starbucks case study

Digging to the bottom of the cup

STARBUCKS NEW BUSINESS PITCHDECEMBER 9, 2008

TAYLOR FOLEYBRITTANY NUGENT

SHANNON REEDMARIAM SHAHABLOUISA STELLE

Table of Contents

Section Page Trove 3 The Market 9 The Competition 13 Starbucks 20 Research 23 Marketing Solutions 33 Fees 53 Presentation Endnotes 56 Business Paper 57

MISSIONCORE BELIEFS

CREATIVE PHILOSOPHYINDUSTRY EXPERIENCE

Trove3

Mission

We dig deep. We strive to find the gem in your brand.

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Core Beliefs

We believe in:

• hunting for the uniqueness in your brand

• building brands that impact consumer lives

• creating a treasure chest for every campaign

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Creative Philosophy

We help brands become diamonds in the faceless clutter of today’s society. Just as a diamond starts out as coal, the process of making a brand valuable is our ultimate goal.

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Industry Experience7

The Team

Mariam ShahabArt Director Ideal Drink: Tall caramel frappuccino, no whipped cream, extra syrup

Taylor Foley Media DirectorIdeal Drink: Grande non-fat mocha with whipped cream

Shannon Reed Interactive DirectorIdeal Drink: Tall mint hot chocolatewith whipped cream and chocolate syrup

Brittany NugentAccount Manager Ideal Drink: Venti soy chai

Louisa StelleAccount PlannerIdeal Drink: Tall non-fat cappuccino

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COFFEE INDUSTRY OVERVIEWCOFFEE HOUSES AND DONUT SHOPS

THE CONSUMERS

The Market9

Coffee Industry Overview

Which coffeehouse or donut shop do you visit most frequently?

All data collected from online surveys and in store intercepts.

43.3% 76.7%43.3%

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• Starbucks and Dunkin Donuts - leaders in the category with 90.3% of sales• Starbucks has seen sales decline and begun closing stores• Dunkin Donuts continued expanding in 2007

• Coffee houses growth from 2005-2007 - 43.7%

• Donut shops growth from 2005-2007 - 16.9%

• Independent coffeehouses have the largest following of regulars

• Starbucks and Dunkin Donuts have the most number of visits per month

• Starbucks dominates the West

• Dunkin Donuts dominates the Northeast

• Quick Service Restaurants (QSR) are faster, cheaper and are beginning to offer breakfast and coffee to budget conscious costumers

• Lack healthy options

Coffee houses and Donut shops11

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• 55% of United States adults consume coffee on a daily basis• Loyal coffee culture

• Television advertising dominates for coffeehouses and donut shops • Interactive marketing and product sampling used to increase sales

• Men are more likely to use coffeehouses as a workspace

• Young customers (18-24 year olds) visit coffee houses for leisure time

• For households with children a drive through is important• Especially in suburban areas

• Most important features that attract potential costumers:• Convenience • Price

The Consumers12

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DUNKIN DONUTSTIM HORTON’SKRISPY KREME

CARIBOU COFFEEPEET’S COFFEE

MCDONALD'S MCCAFE

The Competition13

Dunkin DonutsUnique Selling Proposition: Quality coffee for Americans on the run

Number of Stores: 5,769

Gross Sales: $5.3 billion

Historical Fact: World’s largest coffee and donut shop, serving more than 3 million coffees a day.

Advertising Sample: DunkinbeatsStarbucks.com

The average Joe

Insert company logohere

1413

Tim HortonsUnique Selling Proposition: “Always fresh” coffee, baked goods and home-style breakfasts and lunches in a quick-service restaurant.

Number of Stores: 424

Revenue: $1.9 billion

Historical Fact: Started in Canada by a famous hockey player in 1964 and merged in 1995 with Wendy’s International.

Advertising Sample:

Canadian Craig

1514

Krispy KremeUnique Selling Proposition: Krispy Kreme makes all of its donuts in its store and they are served hot right off the line.


Revenue: $461.2 million

Historical Fact: Founded in 1937 in Winston-Salem, N.C.

Advertising Sample:

Insert company logohere

Joe the Plumber

1615

Caribou CoffeeUnique Selling Proposition: Caribou Coffee uses the highest quality coffee beans no matter what they cost.


Gross Sales: $256.8 million

Historical Fact: In 1990 the founders journeyed to the top of Sable Mountain. The breathtaking views became the entrepreneurial vision for Caribou Coffee.

Advertising Sample:

The Adventure Seeker

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Peet’s CoffeeUnique Selling Proposition: A coffee style emphasizing superior quality beans and a darker roasting style that produces coffee with richness and complexity.


Gross Sales: $184 Million

Historical Fact: Founded in 1966 in Berkley, CA

Advertising Sample:

Peetniks

1819

McCafé Unique Selling Proposition: All of the taste and quality of a coffeehouse with the convenience and price of McDonald’s.

Number of Stores: 3,800

Gross Sales: TBA

Historical Fact: Launched in 2008, their espresso beans come from the same place as Starbucks.

Advertising Sample: “Unsnobby coffee” microsite and television campaign

The Java Junky

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CURRENT SITUATION:WHO YOU ARE

MARKETING OBJECTIVES:WHERE YOU WANT TO BE

Starbucks20

Who You Are

S.W.O.T AnalysisStrengths

• Universally recognized • Customizable drinks• Partnerships with known brands• Ambiance – comfortable stores • Store placement • Introduction of drive-thrus• Community Involvement • Environmental reputation

Weaknesses• Prestigious reputation perceived as snobby• Inconsistency with store experience• Higher prices than main competitors • Do not brew organic coffee in stores• Confusing terminology in ordering

Opportunities• Product placement • Advertising to the digital consumer• Expand on fair trade • Strengthen awareness of partnerships and sponsorship• Sell more ground coffee• Easily accessible nutritional information

Threats • Economy• Trend of coffee drinking may end• Rise in cost of coffee and dairy products• Copy cat brands • Health conscious trend• Cannibalization of products

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Where You Want To Be

• Bring back the magic of the “Starbucks experience”

• Reconnect with consumers• strengthen the brand – consumer relationship

• Increase sales of drinks

• Create a “community” feeling in Starbucks• bring back the idea of a local coffeehouse

Marketing Objectives:

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METHODOLOGYCONSUMER INSIGHT

BRAND ESSENCE

Research23

Methodology

Field Research • 12 Store intercept interviews • 2 Barista intercept interviews

Online Survey • 60 respondents to multiple choice, fill in the blank survey • created using Survey Monkey

Email Survey • 30 respondents to in-depth multiple choice, fill in the blank survey

Primary research conducted:

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Consumer Insight

Global

Reliable

Chain company

Corporation

Expensive

Key Insight: Currently, when a consumer thinks about Starbucks they only think about coffee and not the experience.


What comes to mind when we say “Starbucks?”

My paycheck

Dark

Rich

Coffee

Morning routine

Bad service

Caffeine

Money

Yuppie

Comfy sofas

High price

Caffeine rush

Nice atmosphere Not healthy

Addiction

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Consumer Insight

Describe a typical Starbucks customer“ A female Starbucks customer wears a beret, scarf, Ugg boots, skinny jeans, and has an expensive pocketbook. A male Starbucks customer wears loafers, tight sweater to show he works out, a fancy watch, and uses a debit card because he never carries cash.”

“I think there are three main types. There is the person who works really hard all the time andneeds a caffeine boost, you know the one who takes their coffee back when its not hot enough. Then there's the student who drinks one coffee and stays to study for hours and the indie moody person who likes poetry and the smell of coffee.”

“A young, urban, wannabe writer, who gets a large coffee and has time to sit in the big comfy chairs at Starbucks and write on his Mac laptop.”

“A professional in his mid 20’s on the way to work in the morning.”


Key Insight: There is a wide variety of types of people who visit Starbucks with varying reasons for visiting.

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Consumer Insight

Why do you drink coffee or coffee-related drinks?“I drink coffee sometimes to socialize with my friends or husband or just to treat myself and relax after a long day. ”

“As a nice little pick me up.”

“ Its a necessity on a work morning.”

“To escape from my hectic life and socialize in a relaxing environment.”

“To keep warm.”

“One to get through the morning and one to get through the night!”

“Because I'm addicted to caffeine!”

Key Insight: Coffee is a vital part to a person’s routine.


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Consumer Insight

How was your last Starbucks experience?

“Starbucks is always extremely crowded. I went there because a friend suggested we meet there. I went to Dunkin Donuts afterwards and got my coffee!”

“It was good but there were too many people around for me to relax. But still, somehow the atmosphere felt intellectual.”

“It’s my third home! I love the coziness.”

“Nice and quite.”


Key Insight: Every Starbucks store and experience is not the same.

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Consumer Insight

What do you consider coffee to be?


33.3%

38.3%36.7%

41.7%

6.7%10%

Key Insight: Respondents do not consider coffee to be a healthy option.

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Consumer Insight

Key Insight: People enjoy the experience of drinking coffee in a coffee shop.

Where do you consume Coffee and Coffee-Related drinks?


65.0%

31.7%

15%58.3%

36.7%

38.3%

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Consumer Insight

Key Insight: Starbucks offers a lot of individualization whichhelps people create drinks to suit all taste palates.

What is most important to you when visiting a coffeehouse or donut shop?


26.7%

40%

16.7%10%

73.3%

35%8.3%

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Brand Essence

Rational Emotional

• Diverse, quality selection of specialty coffee• Clean store environment• Eco-conscious• Urban and suburban convenience • Consistent taste • Customizable drinks

• Charitable• Active member in the community• Personable baristas• Comfortable atmosphere• Global brand awareness• Consumer intimacy• Cultural experience

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TARGET AUDIENCEPOSITIONING STATEMENT

CREATIVE STRATEGYMARKETING CONCEPTS

INTEGRATED MARKETING CAMPAIGNMEDIA PLAN

MARKETING CALENDAR

Marketing Solutions33

The Target

• Men and women ages 16 to 27•Educated and cultured•Urban and suburban• Middle to upper class• Balance social life with responsibilities

Cultured Millennials34

Positioning Statement

To cultured millennials, Starbucks is a premium coffee house that adds an intimate and valuable experience to a consumer’s lifestyle by integrating caffeine with a comfortable environment.

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Creative Strategy36

Key insight: Cultured millennials actually value the coffee shop experience as much as they value the quality of coffee.

What the consumer thinks now: I go to Starbucks and pay four dollars for my coffee, but sometimes I feel guilty about spending so much money on a cold corporation. I always feel comfortable at the coffee counter, but I wish Starbucks paid more attention to my needs as a caffeine lover.

What we want the consumer to think: Starbucks is worth every penny because it offers the perfect coffee shop experience. Every time I buy a coffee, I feel like an important individual whom Starbucks cares about.

The single most important thing we want to say to them: Starbucks offers more than just a cup of coffee.

Tone: Friendly, warm, inviting, conversational, informal

Mood Board37

Marketing Concepts

Free Wi-fi in store

• When a user opens an internet browser, the landing page will be a microsite which will include:

• the music currently playing in the store and an option to purchase the songs through iTunes.• information about the local community

• charity the store supports • local happenings

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Marketing Concepts

Going Green

• Place recycling bins in stores.

• Have baristas ask “for here or to go?”• If customer is staying in store, they will have drink served in real ceramic mug.

• To encourage reusing plastic gift cards, customers will receive a free tall “drink of the month” when they reload.

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Marketing Concepts

Community Atmosphere • Require baristas to wear name tags

• Have baristas write names on cups

• Create plastic loyalty card• After 15 visits, consumer will get one free tall “drink of the month”

• Create “drink of the month”• offer sample sizes

• Put bigger tables and more electronic outlets in store

• Create a separate line for drip coffee

• Insert bookshelf with reading material and games

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Marketing Concepts

Health Consciousness

• Serve organic coffee in store

• Implement the Swiss water process

• Create more low fat drinks• More sugar free syrups

• Have healthy food choices

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New Tagline

“A bean is just the beginning”

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Online• Microsite for landing page when connected to Wi-Fi in store

• Feed off of iTunes relationship

Integrated Marketing Campaign

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Newspaper

• inserts or advertisements about new plastic loyalty card program in relation with “drink of the month” promotion

• Regional and national newspapers• New York Times•Chicago Tribune •LA Times •USA Today •Wall Street Journal

• Large college campus newspapers


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In store displays

• Register sign “For here or to go?”

• Free Wi-Fi sign on tables


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In store displays• Barista name tags

• Fast line for drip coffee

• Nutritional information brochures

• Tea choices on a ring at the register


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In store displays• Individual store charity poster

• Monitor featuring music playing in store and visuals of “drink of the month”


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Outdoor• Non-traditional

• coffee beans leading to store


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Outdoor• Billboards

• nearest drive-thru location

• Subway and bus shelters• loyalty card information


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Television

• Spotlight the charities Starbucks supports and has partnerships with• Get in touch with viewers emotions


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Media Plan

• Online

• Outdoor

• Television

• Newspaper

• In store

How to reach our target audience:

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Marketing Calendar

JANUARY FEBRUARY MARCH APRIL MAY JUNE JULY AUGUST SEPTEMBER OCTOBER NOVEMBER DECEMBER

Wi-Fi Site

Newspaper Advertisements

Name Tags

Nutritional Brochure

Menu Extension

Tea Rings

Free Wi-Fi Sign

Music Monitor

Drip Coffee Sign

Mug Sign

Charity Poster

Billboard

Bus Stop/Subway Advertisements

Trail of Beans Outdoor Advertisement

Television Spots

Key

Online

Newspaper

In Store

Outdoor

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BUDGET OUR PROPOSED FEE

Fees53

Budget

• Starbucks 2007 ad spending: $60 million

• Proposed 2009 ad spending: $55 million• Allocated on media planning and buying

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Proposed Fee

• Trove agency fee: 25% of budget• Includes entire process from consumer research to executing creative work

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Endnotes56

1 “Executive Summary.” Coffehouses and Donut shops-US-July(2008).Mintel. Boston University Libraries, Boston, MA. 1 December, 2008.<http://academic.mintel.com.ezproxy.bu.edu/>2 “Executive Summary.” Mintel.3 “Executive Summary.” Mintel.4 “Coffeehouse and Donut Shop Usage.” Mintel.5 “Coffeehouse and Donut Shop Usage.” Mintel.6 “Competitive Context.” Mintel.7 “Competitive Context.” Mintel. 8 “Advertising and Promotion.” Mintel. 9 “How coffeehouses and donut shops are used.” Mintel. 10 “How coffeehouses and donut shops are used.” Mintel.11 “How coffeehouses and donut shops are used.” Mintel.12 “How coffeehouses and donut shops are used.” Mintel.13 “About Us” Dunkin Donuts 2007 <https://www.dunkindonuts.com/aboutus/company/> Viewed December 9, 2008.14Investor Relations Tim Hortons Inc. December 30, 2007. <http://www.cariboucoffee.com/page/1/company-info.jsp> Viewed December 2, 2008.15“Coffeehouse and Donut Shop Usage.” Mintel.16 “Our Company” Caribou Coffee, 2008, 6 Dec. 2008 <http://www.cariboucoffee.com/page/1/our-company.jsp>. 17 “Hoover’s Profile: Caribou Coffee Company, Inc.” Caribou Coffee, 2008, 6 Dec. 2008 < http://www.answers.com/topic/caribou-coffee-company-inc>. 18 “Company Information” Caribou Coffee, 2008, 6 Dec. 2008 <http://www.cariboucoffee.com/page/1/company-info.jsp>19 “ Peet’s Coffee and Tea, Inc” Hoovers 6 Decemeber. 2008 <http://www.hoovers.com/peet%27s/--ID__53648--/freeuk-co-factsheet.xhtml> 20 “Introducing McCafe Coffees” McCafe 2008 <http://www.mymccafe.com/> Viewed December 9, 2008

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