Starbucks Malaysia's Marketing Strategy

 

1.0 INTRODUCTION

Marketing management is fast becoming an integral part of the business process, and this is based on the understanding that marketing involves the adoption of necessary strategies to ensure that the value of any given product or service is communicated to customers and, as such, persuade them to go for these products. The way a company positions itself is without a doubt important, as it can be the link between the company’s failure and success. There are numerous cases of success in which marketing has been held accountable for the company's growth, and this is based on the underlying fact that because the value of any business is centered on offering its services for success and profiting from such sales, the business is expected to implement necessary strategies to ensure that such an approach becomes a success in the organizational setting.

On that account, it can easily be seen that marketing is an integral part of any business process, and this accounts for the need for companies to align their productivity with what is actually demanded in the market in order to ensure that they are capable of meeting these demands. Meeting customer demands benefits the company, as accounts recorded in this perspective have linked such with increased growth and profitability.This is because when the needs of customers are well met, they will be loyal to the company, and the end result is that their repurchase intention will increase as well as their recommendation for the services or products offered by this company. As such, it can be seen that meeting the needs of customers has a direct influence on the profitability of a company.

The need to offer customers what they want is most significant in the fast food industry. This has been heavily influenced by the increase in globalization and internationalization of firms, which has made the market very competitive by giving customers more quality at a reduced price. Pricing is basically the main factor that is used for competition in this market, as it is a measure of what customers can obtain and for how long they can be able to obtain that. The implication now is that a customer who can obtain higher-end brands today may not be able to do so tomorrow due to economic factors.

As a result, the purpose of this paper is to better understand Starbucks' marketing strategies by demonstrating how the company has been able to implement the marketing mix, which is increasing competition for its brand in Malaysia and other countries where they have a presence.

ABOUT STARBUCKS 2.0

The story of Starbucks began in 1971. Back then, the company was a roaster and retailer of ground coffee and whole beans, tea, and spices and had only one store in Seattle’s Pike Place Market. But currently, the company offers its products to millions of customers in 60 countries through its 18,000 retail stores.

The name Starbucks was inspired by the first make in Herman Melville's Moby Dick.The company’s logo is also an inspiration from the sea; it features a twin-tailed siren from ancient Greek mythology. Its mission is to inspire and nurture the human spirit—one person, one cup, and one neighborhood at a time.

Starbucks offers a range of products that customers can enjoy at their stores, at home, or on the go. These products include: coffee—with more than 30 blends and a single source of premium coffee—homemade beverages—freshbrewed coffee, hot and iced espresso beverages, Frappuccino® coffee and non-coffee blended beverages, smoothies, and Tazo® teas—and merchandise, free beverages and foods, and other consumer products. In 2011, Starbucks recorded its highest revenue ever with $11.7 billion in annual revenue generated. The company’s corporate store also grew by 8%, and it is one of the reasons behind the massive revenue generated. 

3.0 MARKETING MIX IMPLEMENTATION IN STARBUCKS

The marketing concept of the 4 Ps was formulated by McCarthy in 1975. The 4Ps are elements used to represent products, prices, promotion, and place in the marketing mix. For over two decades, these elements have been adopted as the root from which marketing plans are developed. In any case, with recent attention offered to service marketing in recent years, theorists have added extra Ps to the basic concept. Fifield and Gilligan (1996) are the authors who recognized the need to include over 100 variables—process, physical, and people—to form the 7 Ps of service marketing, but only the initial 4 Ps were analyzed.

3.1 Product mix

Florence (2013) stated that one of the main corporate objectives of Starbucks is to create a standard taste, irrespective of the country or location where they operate. The company is of the view that while standardization is essential for reducing operation costs, adapting to the local environment they operate in is important for business success. As such, the concept that "its mission is to inspire and nurture the human spirit—one person, one cup, and one neighborhood at a time" has been the founding principle of business management at Starbucks.

Although Starbucks offers the same blend of coffee in terms of ingredients and taste standards across the world, their products are designed to feature the culture, cuisine, and customs of the market they operate in (Florence 2013). Thus, this is why the coffee shop is still the most preferred across countries.

These examples show how the company has designed its business strategy to focus on the local needs of its market instead of adopting an international menu. By focusing on local needs, the company is communicating a cognitive sense of value that the customers, no matter where they might be across the globe, will use in processing their purchase decision. As the company offers beverages and foods that are locally made, the customer value is increased in the sense that customers can be sure of having meals that meet their local taste. In that case, the affective behavior increased, which led to an increase in customer loyalty and repurchase decisions. When customers travel abroad as well, there might be a sense of cognition that Starbucks is the place to be for sourcing quality coffee internationally, as this is the value the company constantly communicates to its customers.

For instance, they sell locally made white coffee in Malaysia while selling pure black coffee in Brazil. The snacks are also different and tailored to the market’s taste, with local Malaysian ingredients used in Malaysian restaurants and the local ingredients of other countries used in their respective outlets in those countries.

3.2 Place

Currently, Starbucks has 18,000 restaurant outlets in 60 countries across the globe (Florence 2013). The company still continues its focus on the management of capital, which is an illustration of its effective, prudent, and strategic expansion. The increased potential for growth in the international market was discovered through its operations in the United States.This strategy has created a benchmarking gap between the company and its competitors. However, there is a need to understand the importance of looking back and using the past experience to build even more lucrative restaurants.

The company's local and global presence is used to communicate the availability message.While the company is focused on business expansion as a means of increasing profitability, the expansion process is communicating to the market that Starbucks is easily available and accessible. As such, the customers can be assured that no matter where they might be, there is always a chance of having Starbucks around. This form of marketing communication enhances cognitive processing in the sense that customers can easily visualize Starbucks whenever they feel like going out to have some meals as the company is communicating that they can easily be found around their homes. In that case, a strong mental image of accessibility and availability increases affective behavior.In some of their outlets, Starbucks operates 24/7, which further enhances convenience on the customer’s side. As such, it can be seen that the company has been successful in enhancing positive behavior and attitude towards its brand. Starbucks is readily available in most of the major shopping malls and airports in Malaysia, as well as in side corners across certain residential areas of the country, and this makes them highly accessible.

3.3 Pricing

Florence (2013) also stated that the company has realized that, notwithstanding its cost-saving approach that is inbuilt in its standardization process, success can only be obtainable by being able to adapt to economic conditions in the different markets they maintain business operations in. This is actually what is happening with the company’s implementation of its pricing strategy, which is focused on localization instead of globalization. This is also in line with the company’s business model of thinking globally and acting locally.

For each country, there are rigorous pricing concepts that can be used to determine the right price for such a market. These processes have been described by Vignali et al. (1999) as:

1. selecting price objectives;
2. Determining demand;
3. Estimating cost;
4. Analyzing competitors' costs, prices, and offers;
5. selecting an appropriate pricing method, and
6. Selecting the definitive price

The above processes are the framework that the company uses to design prices for its products across countries. The overall pricing objectives of Starbucks are to increase market share in each of the countries it operates in, and this is the barometer used in setting prices for each of these markets (Florence 2013).

Such an approach, whereby the company sets its price according to market value, is the best option. This is because there are variations in earnings across the globe, and standardizing the pricing process will be an ineffective measure. For instance, in the USA, the pay for 1 hour could be $5, and the same amount could be the pay for 3 hours in Malaysia or 6 hours in the Philippines, and even higher in some of the developing world. Therefore, while US employers can afford to spend $5 on a meal, this might be possible in countries where the pay is actually lower.

In view of that, Starbucks is communicating value for money by adopting a localized pricing option. This is because international customers will perceive a high value for the products offered in relation to the American market, but will be paying a lot less for the same quality. Overall, this will increase their attachment to the brand and provide them with numerous reasons to choose Starbucks over its competitor.As such, it can be stated that it is significant to note that the company has been adopting numerous localized strategies in relation to the marketing mix discussed, and the reason behind such is to increase brand loyalty and subsequently increase their global market share. The company also uses pricing to communicate value in the sense that its high price is a representation of higher quality than other brands.

3.4 Promotion

The final context that will be discussed is the issue of how promotion influences the cognitive, affective, and behavioral attitudes of customers towards Starbucks. Promotion is also known as the marketing communications mix, and it was developed by someone who also stated that it comprises five major tools as follows:

1. Advertising;
2. Direct marketing;
3. Sales promotion;
4. public relations; and
5. Individual selling (Kotler 1994).

By adopting these tools, Starbucks also localizes its marketing communications strategy as the company seeks to meet the enormous demands of cultural and environmental differences that exist in the markets they operate in. Florence (2013) stated that it would be foolish for the company or any other company to ignore the fact that differences exist between markets in terms of culture and customers, as ignorance or recognition will have a significant impact on brand performance.Although the company focuses on promoting its corporate image globally, it advertises its products by adopting the maxim "branding globally, advertising locally" (Sandler & Shani, 1991) as its promotional strategy.

For instance, in Starbucks' UK advertisement, English footballers such as Alan Shearer are used as the company’s figurehead in the promotion of its products, while the company also uses Fabien Barthez (the international goalkeeper of France) for its advertisement in France. In terms of setting, the environment of Starbucks in China features mostly big round tables, which are a representation of communism in China and allow customers to dine with their families, while the American setting is more of a single table, which represents the American view of individualism.

Overall, the promotional strategy adopted by Starbucks is yielding the same effect as other elements of the marketing mix discussed above. From this analysis, it can be stated that the company has been able to develop the right approach towards strategically managing its operations across the globe by thinking globally and acting locally at the same time. The effects of such are that it provides customers with quality and positive information that they can use for their cognitive processing, and this will positively influence their affective behavior. The reason for that is that customers will view Starbucks as respecting their values in terms of culture, customers, and cuisines, as well as being caring by pricing their products to suit the economic conditions in their country. In that case, the customers will be positively inclined toward the brand, which is the main reason behind its global success.

4.0 RECOMMENDATION

From the above analysis, the implementation of the 4Ps for gaining market advantage through the adoption of numerous strategies that better align the business objectives with the needs of the market in order to gain improved profitability by meeting the needs of customers has been illustrated with the case of Starbucks as contained in this paper. From the above analysis, it was noted that the company has been able to position itself in all markets it maintains a presence in by adopting a number of strategies that best align their business activities with the needs of customers. For instance, the company locates its outlets in easy-to-identify locations, makes the foods well-tailored to what is available in their country of location, promotes their products vividly by adopting the signatures of numerous celebrities in their markets to attract new customers and retain existing ones, and prices their products based on the economic power of the country they exist in.

However, the above analysis also shows that the company prices its products relatively higher than those of their competitors, and this is based on the company’s idea of communicating value through higher prices. However, this strategy risks the company’s chances of success, especially during a period of economic downturn, and it is based on the understanding that their competitor might be able to adopt price advantage as a competitive force by pricing their own products relatively lower, which will definitely shift the attention of customers and risk the company’s chances to retain existing customers or even to attract new ones. On that note, it is recommended that Starbucks consider readjusting their pricing strategies, as it would highlight their potential as a powerhouse in the industry and also present the image of high quality at a low price to the customers, which will directly influence their performance positively.

5.0 CONCLUSION

Numerous studies have supported the idea that understanding the cognitive processing of customers in relation to how it influences their affective behavior and purchase intention is very important (e.g., Peter & Olson, 1999; Van Osselaer & Alba, 2000; Van Osselaer & Janiszewski, 2001; Keller, 2003). The main reason provided by these studies for such claims is that cognitive processing is used by the customer to strategically position the brand in his or her mind. Additionally, the position a brand maintains in the mind of the market is very important because it directly influences their purchase decision. For instance, when a brand maintains a position of high quality at a lower price, there are high chances of the brand being preferred over its competitors when it comes to purchasing products and services offered by this brand. There, the researchers' claims are right, and corporations must put more efforts into understanding the attributes customers use to associate their brand with them and improving these attributes in cases where they are poor in order to ensure that they gain a competitive advantage over their competing brands.

This is in line with practices that were found to be available at Starbucks. In the above discussion, it has been illustrated that the success of the company is not a result of mere chance but rather the adoption of numerous strategies that include a well-integrated marketing mix that is centered on understanding what customers want and applying necessary strategies towards ensuring that such customer needs are met. Basically, the notion presented from the above discussion is that the company is all about satisfying customers’ needs, and they are willing to do whatever it takes to make sure that this becomes a success. A good example comes in the form of the company focusing their service offerings on their local marketing rather than their coveted cuisine, which has been successful over the years.

As noted earlier in the discussion, it was stated that such a practice will be beneficial to the company that adopts it, as it will lead to a subsequent increase in customer loyalty, which will increase their repurchase intention and, as such, increase the profitability of the business. This is because the sustainable growth established in the Starbucks venture can be accounted for by their continued interest in satisfying customers’ needs, which also resulted in their high level of profitability. In conclusion, it will be stated that marketing is an integral part of any business' success, but the factor behind such success lies deeply in the company’s ability to understand what the customers want and provide for such wants, and this can easily be visualized through the adoption of a clear marketing mix.

REFERENCES

Fifield, P. & Gilligan, C. (1996), Strategic Marketing Management, Butterworth-Heinemann, Oxford.

Florence (2013), “Starbucks: International products branding analysis.” Available at: http://s3.amazonaws.com/files.posterous.com/temp-2010-11-24/yDHyFxeeagjtjBysIpgipGhvqDsEimgHdGAeifEwayAxAbIozmspJokbcynq/Starbucks_Product_Strategy_Review.pdf?AWSAccessKeyId=AKIAJFZAE65UYRT34AOQ&Expires=1364513514&Signature=sRl7FJaLIz4fscLDAIkalWC1DRM%3D [Accessed on: 29/03/2013].

Keller, K.L. (2003), “Brand synthesis: the multidimensionality of brand knowledge”, Journal of Consumer Research, Vol. 29 No. 4, pp. 595-600.

Kotler, P. (1994), Marketing Management, Pretice-Hall, Englewood Cliffs, NJ.

Peter, J.P. and Olson, J.C. (1999), Consumer Behaviour and Marketing Strategy, McGraw-Hill International Editions, Singapore.

Saundler, D.M and Shani, D. (1991), “Brand globally but advertise locally? An empirical investigation”, International Marketing Review, Vol.9 No. 4, pp. 18-29.

Van Osselaer, S.M.J. and Alba, J.W. (2000), “Consumer learning and brand equity”, Journal of Consumer Research, Vol. 27 No. 1, pp. 1-16.

Van Osselaer, S.M.J. and Janiszewski, C. (2001), “Two ways of learning brand associations”, Journal of Consumer Research, Vol. 28 No. 2, pp. 202-23.