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Strategic Marketing Management
June 19, 2022
Q1. “Explain the selected pricing strategy (penetration, skimming, competitor-based).”
Starbucks’ pricing strategy has been more dynamic in recent years, as the company has sought to respond to fluctuations in raw material costs and consumer buying power throughout the commencement and advancement of the economic crisis (Larson, 2019). Starbucks’ dynamic pricing approach resulted from a shift in attitude towards its prices. Other expenditures, including advertising expenses, are also included in the Starbucks pricing structure. The experience quality and brand value also influence the price of Starbucks. These factors make its prices considerably more expensive than those of McDonald’s, Dunkin’ Donuts, and local coffee shops. Starbucks’ pricing strategy shifted from market prices to price differentiation depending on the price elasticity of certain consumers. Price is generally inelastic for consumers between the ages of 18 and 34. Despite the company’s frequent price increases over the last many years, this group remains a solid market for Starbucks.
Q2. “Discuss various pricing tactics that have or would prove effective in stimulating sales.”
Starbucks made use of product bundle pricing. Starbucks began selling breakfast combos for $3.95 in March 2009. Drip coffee in a long 12-ounce cup with an egg sandwich or latte in a tall cup with either coffee cake or oatmeal is among the alternatives (Dawson, 2019). When these products are purchased separately, consumers save $1.20 by bundling them. The cost is also less than that of McDonald’s and Dunkin’ Donuts breakfast meals.
Q3. “Discuss the distribution strategy relevant to the product/service.”
A distribution strategy is devising an effective technique for distributing your company’s goods and services. This approach aims to enhance income while keeping consumer loyalty (Abtin and Pouramiri, 2016). Starbucks Company buys coffee beans from growers in many nations to its roasting plants in the United States. The farmer’s coffee cherries are transported to the mills for manufacturing into beans. These mills are part of a cooperative association founded by farmers, typically on a small scale, who operate mills or by intermediaries who purchase cherries from farmers. Through franchise operations, Starbucks goods may be found at airports, bookshops, and college campuses. The corporation has agreements with Albertsons Food Chain, Kraft Foods Inc, and others to operate Starbucks coffee shops in their supermarket where other company goods are offered.
Q4. “Explain the channels used to distribute the product/service.”
Starbucks’ distribution strategy aims to reach people where they work, shop, eat and travel; in other words, everywhere they are. As a result, they strategically put the bulk of their shops in high-traffic, high-visibility areas. Depending on the size of the establishment, many offer a range of pastries, beverages, coffee-related accessories, CDs, seasonal novelty goods, and even sandwiches or salads. Beverages account for 77 percent of shop sales, a significant turnaround from 10 years ago when whole bean sales accounted for well over half of store sales (Hanlon, 2019).The rest, 15%, is accounted for by “specialty operations.” The second component of the distribution plan comprises sales to non-company-run retail chains, hotels, airlines, and restaurants. Establishing businesses with third parties having the same values and dedication to quality is part of this process. This method works best in grocery shops since buying a Starbucks brand product for the first time at a grocery store is less scary than walking into a coffeehouse. According to research, 40% of new coffeehouse consumers had already tasted a Starbucks brand product. Schultz thinks that satisfied partners lead to satisfied customers. The firm has 60,000 employees.
Q5. “Explain the firm’s use of e-channels, e-retailing, or other non-traditional methods of distribution Channel.”
Adoption is a crucial component of omnichannel shopping. It is worthwhile to incentivize by whatever means imaginable. Starbucks’ strategy is straightforward. Identify your strongest consumer touchpoint and promote channel adoption at this touchpoint with a clear advantage. In their situation, they already had 28,000 physical locations and 75 million clients every month (Hanlon, 2019). They found a significant advantage and used that service to establish new consumer ties through email. For many eCommerce businesses, the web channel is the most effective consumer touchpoint (their site). Barilliance provides you with various methods to convert site visitors into the channel that makes the most financial sense.
Abtin, A., & Pouramiri, M. (2016). The impact of relationship marketing on customer loyalty enhancement (Case study: Kerman Iran insurance company). Marketing and Branding Research, 3, 41-49.
Dawson, T. (2019). How Starbucks Uses Pricing Strategy for Profit Maximization.
Hanlon, A. (2019). Digital marketing: strategic planning & integration. Sage.
Larson, R. B. (2019). Promoting demand-based pricing. Journal of Revenue and Pricing Management, 18(1), 42-51.