Marketing Mix & Starbucks
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Abstract
Marketing mix can be defined as combination of marketing elements used in the sale of a particular product. (Marketing, 2007) The elements, also known as the four Ps, are product, price, place (of distribution), and promotion. All are important in defining and fulfilling a target market. Companies use different aspects of marketing mix to help them better serve their target market. Starbucks primarily focus is to provide outstanding service and products to their customer, while earning their loyalty. In addition to the price, the convenience, and other benefits, consumers are demanding more. (News & Release, 2006) We at Starbucks have seen significant loyalty and value around the trust we have built with our customer. (News & Release, 2006)
Marketing Mix And How Starbucks Is Successful Because Of It
Marketing mix is a combination of marketing elements used to sale a product or service to consumers. The elements of marketing mix, also known as the four Ps are (1) product – good or service (2) price – cost of product or service, (3) place – where product or service is located, and (4) promotion – advertisement of product or service. Each element is used by companies to help meet the needs of a target market. A target market is an identifiable group of people that could benefit from purchasing your product, visiting your site, and/or responding to some other call to action. (Marekting & Management, 2007)
Product is the first element of marketing mix. A product is any combination of goods and services offered to satisfy the needs and wants of consumers. (Marketing, 2007) A product can either be tangible or intangible. A tangible product is a product that can be touched by a consumer, such as a car or computer. An intangible product is a service that cannot be touched, such as computer repair, income tax preparation, or an office call. (Marketing, 2007) A product can also be divided into three levels core, actual and augmented product. The core product is the benefits that the consumer purchased. The brand name, features, packing, parts and styling are the actual product. The augmented component includes additional services and benefits that surround the first two levels of the product. (Marketing, 2007)
Products can also be categorized by their consumer. Consumer goods are purchased by final consumers for their personal consumption. (Marketing, 2007) Products sold to the final consumer can be broken into shopping, specialty, convenience and unsought goods. Products or services that are brought with little or no effort are considered convenience goods. Convenience goods can be further divided into staple, impulse, and emergency goods. (Marketing, 2007) Impulse goods like candy and magazines are products that require little planning or search effort because they are normally available in many places. (Marketing, 2007)
The second element of marketing mix is price. Price is simply the amount of money that consumers are willing to pay for a product or service. (Marketing, 2007) Businesses often use strategies such as market penetration or price-skimming strategy when pricing a new product. A market-penetration pricing strategy involves establishing a low product price to attract a large number of customers; in contrast, a price-skimming strategy is used when a high price is established in order to recover the cost of a new product development as quickly as possible. (Marketing, 2007) Pricing objectives are established as a subset of an organizations overall objectives. (Marketing, 2007)
Pricing also includes four forms of pricing objectives: profitability, volume, meeting the competition and prestige. A business that focuses primarily on maximizing its profit is using profitability pricing objectivity. Maximizing sales volume within a given specific profit margin is volume pricing objectivity. The focus of volume pricing objectives is on increasing sales rather than on an immediate increase in profits. (Marketing, 2007) Focusing less on the price and more on the non-price competition items such as service and location is meeting the competition pricing strategy. When a consumer purchases a product that is priced high as a status symbol, this is considered prestige pricing strategy.
In addition to the pricing objectives, there are also five price adjustments: discount pricing and allowances, discriminatory pricing, geographical pricing, promotional pricing and psychological pricing. Discount pricing and allowances include cash discounts, functional discounts, seasonal discounts, trade-in allowances, and promotional allowances. (Marketing, 2007) Discriminatory pricing occurs when a business sells a product or service at two or more prices; it is based on the age of consumers, location of sale, organization membership, time of day or season. Location of the consumer is geographical pricing. Products may be priced differently in distinct regions of a target area because of demand differences. (Marketing, 2007) A product that has a listed priced temporarily below cost is considered promotional pricing. The primary goal with promotional pricing is to increase short term sales. Psychological pricing considers prices by looking at the psychological aspects of price. (Marketing, 2007)
The third element of marketing mix is promotion. Promotion is a communication process that takes place between a business and its various publics. (Marketing, 2007) There are four tools to promotion: advertising, sales promotion, public relations, and personal selling. Each promotion tool has its own unique characteristics and function. (Marketing, 2007) Advertising can be defined as paid communication of messages through print, radio, television, internet etc. As with other elements of the marketing mix, advertising should be appropriate to the target market. (Marketing Mix Elements, 2007) Sales promotions (i.e. coupons, discounts, rebates, sweepstakes) are short-term incentives used to encourage consumers to purchase a product or service. (Marketing, 2007)
Public relation depends on an individuals personality as well as developing a relationship with customers. Public relations activities have the drawback that they may not provide an accurate measure of their influence on sales as they are not directly involved with specific marketing goals. (Marketing, 2007) Personal selling occurs when a person makes a presentation to a potential buyer. There are both advantages and disadvantages of personal selling. Advantages of personal selling is that salespeople can shape the information presented to fit the needs of the customer in contrast, disadvantages are the high cost per contact and dependence on the ability of the salesperson.