Introduction
Starbucks is a world-renowned coffeehouse chain that has provided customers with specialty coffee for decades. Founded in 1971, the company now operates over 30,000 stores in more than 70 countries. Starbucks’ mission is to inspire and nurture the human spirit – one cup of coffee at a time. Their success can be attributed to their strategic planning that involves elements such as segmentation, targeting and positioning (STP).
To better understand how Starbucks uses STP, this report provides an analysis of market segmentation, targeting strategy and positioning factors related to the company’s business operations.
Market segmentation refers to dividing up a market into smaller groups of buyers who share similar characteristics. Starbucks segments its market based on demographics (age and gender) and psychographics (attitude towards products). The company’s target customer base includes those looking for an experienced coffeehouse service that is easy to access and offers the highest quality products.
Starbucks positions its product offerings as high-end luxury items at premium prices compared to other competitors in the market that offer low-cost alternatives with average quality products. This Strategy shows potential consumer that they can expect high quality from them when it comes to their beverages and also charge higher price than any other alternative present in the market thus creating a considerable profit margin for itself in terms of business continuity.
The combination of segmentation, targeting and positioning enables Starbucks to grow its presence around the world by offering what customers want before they know they are looking for it—a great cup of coffee.
Segmentation
It is essential to understand target customers in order to develop effective marketing strategies. Segmentation is a useful tactic to identify customer characteristics and tailor marketing messages accordingly.
Starbucks has utilised its Segmentation, Targeting and Positioning (STP) analysis to gain a better understanding of its customers. This article will explain the Segmentation aspect of STP analysis for Starbucks.
Demographics
Starbucks segmentation, targeting and positioning comprise marketing decisions directed towards identifying appropriate group of people among the general public as future customers for the business and target these people with right promotion and positioning to convert them into actual customers. Starbucks demographically segment its products in terms of geographic, psychographic, behavioral and demographic characteristics as discussed below.
- Geographic segmentation – Starbucks population is divided up by geographical units that include regions, states, cities and even specific store locations. Some stores have different menus based on regional tastes.
- Demographic Segmentation – Age factors are important when considering Starbucks segmentation activities as younger generation is familiar with new trends while older customers prefer traditional drinks that can be enjoyed socially. Other demographic criteria include gender-based preferences in food/drink offerings, levels of educational attainment which are expected to go up in near future with increasing aspirations and income groups who remain loyal to the brand based on their economic circumstances.
- Psychographic Segmentation – Key lifestyle trends among customers such as health consciousness shapes food offerings at Starbucks that focus on fresh ingredients such as vegetables, fruits, meats that help maintain balanced diet along with drinks. Additionally location type matters within psychographics segmentation activities at Starbucks; for instance suburban or downtown locations attracts different types of customer numbers during different hours in day making differential food/drink options necessary for each locale type.
- Behavioral Segmentation – Behavioral factors also form important basis of marketing strategy formation at StarbucksCompany; occasional or regular being primary consideration leading to customized offers being doled out depending on customer needs/desires personalized service being provided including jazz music setting unique atmosphere to please music savvy young audience.
Psychographics
Psychographics is the segmentation of people based on lifestyle, opinions, or values. It takes a deep dive into consumers’ behavior patterns and preferences. Starbucks, like any other retailer or brand, can use psychographic segmentation to better understand and cater to the needs of their target market.
The main demographic factors for psychographic segmentation include lifestyle factors such as activity level, interests/hobbies, social class and media consumption. Additionally, Starbucks can further segment its target market by considering psychological traits like values (health conscious), beliefs (animal rights), attitudes (atmosphere) and personality traits (connoisseurs).
This information allows marketers to create personas for each major consumer type so that they can develop tailored messages that are more likely to resonate with the individuals within that particular audience segment. Ultimately, successful psychographic segmentation enables Starbucks to better tailor its marketing campaigns to appeal to specific customer segments in order to increase engagement, loyalty and sales.
Geographics
Companies use geographic segmentation when they need to target certain markets which have certain characteristics or needs, often related to a common location. Starbucks takes this approach to break their markets into countries, and then cities or regions within that country. In the United States, for instance, they are targeting the West Coast, New York City and Midwest.
They can then adjust their marketing and product offerings based on the differences in those locations. For example, in some locations there may be fewer coffee drinkers so it is more important to focus more of their efforts on education about coffee and its benefits. They can also promote different products that customers in these areas are more likely to purchase.
Furthermore, Starbucks also does research on various countries worldwide to understand the culture better so they can create campaigns that align with local beliefs and customs. For example, in Dubai where local people love exclusivity and luxury goods, Starbucks has ‘Golden Element’ which is an exclusive range of high-end merchandise made with gold accents and diamondsfit for expensive gifting occasions (eid, diwali etc). By taking an informed approach on different geographical locations around the world Starbucks is able to direct its offerings at customers who want unique experiences and customized products.
Targeting
STP (Segmentation, Targeting and Positioning) analysis of Starbucks is a useful tool to understand the positioning of the coffee chain. By analyzing Starbucks’ current targeting strategies, businesses can understand the most important groups of customers that the company is targeting and the primary benefits that it is offering them. With the STP analysis, businesses can also assess the positioning of Starbucks among its competitors. Let’s take a deeper look.
Evaluating Segments
A successful Segmentation, Targeting and Positioning strategy for any organization must begin with a thorough analysis of the available customers and potential segments within the market. Organizations use various criteria to evaluate segments, such as size, purchasing power, current demands, growth opportunities and competitive advantages.
When evaluating segments it is important that organizations ask themselves questions related to their target customers: Where do they live? What is their lifestyle? What is their role in the selection of a product or service? How much money do they spend? What are their attitudes towards a particular product or service?
Once undertaken, an analysis should provide organizations with a more precise picture of their customers and what makes them unique. Starbucks can utilize this insight to identify segment attributes that are most relevant to them such as age, income level, lifestyle interests and geographical location. This can be used by Starbucks to develop strategies for targeting specific customer segments in different markets around the world.
Selecting Target Markets
When selecting target markets for your business, it is important to consider a range of factors including geographic, economic, demographic and psychographic. Selecting a target market is the most important step in formulating a sound business strategy as it focuses all marketing efforts on the markets that are most likely to benefit from an organization’s product or service offering.
For example, Starbucks has used the STP analysis – segmentation, targeting and positioning – to target the US millennials market with its mobile payment service and home delivery service. It offers free WiFi access in its stores and has launched a loyalty program designed specifically for millennials. By segmenting this age group based on criteria such as their needs and preferences, Starbucks was able to focus its marketing efforts on particular segments and products geared for specifically for them.
In order to select a target market effectively it is important to research potential consumers’ needs and preferences as well as their geographical location. Companies should examine their current customer base by performing an in-depth analysis of various demographic categories such as age, gender, income level and professional occupation. It is also essential that companies identify how consumers make purchasing decisions by examining their values, attitudes and lifestyles (i.e., psychographics). By focusing resources in well-defined target markets companies can better develop effective strategies that will increase sales volume while maximizing return on investment (ROI).
Positioning
STP Analysis of Starbucks is an important part of their marketing strategy. Positioning is a key element for any successful business. It is about understanding how customers perceive the brand and how it can be differentiated from competitors in the marketplace. Positioning requires understanding of the target market, competitors, and the customer’s needs and wants.
By understanding these elements well enough, an organisation such as Starbucks can effectively position itself in the market. Let’s look into further details.
Developing a Positioning Statement
Developing an effective positioning statement for Starbucks requires careful establishment and research of both internal facts such as: the product’s features and benefits; target market characteristics; and the competitive environment. Once these elements are understood, a succinct positioning statement can be developed that outlines how a company’s product or brand should be perceived by customers versus its competition.
The first step in creating a positioning statement is to choose a competitive frame of reference, or simply put, identifying Starbucks’ key competitors. With its ubiquitous presence around the world and large number of competitors in many markets, it is important to focus on key competitors as this will determine how Starbucks approaches potential customers. Knowing which products/services customers may perceive as substitutes for Starbucks offerings is also important information to consider at this point.
The next step for developing a positioning statement for Starbucks involves researching what the company has to offer versus what their competition offers. Retailers must understand where their strengths, weaknesses and competitive advantages lie in order to create powerful messaging that differentiates them from others in the space. This includes looking at variables such as utility (the satisfaction gained from using the product), price, quality/size of offerings and unique services that set them apart from their competition. It also includes understanding which areas of expertise present opportunities (e.g., drive-thru convenience) or potential negatives (e.g., extended wait times).
Finally, once these two steps have been completed effectively it’s time to create an intangible position statement targeted at prospective consumers that conveys who you are, why you are better than your competitors, and most importantly how the customer can benefit from choosing your particular offering over any other options available to them in the marketplace today. A well crafted position statement should serve as a guiding force during development activities so product decisions align with customer desires rather than focusing on feature sets alone – ultimately delivering maximum value against known customer needs!
Crafting a Unique Selling Proposition
Creating a Unique Selling Proposition (USP) is an essential element in any business’ positioning strategy. This type of messaging requires careful thought and consideration, to accurately convey the strongest points of what makes the product or service special or different from its competitors. Designing a USP requires identifying a company’s core strengths, market conditions and determining what positions are attractive to potential customers.
An effective USP should be memorable, specific and specialized to cut through the clutter in today’s crowded marketplaces. It needs to highlight the key reasons why a consumer might benefit from selecting your particular product or service over another similar offering. Ultimately, it should be something that can be easily communicated and remembered—a memorable tagline that can be used to increase brand awareness and loyalty among customers.
The most successful messages will differentiate the company from its traditional competitors by focusing on:
- Price point
- Features/benefits
- Quality/reputation
- Customer service
- Selection
By forming succinct but powerful messaging around this idea and reinforcing it through advertising campaigns and marketing collateral, companies will be well-positioned for growth against their competition.
Conclusion
The STP analysis of Starbucks has revealed that the company primarily appeals to a niche market of highly sophisticated coffee consumers who demand quality and consistency. By continually introducing innovative products, Starbucks has grown from a single store in Seattle to a global brand with stores in 65 countries. In addition, it has been successful in creating its own unique identity, offering customers a variety of high-quality products and services.
The main takeaway from the STP analysis is that Starbucks needs to focus on:
- Understanding different demographics within its target market and taking specific approaches when developing marketing strategies for each one.
- Maintaining its existing customer base while also reaching out to new segments in order to increase sales and brand recognition.
- Continuing developing strong relationships with partners and suppliers in order to ensure long-term success.