Harvard Case - Starbucks: Driving Growth Through New Dining Occasions
"Starbucks: Driving Growth Through New Dining Occasions" Harvard business case study is written by Mohanbir Sawhney. It deals with the challenges in the field of Marketing. The case study is 8 page(s) long and it was first published on : Aug 10, 2018
At Fern Fort University, we recommend Starbucks implement a multi-pronged strategy to drive growth through new dining occasions, focusing on:
- Expanding their food offerings: Introducing new, innovative food items that cater to evolving consumer preferences, particularly in the areas of health, convenience, and customization.
- Leveraging digital channels: Utilizing digital marketing strategies and technology to enhance customer experience, drive engagement, and personalize offerings.
- Optimizing their brand positioning: Refining their brand image to emphasize their role as a provider of convenient, high-quality food and beverage experiences throughout the day.
2. Background
Starbucks, a global coffeehouse giant, faces the challenge of driving growth in a saturated market. While their core coffee business remains strong, they need to tap into new dining occasions to capture a larger share of consumer spending. The case study highlights the evolving consumer landscape, with increased demand for convenience, personalization, and healthy options. Starbucks is already experimenting with new food offerings, but they need a more comprehensive strategy to capitalize on these trends.
3. Analysis of the Case Study
SWOT Analysis:
Strengths:
- Strong brand recognition and loyalty
- Extensive global reach
- Robust digital infrastructure
- Expertise in coffee and beverage preparation
- Strong customer relationship management (CRM) system
Weaknesses:
- Limited food offerings compared to competitors
- Perception as primarily a coffee shop
- Potential for price sensitivity among consumers
- Dependence on in-store experience
Opportunities:
- Growing demand for convenience and personalization
- Increasing popularity of healthy food options
- Expansion into new markets and demographics
- Leveraging digital platforms for marketing and customer engagement
Threats:
- Intense competition from other coffee chains and quick-service restaurants
- Fluctuating commodity prices
- Changing consumer preferences
- Economic uncertainty
Marketing Mix (4Ps):
- Product: Expand food offerings to include healthier, more convenient, and customizable options. Introduce new product lines tailored to specific dining occasions, such as breakfast sandwiches, lunch salads, and evening snacks.
- Price: Maintain a competitive pricing strategy while considering the value proposition of new food items. Offer value-oriented options and bundle deals to attract price-sensitive customers.
- Place: Leverage existing store locations and explore new distribution channels, such as delivery services and mobile ordering. Optimize store layouts to accommodate new food offerings and create a more inviting dining experience.
- Promotion: Utilize digital marketing channels to reach target audiences and promote new food items. Leverage social media, influencer marketing, and targeted advertising campaigns.
Consumer Behavior Analysis:
- Segmentation: Identify key customer segments based on demographics, lifestyle, and dining habits. Target different segments with tailored marketing messages and product offerings.
- Targeting: Focus on attracting new customers by appealing to their specific needs and preferences. Leverage data analytics to identify potential customers and tailor marketing campaigns accordingly.
- Positioning: Reposition Starbucks as a provider of convenient, high-quality food and beverage experiences throughout the day. Emphasize the value proposition of their new food offerings and highlight their commitment to innovation and customer satisfaction.
4. Recommendations
1. Expand Food Offerings:
- Innovation and Customization: Invest in product development to introduce new, innovative food items that cater to evolving consumer preferences. Focus on healthy, convenient, and customizable options, such as gluten-free, vegan, and keto-friendly choices.
- Product Lifecycle Management: Implement a rigorous product development process to ensure that new food items meet customer expectations and generate a positive return on investment. Conduct thorough market research and pilot testing to refine product offerings before widespread launch.
- Value Proposition Development: Clearly articulate the value proposition of each new food item, highlighting its unique benefits and target audience. Communicate these benefits effectively through marketing materials and in-store signage.
2. Leverage Digital Channels:
- Digital Marketing Strategies: Develop a comprehensive digital marketing strategy that leverages social media, search engine optimization (SEO), and targeted advertising campaigns. Utilize data analytics to track campaign performance and optimize strategies for maximum impact.
- Social Media Marketing: Engage with customers on social media platforms to build brand awareness, promote new food items, and collect valuable customer feedback. Leverage influencer marketing to reach new audiences and generate buzz.
- Content Marketing: Create engaging content that educates and entertains customers, highlighting the benefits of Starbucks' food offerings and their commitment to quality and innovation.
3. Optimize Brand Positioning:
- Brand Management: Refine Starbucks' brand image to emphasize its role as a provider of convenient, high-quality food and beverage experiences throughout the day.
- Brand Positioning: Communicate a clear and consistent brand message that resonates with target audiences. Emphasize the value proposition of Starbucks' food offerings and highlight their commitment to innovation and customer satisfaction.
5. Basis of Recommendations
These recommendations are based on a thorough analysis of Starbucks' strengths, weaknesses, opportunities, and threats. They align with the company's core competencies and mission to provide a premium coffeehouse experience. The recommendations also consider the evolving needs of external customers and internal clients, as well as the competitive landscape.
The recommendations are likely to result in increased revenue and market share, as they address key consumer trends and leverage Starbucks' existing strengths. The recommendations are also consistent with Starbucks' commitment to sustainability and social responsibility.
6. Conclusion
Starbucks has a unique opportunity to drive growth through new dining occasions. By expanding their food offerings, leveraging digital channels, and optimizing their brand positioning, they can capture a larger share of consumer spending and solidify their position as a leading provider of convenient, high-quality food and beverage experiences.
7. Discussion
Alternatives:
- Focus solely on coffee: This would be a conservative approach, but it would likely limit growth potential.
- Partner with other food brands: This could provide access to new food offerings, but it could also dilute the Starbucks brand.
Risks:
- Negative customer feedback: New food offerings may not meet customer expectations.
- Increased costs: Developing and launching new food items can be expensive.
- Competition: Other coffee chains and quick-service restaurants are also expanding their food offerings.
Key Assumptions:
- Consumers are willing to pay a premium for high-quality food and beverage experiences.
- Starbucks can successfully develop and launch new food items that meet customer expectations.
- Digital marketing channels will continue to be effective in reaching target audiences.
8. Next Steps
- Phase 1 (Short-Term):
- Conduct market research to identify specific consumer needs and preferences.
- Develop and pilot test new food items.
- Launch a digital marketing campaign to promote new food offerings.
- Phase 2 (Mid-Term):
- Expand food offerings to include a wider range of options.
- Refine brand positioning to emphasize the new food offerings.
- Optimize store layouts to accommodate new food offerings.
- Phase 3 (Long-Term):
- Explore new distribution channels, such as delivery services and mobile ordering.
- Invest in technology and analytics to enhance customer experience and drive engagement.
- Continuously monitor market trends and adjust strategies accordingly.
By implementing these recommendations, Starbucks can drive growth through new dining occasions and solidify its position as a leading provider of convenient, high-quality food and beverage experiences.
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Case Description
In 2008, Starbucks was in crisis as a result of undisciplined growth and loss of focus, and its stock declined almost 70%. In August of that year, Howard Schultz, the founder of Starbucks, came out of retirement to take over as the CEO. The company regained its footing by refocusing on its core and driving strong organic growth. By 2014, the stock price had reached $40, an all-time high. To prevent history from repeating itself, Schultz wanted to ensure that Starbucks' growth strategies not only addressed market opportunities, but also were aligned with the company's brand image, assets, and capabilities. Starbucks announced a five-year growth plan in December 2014 with ambitious goals that included nearly doubling its revenues from $16 billion to $30 billion, doubling operating income, and expanding its footprint to more than 30,000 stores globally by 2019. The growth plan consisted of seven specific growth strategies, one of which was the New Occasions strategy. The objective of New Occasions was to drive growth by diversifying Starbucks' revenues beyond breakfast to the lunch, afternoon, and evening dayparts. Starbucks created specific offerings for each daypart, called the Lunch, Sunset, and Evenings programs. The case focuses on evaluating these three occasions-based growth opportunities and identifying the best path forward.
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