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Extensive Business Model of Starbucks

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Starbucks “the McDonald’s of coffee”, is the world’s most well-known coffee business. As of early 2020, the company is present in more than 30,000 sites across 70 countries. As Starbucks puts it, the corporation isn’t only passionate about coffee; but everything that goes with it.

This blog analyses the Business Model of Starbucks, its marketing methods, and its value proposition, target market, and more. You can also view our other posts describing the Starbucks Marketing Strategy & Marketing Mix.

So let’s get started by getting to know a little bit more about Starbucks.

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About Starbucks

 

Starbucks Outlets - Business Model of Starbucks | IIDE

 

In 1971 Starbucks Coffee, Tea and Spice were founded by Jerry Baldwin, Zev Siegl, and Gordin Bowker with a goal that would introduce the world to exquisite coffee tastes. In 1987 Howard Schultz took over the enterprise and reconstructed it through a personal coffee-consumer relationship. Within a few years, the company has become an unquestionable leader in the coffee industry from a regional and modest business. Starbucks is the world’s largest coffee company and offers its consumers an unparalleled experience.

Fair Trade is its core mission. They have signed and purchased their coffee in a socially sound and ethically responsible manner. They want to deliver more than a cup of coffee to their clients. Starbucks has kept growing since the day has been set, its management decisions have been underlined and emphasized. Starbucks presently has more than 16,858 cafes in over 50 countries.

 

 

BUSINESS MODEL OF STARBUCKS

 

For Starbucks to distinguish itself from competitors, it was possible to provide the unique value solution to become the “third place.” A cup of coffee becomes an “accessible luxury” and an experience. Customers were able in a pleasant and sophisticated environment to order their drinks and enjoy the beverage. Starbucks uses mostly the typical retail business model, where the majority of its businesses are owned and operated.

Nevertheless, Starbucks has incorporated aspects of the business models of the franchise company into its strategy to build on expansion and keep its business control through its core strategy, as the growing economies have become an appealing terrain for investors. Moreover, the corporation does not advertise traditionally. Starbucks aims instead to increase its value proposition by offering products and services of high quality.

 

 

1. Starbucks Target Customers

In the Starbucks business model, there is no major client segmentation. It produces and sells coffee to everyone who desires high-quality, distinctive coffee. But in a general way, you may say that Starbucks Customer Segment customers are home and office customers. High-end clients are also included in the customer categories of the company.

Starbucks is a high-end coffee company with a clientele that is predominantly from the upper-middle and upper classes. The brand is aimed at customers who desire a relaxing environment to consume coffee and unwind. These are primarily higher-wage professionals, business owners, or other high-end clientele between the ages of 22 and 50. 

 

Starbucks Target Customers - Business Model of Starbucks | IIDE

 

People who live fast-paced lives desire delicious coffee and a quiet place to unwind after a long day. Starbucks provides all of these benefits in one convenient location. Starbucks’ target audience includes both male and female customers, with the majority of these customers falling within the 25-45 age bracket. Specifically, urban, health-conscious, and middle-class consumers. The truth is that the corporation has done so well because it knows exactly who its target audience is at any given time and goes out of its way to cater to them.

 

2. Starbucks Value Proposition

This is Starbucks’ initial value. It only uses high-quality beans and designs its consumers with new items. It uses trained roasters to work on high-quality beans. To order their products, customers can utilize the Starbucks app. This makes customers’ lives easier and now lineups in stores can be avoided. Starbucks attempts to ensure availability by providing its consumers with a wide choice of items. More than 30,000 shops are offering approximately 30 coffee mixtures. It offers other products such as baked goods, tea, smoothies, salads, yogurt, perfect foods, and cups for fruit. Starbucks currently has a tremendous brand as a result of its success. She has been awarded numerous prizes and her name now stands for premium quality coffee.

 

3. Starbucks Customer Relationship Strategy

Starbucks offers personal support to its consumers. The personnel supply the merchandise and serve customers. They also provide customers with assistance. This helps Starbucks to develop a solid relationship with its customers. To ensure that the loyal customer base of the company is emphasized, Starbucks’ business model plays a significant role.

 

4. Starbucks Cost Structures

Starbucks’ business model is built on its ideals. It seeks to offer warm and pleasant personal service to premium-grade products. Starbucks’ cost structure comprises mainly of fixed expenditures like administrative and storage charges. The occupancy costs, which are variable expenses, are another main cost driver.

 

5. Starbucks Revenue Model

 

Starbucks Products - Business Model of Starbucks | IIDE

 

The selling of fresh beverages packed tea and coffee, and meals are part of Starbucks’ revenue stream. The Starbucks-owned outlets normally account for 79 per cent of company sales.

The company’s other main revenue streams are

  • Premium Coffees
  • Whole bean coffees
  • Premium Teas
  • Food items
  • Seasonal Novelty Items

 

Let’s now start delving into the Business Strategies of Starbucks that have helped Starbucks grow into the behemoth it is today, now that we have a better understanding of their foundation and company.

 

 

Business Strategy of Starbucks

Starbucks has been employing the following marketing methods to ensure that it remains at the top of the coffee business: –

 

Consistent Branding and Customer Experience

You can recognize a Starbucks from everywhere in the globe, regardless of country or location, because the corporation is consistent in all they do in terms of the brand. The traditional siren emblem is iconic, and despite various redesigns, it has remained consistent in the sense that when you see a green Siren, you know it’s a Starbucks cup. The most recent rebranding in 2011 deleted all text from the logo, leaving only the basic picture. This allows the brand to be placed everywhere and on any product while maintaining its appeal and not looking out of place.

 

Starbucks Loyalty Program

Starbucks has a fantastic Rewards program that encourages customers to purchase their products. Free in-store refills, free products, gift cards, and cash back incentives are among the benefits. By implementing a referral program in your firm, you can get the same results. Many promotions also take place via social media with Starbucks rewarding clients who share their material online. To reward their social media followers, the brand retweets and offers giveaways regularly.

 

Does Starbucks advertise on social media?

Starbucks produces a lot of material, but it’s broken down into numerous smaller pieces that are then repurposed across several media. Each social media site has its material based on the demographics of its users. The language is distinct, approachable, and straightforward. Because Twitter employs short form, even though the caption is shorter, it has the same distinct vibe. Customers are also urged to take photos with their Starbucks coffee mugs and share them on social media. Starbucks also runs social media contests and promotions regularly, rewarding likes, shares, and mentions.

 

Convenience: The Starbucks Mobile App

The mobile app is a convenient method to buy things on the road with your phone and pick them up quickly in the store. Starbucks’ app combines all of the features of a loyalty card, a referral program, and a consumer rewards program into one convenient app. The more you use it, the more discounts and free drinks you’ll receive at your favourite retailers. More than 20% of all Starbucks purchases are now made through the app. 

 

Social Responsibility

Starbucks is one of the world’s most socially conscious corporations. Starbuck is LGBT-friendly and has developed its shops for persons of all sexuality as safe-havens. Starbucks also donates to humanitarian causes around the world regularly, such as the 2015 Syrian crisis, where it provided millions of dollars to help refugees and migrants.

Starbucks has announced a nationwide drive to hire 10,000 military veterans into their workforce.

 

With this, we come to the end of the Business model of Starbucks. Let’s conclude this case study in the next section below.

 

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Conclusion 

 

Smart marketing, consistency, tough labor, and high-quality customer service provide a great example for Starbucks. Starbucks’ business model displays the well-considered planning and implementation behind it. Surely, Starbucks serves the business world as an idol. Starbucks has certainly an inspirational business plan as one of the top participants in the Coffee Shop Industry. Starbucks is a marketing behemoth with a massive marketing budget, yet they still get the basics right. A business must make sure that its social media presence reflects its objectives, vision, and goods.

Sales and revenue will undoubtedly increase as a result of engaging customers through social media, promotions, and referral programs. Starbucks has demonstrated that a marketing brand can be built from the ground up while maintaining a human face, outstanding customer service, and a fantastic brand. As a result of its all-encompassing marketing strategy, Starbucks has a strong market position.

If you’d like to analyze the business model of Starbucks, please review the blogs that have been written by our students about several other business techniques. IIDE enables its students to analyze such campaigns and studies and curate them. For those of you who want to acquire these skills, IIDE offers several digital marketing courses for persons like you. Begin your quest today to become more skilled!

Do you also think Starbucks’ business plan is flawless or can you identify some of the negative elements of its business approach? In the following comments, share your views with us.

Thank you for reading!

 

Lead Trainer & Head of Learning & Development at IIDE

Leads the Learning & Development segment at IIDE. He is a Content Marketing Expert and has trained 6000+ students and working professionals on various topics of Digital Marketing. He has been a guest speaker at prominent colleges in India including IIMs......[Read full bio]

Aditya Shastri

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