Incorporating Alcoholic Beverages into Starbucks Product Line

The assignment content discusses Starbucks' product lines, branding strategy, marketing recommendations, and product life cycle. It also explores the advantages and disadvantages of skimming and penetration pricing strategies for both the organization and customers. The key points include: Starbucks has a wide range of products including coffee, drinks, snacks, ice cream, and merchandise; its corporate social responsibility branding strategy builds strong relationships with customers and increases loyalty; the company should consider orienting its stores to reflect local cultures to attract conservative consumers; Starbucks' product life cycle is in the growth stage globally but facing competition in some regions. The pricing strategies discussed are skimming and penetration, which have both advantages and disadvantages for both the organization and customers.

CREATE THE VALUE
Assignment 3
Create the Value
AhmadrezaMohmmadi
MKTG 2431
August 2, 2016

CREATE THE VALUE
Table of Contents
3.1 Diffusion of Innovation and Product Concepts.........................................................................1
3.2 Product Management Concept...................................................................................................3
A. Competitive Factors in Starbucks...........................................................................................3
B. Marketing Concept..................................................................................................................4
C. Starbucks Branding Strategy...................................................................................................5
D. Marketing Recommendation...................................................................................................5
E. Product Life Cycle of Starbucks Products..................................................................................5
3.3 Pricing Strategy.........................................................................................................................6
A. A &D of Skimming price and Penetration price for organizations.........................................6
B. A&D of Skimming price and Penetration price for customers...............................................7
References........................................................................................................................................9

CREATE THE VALUE
3.1 Diffusion of Innovation and Product Concepts
Typically, a new product for the customers means an increased opportunity to meet
individual environmental and social needs. It also means an increased opportunity to add the
quality of their personal life. On the other hand, a newly introduced item in the market for the
marketers and involved companies significances signifies the beginning of a fundamental
technique to for maintaining the competitive, profitable and the growth of an organization. From
a marketing perspective, diffusion is used to describe a macro process that is related with the
spread of a newly introduced item from its source the target consumers. Yet, adoption is a micro
process that concentrates on various steps through which a particular consumer observes before
either accepting or rejecting a newly introduced product in the market.
Subsequently, there are various factors that tend to affect the speed of the adoption of a
new product, as advertised by the Microsoft. Some of the major factors that are likely to
influence the diffusion of this tablet include relative advantage, compatibility, complexity, trial-
ability and observability (Microsoft). To begin with, the relative advantage of this tablet will
affect the speed at which it will be diffused and adopted in the market. In this case, how
improved the products appear to the end users will affect the speed of adoption. From the link
provided, the Surface, which is the new product, is likely to have relative advantage. This is
mainly because it can be used for various purposes, since it can be converted from a laptop to a
tablet and the reverse.
Secondly, this product is highly compatible and can easily be assimilated in different
ways in the life of the consumer. For instance, the Surface, on the website is described as a
product that can be used for the school work, office as well as in the studio. It is also highly
convenient for the users. The third factor is complexity of the product. This factor proposes that
products that are too complex are less likely to be diffused in the market. Ideally, this product
has a touch sensitive screen, with an option of a keyboard. Thus, it is less complex and hence
more likely to be adopted. Trial-ability proposes that an innovation that is relatively easy to
experiment with is high likely to be adopted. At this point, the Microsoft website does not offer a
user friendly website where a person can easily operate a virtual tablet. Therefore, this is likely to
reduce the rate of adoption. The observability of this product is likely to increase its diffusion
1

CREATE THE VALUE
rate. According to the website, the signature cover of the Microsoft is designed using luxurious
materials, making the product beautiful and wonderful to the touch.
Incidentally, there are other relevant non-product related factors that might also influence
the rate of diffusion of innovation. Most of these factors are based on the consumer behavior.
They include psychological factors, age, perceived value, modernity and awareness. Personally,
the major factors that influence me to buy new products include awareness as well as
psychological factors. It is highly likely that I buy a product, which is trending in the market.
Also, the product must meet my personal desires so that I can fit in the social class.
The Surface, as it is being advertised by the website seems to be a good product, in which
the diffusion rate can be increased steadily. As previously indicated, modernity significantly
influences the rate of diffusion in the market. In this case, the Microsoft can significantly relate
the Surface with different cultures so as to capture the conservative consumers. For instance, the
product might be sold preloaded with tens of hundreds of traditional recipes, languages, songs or
even directions to popular joints that reflect the culture of the target market. The second
recommendation involves increased awareness. Even though advertising a product is a sufficient
marketing strategy, hyping it makes it more appealing. It also increases the desires of the buyers
to try the new product as a result of enhanced awareness.
The third marketing recommendation involves opinion leaders. Making use of such
moves increases the awareness of the product as well as its popularity, increasing the rate of
diffusion. This can be done by initiating strategic alliance with celebrities. In this case, the fans
and loyal followers can be combined with the loyal clients of Microsoft, increasing the speed of
diffusion of the Surface. Fourthly, Microsoft should initiate marketing strategies that are
customers oriented. This will increase the satisfaction of the clientele, increasing the image of the
organization and its products. Eventually, more customers will flock to the Surface, among other
Microsoft products, to buy newly introduced items. The primary driver of such customer
behavior is the reputation of the product, where the majority of consumers believe that all
Microsoft products are of high quality. Lastly, another major factor that should be considered in
increasing the speed of diffusion is promotion of the product. Even though this comes in handy
with the creation of awareness, it requires its specific strategies.
2

CREATE THE VALUE
3.2 Product Management Concepts
A. Competitive Factors in Starbucks
In all marketing strategies, brand recognition plays a central role in securing the market
shares. A highly reputable organization creates its unique category where the consumers pay
premium prices and at the same time retain their royalty towards the company. A highly
reputable brand affects both the external environment as well as the external stakeholders.
Ideally, Starbucks has stationed its brand in the market as a high quality experience trademark.
One of the most outstanding features in Starbucks is the Italian theme, which is reflected in its
major bars, giving its clientele a home like experience. In addition to this, it the primary focus of
its services is often invested in the satisfaction levels of the loyal consumers.
Incidentally, there are various factors that have significantly contributed to its market
shares. One of the most significant factors that have contributed to this success is the
government, as well as the political environment. Ideally, the government significantly
influences the free markets through the economic policies. The Starbucks’ primary stores are
located in Canada. This country has well defined policies that are initiated, regulated and
enforced by the Bank of Canada, which is semi-autonomous. This plays a critical role in
stabilizing the monetary policies, by protecting them from political interference. In addition to
this, a majority of Starbucks stores are located in regions that are highly stable, creating a
favorable environment for the growth of the business. This explains why Starbucks Coffee
Canada has been flourishing since 1987. Briefly, the political environment favors this
organization, making it convenient to continue conducting its business without being affected by
political instabilities or unfavorable economic policies.
Starbucks offers high-quality coffee beverages to all customers. In addition to this, it
offers a small selection of food products and various coffee-free beverages, making it friendlier
to children and snack-lovers. Briefly, diversification has allowed it to capture a number of
customers. Also, this company offers a variety of products at various prices, hence
accommodating people from all economic divide. Therefore, fair prices that start from a
relatively low price significantly contributes to the attraction of numerous clients, hence
3

CREATE THE VALUE
increasing the market shares. The fourth factor that has positively contributed to the growth of
Starbucks is the marketing mix strategy. This strategy is used to understand the needs of the
clients, enabling the organization to meet these expectations. In particular, Starbucks has adopted
a branding technique, making it more precise and illustrates the sustainability of the policies of
the company. Some of the strategies used by Starbucks include integrated marketing
communication, mouth to mouth marketing, social media marketing, customer relationship
management and creating a good customer experience. The last factor that has made Starbucks to
have increased market shares is the convenience and it consistency. At the present, it has mobile
applications in which the consumers are provided with purchase options as well as payments.
This payment is relatively fast and hence convenient. Further it allows customers to prepare their
own recipe online and the barista in the stores prepares that recipe for the customers.
B. Marketing Concepts
Ideally, the core products in Starbucks shops are the coffee drinks and beverages.
However, there are other additional features and products that are provided so as to enhance the
experience of the clientele. Incidentally, augmented products can be defined as additional
features, benefits and attributes, whose main aim is to differentiate the company from its
competitors. One of the most popular augmented products offered by Starbucks is the WiFi
connections. This strategy targets the young generation as well as other clienteles. The Starbucks
cards are also categorized in this class. It allows the customers to accumulate loyalty points
which can be redeemed in exchange of services and products. Further, the customers have the
been given the liberty to replace substandard drinks, customize their drinks along with friendly
service.
Lastly, the potential products in are all augmentations along with transformations a given
item might undergo in the future. One of the major potential products in Starbucks is the
alcoholic beverages in all its shops across the globe. Starbucks has started to include alcoholic
beverages such as wine and beer at certain Starbucks locations in Toronto and it hopes to include
alcoholic beverages across Canada (CBC News, 2016). Incidentally, the product line is defined
as a group of individual products that are closely associated in some way. The product lines in
4

CREATE THE VALUE
Starbucks include coffee, drinkware, snacks and ice cream. Product line length is the number of
products lines in any one product line. For instance various beverages are included in one line
length. While on the other hand the product line width is the “number of different product lines
the firm produces” (Solomon, pg.270).Other products that are offered in this organization
include coffee, tea, pastries, frappuccino beverages, smoothies as well as merchandise such as
mugs, instant coffee, etc. These items can be considered as the width of product mix.
C. StarbucksBranding Strategy
One of the most conspicuous branding strategies used by Starbucks is corporate social
responsibility. It plays a significant role in highlighting the values of the company to the public.
This highlights the commitment of the company towards the social ethics. In addition to this, the
corporate branding strategy builds a strong image for the company. The baristas are often trained
so as to provide unique relationships with all the consumers, hence increasing their loyalty. One
of the most important aspects of corporate branding strategy is enhanced awareness. It also
creates consistency in the market place, giving Starbucks added competitive advantage. Also, it
increases the market shares of the corporation. On the other hand, this strategy is relatively
expensive and increases the risk of negative publicity, which could adversely affect the market
share levels hence its profits and customer loyalty. The Barista’s are asked to remember the
choices of their regular customers, thereby enhancing their customer loyalty.
D. Marketing Recommendations
With coffee shops in over 50 different countries, Starbucks has managed to curve its
niche as the leading coffee shop in the world. At the present, most of the coffee shops in these
regions are strikingly similar to each other. Even though this might be the pride of this
organization, the coffee shops and stores should be oriented so as to reflect the culture and social
setups of these regions. By doing so, it will attract the conservative people, along with those who
prefer traditional products, further increasing its market shares. Therefore, the marketing efforts
should reflect the culture of the regions that the Starbucks’s shops are located. Furthermore,
Starbucks can create loyalty programs,
E. Product Life Cycle of Starbucks Products
5

CREATE THE VALUE
In my opinion, the product life cycle of Starbucks products is still in the growth stage.
However, this applies to the global operations. Currently, it is considered as the leading coffee
shop stores around the globe since it has been penetrating into new markets in various regions.
For instance, it has penetrated in Asian as well as European region. Nevertheless, Starbucks is
facing stiff competition in some regions such as Seattle.
In this stage, the marketing mix implication includes increased profits, growing
awareness as well as enhanced customer loyalty. In this stage, the product quality is maintained
and supplementary features as well as support services are added. The pricing is conserved since
the firm enjoys increased demand with little competition. As demand increases, the distribution
channels are also increased and the customers accept the products. The promotion strategies are
aimed at broader audience, as the company seeks to cement its position in the market.
3.3 Pricing Strategy
A. Advantages and disadvantages of skimming price and penetration price strategies for
the organization
Advantages of skimming price for organization
 It attracts consumers to the products and services offered.
 It establishes strong brand into the market.
 It gives a business a strong foundation into the market.
 It plays a significant role in increasing the perceived quality to the products.
 It offers a perfect opportunity for the company recovering from developmental expenses.
Disadvantages of skimming price for organization
 It increases competition from rival businesses that offers the same products.
 Ideally, high prices do not always stir up quick sales.
 The client may shift their loyalty to low priced products offered in the same market niche.
 As a result of low demand for the product being sold, the benefits of large production
may not be realized.
 This strategy may not be viable in a strict legal environment regarding the rights of the
clients.
6

CREATE THE VALUE
Advantages of penetration price strategy for organization
 It fosters faster growth of the business, revenue and customer base.
 It lures more clients away from highly priced products, increasing the customer base as
well as market shares.
 It plays a central role in taming or combating aggressive competitors in the market.
 Competitors are often forced to reduce their prices so as to suit the market prices. This
ensures that all business have equal chances of drawing relatively similar profits.
 The benefits of large scale production are realized, especially when the demand is
relatively high.
Disadvantages of penetration price strategy for organization
 It creates the perception that the products are of low quality, hence pushing the clients
away.
 It may result to price wars, where competitors result to lower their prices further.
 The competitors may have strong products, where the clients may not be willing to shift
their loyalty to even lower prices.
B. Advantages and disadvantages of skimming price and penetration price strategies for
the customer
Advantages of skimming price for the customers
 It allows the clients to access quality products that have just been introduced to the
market, before counterfeit items are produced.
 It gives the satisfactory experience of being among the first clienteles to experience a
certain product in the market.
Disadvantages of skimming price strategy for customers
 The customers may be exploited as a result of a perception of expensive goods is of high
quality. In other words, clients may end up paying more for less quality.
Advantages of penetration strategy for the customers
7

CREATE THE VALUE
 It allows the clients to access products at relatively low prices.
 When the businesses resolve to engage in price wars, the only thing that is left for them is
to improve the quality of goods so as to attract more clients.
 The clients access quality products at highly competitive prices. In other words, price
wars ensure that the products in the markets are accessed with relatively low prices.
Disadvantages of penetration price strategy for the customers
 Penetration prices may create confusion among the clients especially because of the
perceived values. In perceived prices, expensive goods appear to be of high quality while
low priced products are associated with poor quality. Due to this confusion, consumers
might be exposed to substandard products in the market.
8

CREATE THE VALUE
References
CBC News. Selected Canadian Starbucks begin serving booze on Tuesday. CBC News:
Business. Retrieved (Aug 1, 2016) from: http://www.cbc.ca/news/business/starbucks-
alcohol-1.3515092
Microsoft. (2016). Surface. Retrieved (Aug 1, 2016) from:
https://www.microsoft.com/surface/en-ca.
Solomon, Marshall. Smith, Stuart. Shah, Charlebois. (2012). Marketing: Real People, Real
Choices, Fourth Canadian Edition. Pearson Education.
Starbucks. (2016). About Us. Retrieved (Aug 1, 2016) from: http://www.starbucks.ca.
9