growers into deals that are perceived as being more beneficial to Starbucks (2011). Starbucks is
also accused of being anti-union, and therefore anti-worker, because they have and use their
leeway to be a union-busting corporation (2011).
Conclusion
In conclusion, marketing management is an essential business function. Starbucks has
utilized marketing management principles to become the worlds leading roaster and retailer of
premium coffee products. This is evidenced by an examination of the Frappuccino blended
beverage. The Frappuccino like many other products was designed to satisfy a specific target
markets needs. Starbucks capitalizes upon its marketing mix to exceed consumer expectations
and deliver a quality product that consumers desire. Starbucks serves as an example of an
organization that has decided to harness the power of marketing management to develop and
promote the Frappuccino in a manner that is consistent with its brand identity.
Kirksey: 31

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