Would you ever pay $5.00 for a pack of gum? My guess is that a majority of you would say no. While paying $5.00 for a pack of gum may sound absurd, ‘gourmet’ gum may be just around the corner. With the days of $.50 coffee a thing of the past and cappuccino’s and latte’s become mainstream, Starbucks has turned shelling out big money for ‘simple’ products the norm.
If you drive through any big city in the United States, you probably wouldn’t have to look far to find a Starbucks. With it’s green and white logo, it sometimes feels like Starbucks opens new stores just for fun. Just the other day I saw 2 Starbucks in the same plaza. Whether it is by mistake or a strategic marketing strategy, Starbucks continues to open new stores and with it comes new Starbucks aficionado’s.
For anyone starting a business, one can only dream of one day becoming as big and well-known as Starbucks. Started in 1971, Starbucks has joined the elite group of cultural icons which include McDonald’s and Coca-Cola. While not everyone may like Starbucks and some even flat out hate it, no one can deny the fact that Starbucks played a big part in the way consumers view products.
It’s Not Just Coffee, It’s ‘Gourmet’
Whenever I ask people why they like Starbucks, they tell me that it isn’t just coffee, it’s ‘gourmet’. While I’ll admit that Starbucks coffee may taste better than something you might make at home, is it really worth the extra cost? If you ask Starbucks they will tell you absolutely. Starbucks is genius in many different ways. They have taken a simple product, coffee, and turned it into a lifestyle. Coffee is no longer just a drink, it is an event in itself. Instead of just buying a cup of coffee, Starbucks is letting you buy an experience. From the renaming of sizes to Tall, Grande, and Venti, to the always consistent ‘coffee house’ experience, Starbucks makes you feel like you are part of something. Whether you drink it by yourself while reading a book or drink it with your friends while you talk about the latest news, people love being part of the Starbucks brand.
Building A Community Around Your Business
One of the big reasons for Starbucks success is due to the strong community that they have built around them. Starbucks realized that no one would buy coffee at $5.00 therefore they relied on those die-hard supporters. The one’s that were convinced that the coffee they were buying was special had a huge part in the success of Starbucks. The community around them doesn’t necessarily buy Starbucks coffee because they feel it is superior in taste amongst the rest, but because of what having that Starbucks cup in your hand means.
As companies begin to use social media platforms like Twitter more and more, the importance of building community will increase. With the ability to reach millions at such a low investment, Starbucks has realized this and has setup their own Twitter feed which has daily tweets for all their Starbucks fans. With the average consumer becoming less and less connected with traditional forms of advertisement, Starbucks along with many other companies have realized this and have begun the transition to new media. The community that Starbucks has is not just national, but global.
Be The Global Brand
If you travel to other major cities in other countries one of the first things you might notice at the airport is a Starbucks. While Starbucks may not have infiltrated every single terminal in the world, they are coming close to it. It seems like for every airport that has a coffee shop but isn’t a Starbucks, people always wonder why it isn’t one. When you step outside the terminals, even though you don’t speak the language, Starbucks seems to be a universal word. The best comparison to use is McDonald’s. McDonald’s has firmly established themselves as a global food empire. It doesn’t matter whether you are in China or France, the golden arches are an iconic figure that most everyone knows.
Starting in 2003, Starbucks began their move into global expansion just as McDonald’s began their cutbacks of new stores globally. While Starbucks is still a ways off from taking over McDonald’s global crown, Starbucks is opening stores at an astounding rate.
With nearly 1,500 new stores being opened from 2007-2008 Starbucks continues to keep their foot on the gas when it comes to global expansion. Globally, the response has been positive both culturally and economically as 20% of yearly revenue was recorded from international sales.
The factor that separates successful companies from the elite is how they approach global expansion. The big difference between the two is that while some companies may view the states in the US as many different markets, large corporations like Starbucks and Coca-Cola view the United States as one large market that is part of a whole global landscape.
While someone who is starting a business may not think about trying to win over a whole international market at first, it is important to think ahead on how you will approach it and how you will enter the market. Will you be aggressive or will you be cautious? These sort of questions will may determine how you fare in the global market.
The Future Of Starbucks
While i’m not a fortune teller by no means, I can predict that Starbucks is going nowhere. While it is true that they did post a loss in the third fiscal quarter in 2008, having already turned coffee into an any time of the day drink and having successfully convinced people that $5.00 for a cup of coffee is reasonable, Starbucks is still in the drivers seat. Just like any good company, it is important that Starbucks be able to ride out these poor economic times.
To be honest, I don’t drink coffee nor do I plan to anytime soon. If I did though, I can say that although I believe what Starbucks is doing is quite impressive as far as their global expansion and reach, I would still rather pay for $1.00 McDonald’s coffee and save the extra $4.00 for a rainy day.
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Photo by JAMI
A pretty comprehensive breakdown of the coffee juggernaut’s past, present and future. Your posts are always well thought-out and informative.
love it 🙂
It’s always drive me crazy reading postings like this that refer to Starbucks and coffee in the same sentence. Yes, you can get coffee at Starbucks and you can make it at home — generally most people I believe would make it at home, albeit the convenience factor.
What these stories fail to comprehend is the gourmet drink — latte’s, cappuccino’s, etc… are NOT coffee. And for someone to make it at home usually would require buying a specialty machine along with the syrups, etc… This is where Starbucks has thrived — not coffee.
Joseph, you’re right when you say that people buy Starbucks “because of what having that Starbucks cup in your hand means.” Although the first customers may have made purchases based on a desire to sip relatively tastier lattes in a cozier environment, many more were soon swept in for reasons beyond taste and comfort as the cooperation quickly evolved itself into a global brand. If you go overseas, you will find that not only are Starbucks stores available in major cities, but replica coffee shops bearing a near clone of the famous green and white Starbucks logo also do decently. Not surprisingly, customers are also drawn to these stores simply because of their association with Starbucks, without any prior knowledge of the copy store’s taste, selection, or ambiance. Thus, it’s true – Starbucks has successfully branded itself in a way that more people nowadays buy for the name than just for the commodities offered themselves. This is nothing new – just look at those who don Gucci, D&G, and Louis Vuitton bags and clothes. They, too, paid the price of the item plus much more for the bonus status boost the brands provide. Likewise, buying a drink at Starbucks has become a culturally “in” thing to do, relaying upon its users a certain status, so people are willing to pay the higher price to become part of the phenomenon. For its coffee alone, Starbucks probably isn’t worth the price, but for all the other positive experiences that comes with it, it is.
Hey, Joseph.
A couple of things stuck out in your article.
It’s not just you; there is a Starbucks on every corner. This type of cannibalization allows Starbucks to put their stores close together, feeding off each other and increasing profits in both.
Starbucks have maximized their value chain with its Shared Planet™ and its Farmer Support Centers in Costa Rica and Rwanda initiatives. By partnering with the farmers and local agencies, they’ve maximized their vertical integration strategy, cut costs, and built a reputation around corporate social responsibility.
If they’ve posted a loss, it’s because people have realized they’re paying five bucks for a cup of coffee. McDonald’s started selling their version of gourmet coffee and cut into Starbucks’ niche. Now Starbucks wants to start selling black coffee with two sugars.
Good article!
Tony