Case Study: Starbucks and Application of Services Marketing Principles

This case study examines Starbucks' approach to services marketing, analyzing whether the company is primarily a product or service provider. The analysis reveals that Starbucks successfully blends tangible product offerings with intangible service aspects to create a comprehensive customer experience. The case study delves into how Starbucks applies services marketing principles, such as focusing on a core product, providing augmented products, and ensuring well-trained, customer-focused employees. It highlights the importance of employee-customer relationships, heterogeneous service aspects, and the utilization of the marketing mix to achieve competitive advantage. The study also explores how Starbucks differentiates itself from competitors through product innovation, strategic placement of franchises, and the creation of a comfortable environment. The conclusion emphasizes the need for companies to adapt and innovate to succeed in the market by providing a tangible and heterogeneous service that accurately targets a consumer market.

Services Marketing
Case Study – Starbucks:
Brewing More Than Just Coffee
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Is Starbucks a product or a service? Justify your answer.
Starbucks cannot be defined as only a product or a service, as the
company focuses around a core product but also displays intangible
service qualities in coherence with said product. Starbucks aims to appeal
to a consumers 5 senses of sight, sound, smell, taste and touch through
their products, service and atmosphere.
To begin with, product is defined as “the core output (either a service or
manufactured good) produced by a firm.” (Lovelock and Jochen Wirtz,
2011). This is generally a tangible object. In relation to Starbucks, their
coffees, food, cups etc. are classified as their products. Originally when
Starbucks was launched in 1971, it began solely as a retail store selling
the most premium coffee brewing equipment, including ‘the high-altitude
Arabic bean’. This was an extremely successful product as it was new and
different being one of the first quality coffee retailers introduced to the
American market. Starbucks continues to provide quality products but has
also incorporated a service aspect to the business to better appeal to
consumers. The tangible aspects of Starbucks’ business are considered to
be the ‘product’.
Additionally, Starbucks delivers quality service to its consumers. (Kotler et
al., 2017)
defines a service as “any act, performance, or experience that one party
can offer to another and that is essentially intangible and does not result
in the ownership of anything, but nonetheless creates value for the
recipient.” Starbucks displays this in their employee to customer
interactions and other intangible aspects of their business. The service
feature of Starbucks was introduced in 1982 when Howard Schultz was
hired as Marketing Director of the company. As more and more people
started acquiring a taste for gourmet coffee, Schultz decided Starbucks’
future was not in selling coffee brewing equipment, rather offering
customers an experience when visiting the stores. This was an evident
success, Starbucks grew from only 17 shops in Seattle to around 6000 in
2002 and now operate in more than 75 markets with over 24,000 stores
(Starbucks, 2019). Services are generally added to compliment a product
and create more value (Balin and Giard, n.d.), which Starbucks have
ultimately done. With over 346,000 employees worldwide (Forbes, 2020),
Starbucks provides an exceptional service through extensive product and
service training of employees.
Moreover, Starbucks improved both their tangible and intangible aspects
of the company through becoming a ‘customer intelligent company’. A
customer intelligent company is a company that “understands the value
of connecting with a customer’s mind as well as their wallet and that to do
the former, you will improve your results in terms of the latter”
(Pennington, 2016). Starbucks have proven to be a very flexible company,
adhering to the market place which they are operating in. Over the years
Starbucks have grown their business by being innovative and introducing

new products and services to keep up with the advancing economy.
Products such as seasonal drinks (e.g. spiced pumpkin latte in the
fall/autumn) have been introduced, as well as food sales to accompany
the main coffee products. Starbucks have also introduced loyalty cards for
regular customers to reward them for regularly buying their product, this
is a smart move as it keeps a customer coming back and leaves the
customer feeling special and noticed when they receive a free coffee after
so many purchases. Overall, Starbucks offers an exceptional product as
well as competitive and first-class service. Combining knowledgeable and
friendly employees with a great environment and product, Starbucks is
able to appeal to consumers tangible and intangible natures while gaining
benefit.
Discuss how companies can apply the principles of
services marketing to achieve greater success today
(using examples from the Starbucks case study)
It is crucial for companies to apply principles and strategies of services
marketing to stay relevant and achieve success in today’s rapidly
advancing society. This is generally done by marketing around a core
product, which is considered “the basic benefit the customer is buying”
(Wirtz and Lovelock, 2016). In Starbucks’ case, this is their exceptional,
high quality coffee. However, they also provide intangible and
heterogeneous service aspects based around their core product to
achieve greater success and improve customer experience.
Along with a core product, to be successful companies should provide
augmented products which are “further benefits or superior levels of
service that add value” (Wirtz and Lovelock, 2016). Starbucks
demonstrates this by providing loyalty cards, instore Wi-Fi, high quality
amenities etc. Starbucks can also be set apart from competitors by
providing well trained, customer focused employees who strive to deliver
exceptional service. Employee-customer relationships and mutual respect
contribute to the overall customer satisfaction which is a key determinate
in a consumer’s decision making (K Rama Mohana Rao, 2007), meaning
the more knowledgeable, trained and friendly an employee is, the greater
the possibility of a loyal customer.
Also, to achieve competitive advantage, companies must demonstrate
heterogeneous aspects to their service in order to set them apart from
similar competitors. Differentiation is providing meaningful changes in
services offered that add value to the customer and are capable of
generating quality perceptions distinct from competitive offers (K Rama
Mohana Rao, 2007). Differentiation can be achieved by utilising the
marketing mix, in particular, Starbucks focuses on product, place and
physical evidence. For example, before launching, Starbucks founders
noticed that Americans weren’t happy with the cheap coffee being sold by
other companies and aimed to deliver a gourmet, high quality coffee
product to gain competitive advantage and appeal to the market.

Moreover, companies can utilise place principles by clustering franchises
to increase market share and suppress competitors, as Starbucks have
done. Starbucks have also applied physical evidence in providing a
comforting environment for customers. Finally, a returning Starbucks
customer knows they will receive excellent coffee, 5 star service, wireless
internet connection, a comfortable environment etc. when visiting a
franchise and will have the same high expectations when visiting other
coffee distributors because Starbucks have set that high standard, giving
them a strong competitive advantage.
To conclude, to successfully provide customer focused services,
companies must adopt several qualities of services marketing as well as
adapt and be innovative to account for different and changing markets.
Such as, providing a tangible yet heterogeneous service which accurately
targets a consumer market and also has intangible aspects. Along with,
being unique and innovative in the marketplace. Analysing these aspects
as well as applying the marketing mix assists in achieving competitive
advantage over other companies targeting the same or similar markets.

Reference list
Balin, S. and Giard, V. (n.d.). A process oriented approach to the service concepts. [online]
Available at: https://www.lamsade.dauphine.fr/~giard/IEEE_SSSM06_Giard_Balin.pdf
[Accessed 23 Jul. 2020].
Forbes (2020). Starbucks (SBUX). [online] Forbes. Available at:
https://www.forbes.com/companies/starbucks/#2c9bffe328ac [Accessed 23 Jul. 2020].
K Rama Mohana Rao (2007). Services marketing. New Delhi: Dorling Kindersley (India.
Kotler, P., Bowen, J., Makens, J.C. and Seyhmus Baloglu (2017). Marketing for hospitality
and tourism. Harlow, Essex, England: Pearson.
Lovelock, C.H. and Jochen Wirtz (2011). Services marketing : people, technology, strategy.
Boston: Prentice Hall.
Pennington, A. (2016). The customer experience book : how to design, measure and improve
customer experience in your business. Pearson.
Starbucks (2019). International Stores. [online] Starbucks Coffee Company. Available at:
https://www.starbucks.com/business/international-stores.
Wirtz, J. and Lovelock, C.H. (2016). Services marketing : people, technology, strategy. New
Jersey: World Scientific.