Reason for success of Starbucks

On September 4, 2007, we witnessed once more a cultural invasion of Starbucks. The International Herald Tribune’s article describes that “With the hiss of an espresso machine and a note in Russian explaining the meaning of tall, grande and vente, Starbucks opened its first coffee shop in Russia on Thursday in a mall outside Moscow” (Kramer, 2007, para.1). Nowadays most people know Starbucks and have tasted their coffee. A cup of Starbucks coffee is not only a drink, but also a part of modern culture. “A cup of coffee is just a drink. But a frappuccino is an experience” (Lawless, 2006, para.1). In addition success of Starbucks became a good model for many economists. What is a reason for success of Starbucks? We can find the key point in their special marketing such as emotional branding, experience marketing, and relationship marketing, also their management of employee training.

Starbucks is a coffeehouse chain based in the United States. Named after the first mate in the novel Moby-Dick, Starbucks is the largest coffeehouse company in the world, with 7,521 self-operated and 5,647 licensed stores in 40 countries, making a total of 13,168 stores worldwide (Starbucks, 2007). Starbucks is founded in Seattle, Washington, in 1971 by three young people: Jerry Baldwin, Kristina Taplin, and Gordon Bowker. When Howard Schultz first joined the company in the early 1980s, Starbucks has grown quickly and enormously. However their anti-competitive tactics and predatory pricing to expand and keep their principal position are issue of controversy. Although it is certainly unfair policy, we have to recognize that the world of business is the survival of the fittest. In fact, we can learn from Starbucks how we can survive in the cruel world.

First reason for success of Starbucks is their emotional branding. They approach the customer sensitively. Starbucks recognized earlier the emotional value. They research to know what the customers’ preference is. “Starbucks has created a retail store experience that is attractive, comfortable, and even entertaining, designed to attract customers and keep them coming back to the stores” (Isidro, 2004, para 5). In a Starbucks store, we can find their stone counters, soft wooden floors, comfortable chairs, modern track lights and white cups also give them image of the great place to drink real coffee. It is a Starbucks’ idea to make customer’s satisfaction greater and better through a process. In addition we can feel psychology of luxury by drinking Starbucks coffee. People tend to be the higher classes, but it is restrictive. Starbucks’ high quality policy allows us to feel substitute behavior. All can not purchase a luxury car, however most people can drink a luxury coffee. In conclusion, their emotional branding is a development and maintenance of a company’s identity and Starbucks could succeed by their efforts for the company’s identity.

The second reason is their experience marketing. This idea of experience came from Howard Schultz, Starbuck’s leader. When he visited Europe, in Milano, he saw that many people sat at an espresso café on the street and talked each other, and then he decided to introduce this idea to US (Starbucks, 2007). For example, Starbucks began to present wireless high-speed Internet access in its stores in 2001 to improve the experience for students, business travelers, and web surfers who take advantage of this service while tasting their beloved coffee (Isidro, 2004). What can we imagine with this situation? It is a “third place”. According to the Howard Schultz’s interview with the New York Times, he wants Starbucks to become “The third place” in people’s lives (Nocera, 2007). It is a kind of link between home and work where we can read the paper, download and enjoy music, study or buy a book, and either prepare for the day or wind down from it. To sum up, their experience marketing has enabled customers to satisfy their physical desire, provides us a comfortable place to a quiet rest.

Moreover Starbucks’ relationship marketing is a motive power of success. A key reason for Starbucks’ success is its strategic partnership initiatives (Isidro, 2004). In 1993, Starbucks made relationship Barnes and Noble bookstore in the United States to make its coffee available to bookstore customers and Starbucks partnered with Pepsi-Cola Company in 1996 to start the business and they sold a bottled version of Starbucks Frappuccino in supermarkets. Also in same year, the company also made partnership with Dreyer's Grand Ice Cream, Inc. and launched Starbucks Ice cream and Starbucks Ice cream bars, which rapidly turn into the best selling coffee ice cream in the United States. To obtain success in business, we have to find various possibilities to use the product’s value. In this process, making efficient network with partners who can share a risky attempt is a very important for success.

Finally, Starbucks’ employee management is very special. It is kind of human and familial. Howard Schultz, Chairman, said that he created Starbucks brand first with employees, not with customers, because he believe that the best way to meet exceed the expectations of customers was to hire and train great people, they invested in employees (Moore, 2006). All employees of Starbucks are treated like a member of family and have pride of their company. For example Starbucks offers stock options to even part-timers and spending more on employee training and health insurance than advertising. Consequently, the Starbucks employee turnover rate is 250% lower than the industry average (Michelli, 2006). Therefore their human employee management enables Starbucks to keep success.

Opponents say one reason that has been put forth for the success of Starbucks is their alleged practice of predatory pricing. Recently, their anti-competitive tactics and predatory pricing to expand and keep their principal position are issue of controversy. For example the company would open a branch close to a rival’s business, using competitive pricing to interest customers away from their rivals. As soon as the rival had left the zone Starbucks would then be able to set its own price. However it is true that all kind business uses strategy and need inevitable situation in competition world. According to the theory “Creative destruction”, “Process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one” (Schumpeter, 1975, pp. 82). In addition customers still prefer Starbucks coffee rather than the other one. If customers find some quality problem in Starbucks, even their prices are cheap, they should stop to drink Frappuccino. We still drink Starbucks coffee which is always same quality.

In conclusion, Starbucks’s reason for success is their special mind. Starbucks’s success is made with its strong development of identity by the company’s actual movement, mark and communication. Furthermore, Starbucks created a new coffee culture by relationship between product and experience. This is a main point of their success. Now it influences other business as well as people’s life. Starbucks opened up a new market for new drinking culture. Their pioneer spirit is an exemplary conduct.


References

Isidro, I. (2004, October 5). Learning from Starbucks: 10 Lessons for small businesses. Retrieved September 20, 2007, from http://www.powerhomebiz.com/vol144/starbucks2.htm

Kramer, A. (2007, September 6), Starbucks opens its first store in Russia, International Herald Tribune, Retrieved September 26, 2007 from http://www.iht.com/articles/2007/09/06/business/starbucks.php

Lawless, J. (2006, April 16). Academic studies Starbucks cultural impact. Retrieved
September 20, 2007, from Lexis Nexis database.

Moore, J. (2006). Tribal knowledge: Business wisdom brewed from the grounds of Starbucks corporate culture. New York, Kaplan Business

Michelli, J. (2006). The Starbucks experience. Hightstown, McGraw-Hill

Nocera, J. (2007, March 3). Give me a double shot of Starbucks nostalgia,
NewYork Times, Retrieved September 28, 2007, from
http://select.nytimes.com/2007/03/03/business/03nocera.html?_r=1&oref=slogin

Schumpeter, J. (1975). Capitalism, socialism and democracy. New York, Harper.

Starbucks (2007). Starbucks company profile. Retrieved September 27, 2007 from http://www.starbucks.com/aboutus/Company_Profile.pdf