III. Some facts of business life

1. Starbucks

Read and translate the text:

today's coffee lovers can choose an estimated 8,000 outlets that serve Starbucks, a figure up from 200 in 1989.

According to the company, whose largest competitor is less than half its size, coffee is not a trend, it's a lifestyle. Starbucks has been "elevating the coffee experience" since 1971, when three men opened a gourmet coffee shop in Seattle, Washington. Many people are unaware that Starbucks has been around for so many years. In fact, it wasn't long ago that latte, cappuccino and expresso were not part of America's everyday vocabulary.

Starbuck's success can be attributed greatly to marketing ef­forts. In 1982, the company hired 1 toward Schultz as its marketer. After visiting Italy the following year, Schultz was inspired. The relationship he saw between coffee and people in Italy awakened him to the untapped markets in America. In 1987, Schultz added six Starbucks stores and planned to go national with his ideas. Was he successful? The corporation is now the leading retailer, roaster, and brand of specialty coffee, with 1,401 Starbucks stores in the United States, Canada, Japan, and Hong Kong. Starbucks supplies fine dining, food service, travel, and restaurant accounts with both coffee and equipment. Its ambitions are not small. The company plans to have 2,000 stores by 2000.

Approximately 20,000 employees, known as "partners," un­dergo five sessions of rigorous training. They are taught to edu­cate customers about coffee making, to remind them to purchase new beans weekly, to explain the various blends and beverages, and most important, to serve only the highest quality drinks. Em­ployees learn to make the drinks in an eight-hour seminar that includes lectures, demonstrations, and hands-on experience. They taste beverages that do not meet quality standards so they can be more sensitive to an unsatisfied customer.

The average customer visits Starbucks 18 times a month, and 10 percent of its clientele stop in twice a day. That's big business. A latte and scone per day adds up to $1,400 per year. Starbucks has the best success in its top markets—Seattle, Los Angeles, and Chicago—each of which has approximately 100 stores. Located mostly in urban areas and college towns, Starbucks has also ven­tured into alliances with other companies. It reaches an estimated 80 million travelers per year in a deal with United Airlines. The Starbucks name can be found on mobile coffee carts and in air-ports, bookstores, and fine restaurants. Its extended line of prod­ucts includes a coffee-flavored ice cream from Dreyer's Grand, a coffee-flavored beer from Redhook Ale Brewery, and a bottled ver­sion of its Frappuccino, which was developed with PepsiCo.

Global expansion has been a large success as well. When Star­bucks was introduced in Japan, as many as 200 customers lined up at a time. The company provides informational pamphlets in Japanese and posts menus in both English and Japanese. The world's fourth largest consumer of coffee, Japan is a potential $7 million market for Frappuccino alone.

Despite its rapid growth, Starbucks refuses to compromise quality. The company will not franchise, will not artificially fla­vor its coffee, and is very selective about business alliances. Schultz intends to maintain the Starbucks upscale image. That's why Star­bucks coffee will not be sold in gas stations or convenience stores, among many other places.

From 1992 to 1996 alone, consolidated net revenues of the company grew an astounding 575 percent. How has the name be­come so renowned? Not only has the company put its logo out through its products, accounts, and locations, but Starbucks also has received a significant amount of positive press for commu­nity involvement, charity work, and progressive employee poli­cies. Starbucks uses its $18.75 million in mail orders to bring its name to markets where there are no retail locations. Amazingly, traditional advertising has not played a major role in the com­pany's success.

Starbucks seems to have found its way into coffee cups every­where. Never tried it? Ask one of the three million people who regularly buy Starbucks coffee. They'll probably tell you what you're missing.

Assignments:

1. The definition of marketing describes four types of decisions made by

marketers: product, price, promotion, and place. Identify a place and

promotion decision Starbucks has made.

2. Based on the types of retail locations selected by Starbucks, what customer

characteristics form its target markets?

3. The marketing concept holds that the purpose of marketing is to understand

the needs and wants of customers and create customer value through

satisfaction and quality more effectively and efficiently than competitors?

Summarize how Starbucks implements the marketing concept.