Retail Customer Orientation Report - DAM780, Graduate Diploma

This report provides a comprehensive analysis of retail customer orientation, with a specific focus on Starbucks' strategies within the New Zealand market. The report begins with an overview of the coffee industry and Starbucks' retail strategy, including customer and competitor analysis, sustainable advantages, and retail formats like store design and location strategy. It then delves into consumer behavior within the coffee industry, examining customer communication methods such as advertising, sales promotion, and social media marketing. The report also explores customer relationship management (CRM) and the impact of technology on empowered customers. Furthermore, it examines retail buying trends, including the influence of minimalism and e-commerce. The report concludes with recommendations for Starbucks, including price differentiation strategies, sales promotion, and customer loyalty programs, while also addressing challenges like employee training and the complexities of the market. The report offers insights into the importance of location, retail communication, and the changing consumer landscape.

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RETAIL CUSTOMER ORIENTATION
6/25/2019
Student name

RETAIL CUSTOMER ORIENTATION 1
Executive Summary
In New Zealand, it has been observed that the coffee intake has increased to a large enter and due
to which the coffee business has been extended. Starbucks has always been focused on the
quality of the coffee beans, which makes it a premium brands in coffee. Starbucks customer
segment are the key aspect for which the company has been developed and implemented various
strategies for the customer experience and to increase customer loyalty. The key target market of
the company includes higher income group and college going students with Regular intake of
caffeine. The key competitors of the company in New Zealand included Costa coffee and
McDonald’s.
Starbucks has considered putting the technology and the business heart that is growing the
technological innovation to the business and enhancing the customer experience. Some of the
key benefits for Starbucks will include Increase in revenue and Social Innovation. This social
change of the company has resulted in some challenges as well that includes the complexity of
the situation and Training to the employees. The key recommendation to Starbucks included
price differentiation – saving menu, sales promotion, and customer loyalty programs.

RETAIL CUSTOMER ORIENTATION 2
Contents
Executive Summary.........................................................................................................................1
1. Overview of industry and organisation........................................................................................3
2. Starbuck’s Retail Strategy...........................................................................................................3
2.1 Customer overview of Starbucks...........................................................................................3
2.2 Competitor overview of Starbucks........................................................................................4
2.3 Sustainable advantage of Starbucks.......................................................................................5
2.4 Retail format of Starbucks.....................................................................................................6
1. Store design.............................................................................................................................6
2. Location strategy.....................................................................................................................7
3. Consumer behaviour of the coffee industry.................................................................................7
3.1 Customer communication of Starbucks.................................................................................7
3.2 Customer relationship management (CRM)..........................................................................8
3.3 Technology-empowered customers.......................................................................................9
4. Conclusion.................................................................................................................................11
5. Recommendations......................................................................................................................11
References......................................................................................................................................13

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1. Overview of industry and organisation
Coffee culture of all the countries across the globe is different and has been found to be
enhanced since years, which has not only provided the coffee manufacturers and retailers to
grow their business but has also increased the competition in the industry (theguardian, 2019).
The western culture has always been popular for having caffeine every day, which has been
extended across the globe. In New Zealand, it has been observed that the coffee intake has
increased to a large enter and due to which the coffee business has been extended. One of the
largest coffee chains introduced and grow across the globe is Starbucks, which would be
discussed in detail in the report further. Starbucks has always been focused on the quality of the
coffee beans, which makes it a premium brands in coffee. Starbucks customer segment are the
key aspect for which the company has been developed and implemented various strategies for
the customer experience and to increase customer loyalty (Pappas, 2016).
2. Starbuck’s Retail Strategy
2.1 Customer overview of Starbucks
Target market Demographic
profile
Needs/
characteristics
Buying trends
Higher income
group
Income group Higher
purchasing
power
Consider status
while visiting the
place
College going
students
Age group and
lifestyle
Interested in
entertainment
and fun time
with friends
Regular users
The key target market Starbucks considering
1. Demographic factors

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One of the key elements of demographic factor includes the income level of the customer. The
company targets the upper middle and upper-income class. The reason being the company has
been adopted the premium pricing strategy that reflects that the company is asking for a higher
price than their competitors for higher quality coffee beans. Moreover, the company is providing
extra ordinary experience to the customer for which they are targeting higher income group
customer segment. The prices in this industry are an important factor that would reflect through
target audience and this is also helped the company to develop brand positioning towards
premium brand and premium product range. However, this can restrict the middle-income group
customers to visits the store (Mills, 2015).
2. Psychographic factors
Customer lifestyle and interest are the elements as per this basis that is considered by Starbucks
to target the customer segment. The company is targeting the customer that is interested and
willing to spend time with friend and family and would love to enjoy a good and luxurious
experience at restaurants and cafeterias (Petersen, 2015). Through this, it can be said that people
like college friends prefer to enjoy such experience and spend time with their friends and family
at Starbucks. On the contrary, college students may also go for the cheaper options due to regular
use of coffee. The lifestyle is a relevant factor as it is dependable for the purchase decision and
perception of the potential customer (Kumar, Harmeling, & Palmatier, 2018).
2.2 Competitor overview of Starbucks
Competitor Vision/ Mission Products/ service
offered
Costa coffee To provide high
quality coffee to the
customers
Coffee and snacks
MC Donald’s To provide Fast food and
beverages
The two key competitors of Starbucks in New Zealand are
1. Costa coffee

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Costa coffee is another large coffee chain across the globe and in New Zealand. It can be said
that cost coffee is a direct competitor of Starbucks. The competition is high due to the similar
product range, and similar product and pricing strategy of the brands. In addition to this, the
customer segment targeted by both the brands are similar, which means that the competition of
the two brands are very close and for this, the company needs to be one step ahead of the other to
sustain in the industry and gain competitive advantage. This can reduce the customer’s numbers
for Starbucks and make retaining customers difficult. The company can only retain its customer
with taste and preference and keep the quality up to the standards. Moreover, the differentiation
is necessary too to give customers the options to have a change in repetitive taste, which could be
boring and the willingness to taste something new does not let them switch to another brand
(Kaplan, 2015).
2. McDonald
McDonald is one of the fast food chains that has gained enough popularity across the globe. This
may not be the direct competition to Starbucks but it is definitely an indirect competition to
Starbucks in New Zealand. The company has been providing fast food and beverages to the
customer, however, the customer segment by both the brands are different as McDonald’s is
been serving various income groups that are lower income group middle income group and as
well as upper-income groups. Does it can be said that the customer of Starbucks can be
distributed amongst McDonald’s or similar fast food chains as well. In order to sustain in such a
competitive industry the company needs to go for price differentiation and product
differentiation, amongst these Starbucks, has been working over product differentiation since
years but has not been able to go for price differentiation strategy it which can be one of the
customers lost strategy for the company (Hu, Krush, & Agnihotri, 2016).
2.3 Sustainable advantage of Starbucks
Starbucks has been able to sustain in the market and some of the aspects that have been proved to
be a competitive advantage of the company first service orientation.
1. Service orientation
The company along with the product orientation that is the high quality product, the focus is also
over the service provided to the customers. This has resulted into one of the key competitive

RETAIL CUSTOMER ORIENTATION 6
advantages for the company, the reason the customers are now a days looking for services that
have been provided by the customer restaurants and cafes (Mohd & Sasmita, 2015). Starbucks
has successfully provided a luxurious experience to the customers and the perfect time to spend
with your family and friends at the cafe. Moreover, the company was able to provide the best
quality services like Trained employees that are helpful to the customers and serve them with a
smile to make them feel comfort table at the cafeteria. Moreover, the technical innovation has
resulted in a good service oriented strategy of the company (Gong & Yi, 2018).
2. Premium quality
The second premium quality of the company has also been able to become a competitive
advantage for the company. The company has always been the focus on the quality of the
business for which the coffee has gained large popularity among the competitive industry. The
company has been dealing with coffee suppliers and has been able to create a combination of
best quality coffee with varied flavours to serve to the customers, which has resulted into the
sustainable advantage of the Starbucks. However, it can be said that many other companies have
been working to words the premium quality like Costa coffee as discussed in the previous
section, which can be the largest competition to the company (Chung, Yu, Choi, & Shin, 2015).
3. Kiwi coffee connoisseurs
The third is the TV coffee strategy of the company in New Zealand, Starbucks has been
struggling to Kiwi coffee connoisseurs since years, this has found to be one of the successful
steps by the company in order to gain a sustainable advantage in a nation like New Zealand. This
was to give the residents of New Zealand a flavour of coffee that people prefer and this will also
enhance the glocalization strategy of the company. However, the company asshole soon found to
be in a problematic situation regarding this strategy (Russell, J.D & Hull, 2017). For instance, as
per the news article in 2018 Starbucks has found a new partner in New Zealand after having the
license The company found a problem in renewing the license (reuters, 2019).

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2.4 Retail format of Starbucks
1. Store design
Store design has found to be one of the key advantages that the company has been implied since
years. Starbucks has been working for the store design in order to provide luxurious experience
to the customer, for which one of the strategies was to provide a good environment to the
customer through the design of the stall and interior used at the store. The renovation strategy of
the company has brought on two days to the integration of local attraction for the customers
(Safari, Safari, & Montazer, 2016). The company has realized that the customers need this space
and understand psychology and behind designing. The approach adopted by the company was to
provide a unique style to the customers in their local area this would include unique pieces from
local artist models of local attraction and deception of the local city. The company has been
implementing the strategy across the globe and this was intended to remove the feeling of the
change store to the customer and more of a feel like their own coffee store nearby. However, this
strategy may lose the integration of the global strategy of the company that is to provide big
global experience and luxurious experience to the customer (starbuckstenthings, 2019).
2. Location strategy
The company has also been working for the location strategy that included, increasing the stores
to make the stores available to the customer by the nearby city location, this was to enhance the
brand awareness and brand recognition across the globe. The company has initiated the stores in
lastly visible locations for instance in densely populated open areas office buildings,
supermarkets, near nearby neighbourhoods (Sharma & Gautam, 2017). Moreover, the company
has also initiated the hub and spoke strategy along with the locational strategy that will include
the opening of the outlets in the large cities that will also act as the hub for the small locations
around the larger cities. This has helped the company to continuously increasing and expanding
their stores to the suburban areas, which will act like spokes of a wheel. In addition to this, the
company has also opened their outlets in the relevant locations, which will help the company to
enhance the market share and will eventually, saturated the market (medium, 2019).

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3. Consumer behaviour of the coffee industry
3.1 Customer communication of Starbucks
The three key communication strategies include advertisement, sales promotion, and social
media marketing.
1. Launch offers and sales promotion
Starbucks condition strategy has implemented through various modes of publication that is
advertisement launch offers social sponsorship social media advertising publicity and many more
tools. The key strategy of the company is to acknowledge because of tomorrow brand
recognition and increase the brand loyalty that is one of the positive aspects of the
communication strategy of the company. Starbucks has used short-term and medium-term more
for communication strategy for example launch of that is an open new product to introduce to the
industry.
2. Advertisement
Second is Advertisement through electronic media that would be television ads. Some of the
long term to start the company has been using a social sponsorship that is a contribution to words
the environment like reducing waste recycling saving water and energy, another tool was sales
promotion for example the loyal card opportunity for the loyal customers in order to enhance the
customer loyalty.
3. Social media marketing
Social media communication is the largest strategy that the company has been using to
communicate to the customer, wait the customer can also interact with the company. However
this is also the key issue identified for Starbucks, the feedback from the customers are mixed
feedback that is some may be more positive but some may feel negatively about the brand. Most
of the negative comments included the pricing strategy of the company that is they are unable to
serve to medium income group customers. This may affect the sales of the company and
decrease the brand image of the company (Chung T. , 2015).

RETAIL CUSTOMER ORIENTATION 9
3.2 Customer relationship management (CRM)
1. Personalisation strategy
The company has been attempted to enhance the customer relationship for which the customer
relationship management strategy has been adopted one of such strategy is personalisation
strategy. As per this strategy, the company has been adopted customisation of the product. That
includes flavour and taste the choice of the customer, this helps the company to enhance
customer satisfaction and interact with the company as well call. However, this may be the
problem as the customer may like to have something else and the company may misunderstand
the expected product by the customer (Finne, 2017).
2. Specialise customer experience
The second strategy is specialise customer experience, through this the company is been
providing this special attention to the customer for example writing the name of the customer on
the coffee cups, wishing them when they enter and leave the cafe. This improves the customer
database of the company by knowing the name and personal information of the customer and
increases the interaction between both the parties (Harrigan & Choudhury, 2014).
3.3 Technology-empowered customers
Starbucks has considered putting the technology and the business heart that is growing the
technological innovation to the business and enhancing the customer experience. In 2015, the
company has launched with the Pei feature in mobile ordering that will enhance the customer
experience by not getting into the queue for having coffee (Gabriel, 2016).

RETAIL CUSTOMER ORIENTATION 10
Some of the key benefits for Starbucks will include
1. Increase in revenue
The company enhanced the revenue of the company due to increase introduction of business
through online mode. This is found to be a seismic change in customer behaviour. The company
has increased the customer centre digital plan that will enhance the company revenue and an
increase in customer base.
2. Social innovation
The company has been the transforming in the company in the industry that is been
implementing be online mode to the beverage market. It has used to digital experience the
company has also been able to provide an online experience to the customer; this has resulted
into innovative approach adopted by the customer and bring the positive social change to the
industry (Chung T. , 2015).
This social change of the Company has resulted in some challenges as well
1. The complexity of the situation
The first challenge includes the challenge of the service policy of the company. The company
has always been the focus over to customer service and experience, which becomes difficult with
the online mode. Moreover, this challenge includes the changing social times, this has decreased
the communication between the customer and the company due to lack of physical interaction
(Chung & Fiore, 2017).
2. Training to the employees
In order to provide excellent customer service it is the digital change has also increased the
investment in training to the employees. The digital was a large change to the company, for
which the training needs to be provided to the staff of the company. This was the short-term
challenge for the strategy of the company (Choi, 2015).

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4. Conclusion
From the discussion, it can be highlighted that the coffee industry in New Zealand has identified
to extend due to the increase in coffee intake and change in social trends. Starbucks is one of the
largest coffee chains across the globe and has been one of the successful coffee chains in New
Zealand. The key target market of the company includes higher income group and college going
students with Regular intake of caffeine. The key competitors of the company in New Zealand
included Costa coffee and McDonald’s. The retail format of Starbucks included two key
strategies of the company that is location strategy and stall design. The major three
communication strategies that the company has been implemented include the advertisement
through printed and electronic media, space sales promotion, and social media marketing. The
key issue with social media marketing was negative comments on social pages of the company,
especially regarding the price of the products.
5. Recommendations
1. Price differentiation – saving menu
One of the recommendations to the company is price differentiation. The customer has
found that the price of the products of the company is quite high, which has been
identified through the feedback on social media websites. The company can increase the
saving menu that would include the products with a lower price category. This will help
the company to increase the customer segment and eventually increase the sales of the
company (Tuten & Ashley, 2015).
2. Sales promotion
Sales promotion is another recommended method for the company to communicate with
the customer. Since the premium pricing strategy of the company has restricted some of
the customers to have products and services from Starbucks on a regular basis. Sales
promotion that is discounting and other price quote options can increase the sales of the
company and enhance the communication with the customer (Finne, 2017).
3. Customer loyalty programs

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The third recommendation is customer loyalty programs. In the beverage industry, it is
difficult to retain the customer due to lower switching cost for the customer; Starbucks
cannot retain the customer by enhancing customer loyalty through various programs like
events, special services to the regular customer and similar customer loyalty activities on
the daily basis (Zhang, 2015).

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