**Disclaimer: JoshMeah.com takes no claim or ownership over any aspect of Starbucks trademarks, branding, or imagery within this article, which is for business strategy and analysis purposes only.
For a global brand with an operating income exceeding $4.1 B, Starbucks had humble beginnings. Three students opened the first Starbucks in Seattle in 1971. Thanks to its highly successful marketing strategy, today Starbucks has more than 27,300 stores around the world. It has become the world’s 60th best brand, just behind Nestle and just ahead of Sony.
Cafes and restaurants are a high-risk business. Some 60% of all independent cafes and restaurants would fail within the first year after launch.
So, what did Starbucks do differently? Can you perhaps do some of those things?
Starbucks might have a billion-dollar marketing budget, but you don’t have to rob a bank to follow in their footstep.
#1. Write a Unique Positioning Statement
Starbucks positions itself as the third place—a place distinct from home and office where you can relax, engage in conversations and have a great time. Starbucks is not selling just coffee but a whole experience…and it’s working.
A great positioning statement allows you to concentrate on the right areas of your business, so you may beat the competition in those areas. It describes what you want your customers to think when they think of your brand.
Proceed as follows to create an effective positioning strategy:
Open your laptop or take a pencil and paper and start writing. Answer the following questions:
Who are my customers?
What benefits does my product offer to its users?
Who are my competitors? Write down their names.
How do my competitors position their business—e.g. big portions, healthy food, a great environment, ethnic dishes? Taking a look at their marketing communications will help you find out their positioning strategy.
Mull over the answers for some time and then start writing your positioning statement. It should describe in a sentence what core benefit(s) your product offers and how it’s distinct from the competing products.
Use the following template that Starbucks also uses: To [CUSTOMER GROUP], [YOUR BRAND] is [DIFFERENTIATING BENEFIT FOR CUSTOMERS] by [HOW YOU MAKE IT POSSIBLE]Example:
Your positioning statement should be simple, clear and consistent.
Test your positioning statement by asking: Does this sound like us?
While you’re at it, you can also convert your positioning statement into a brand tagline.Example: Brand: Target Positioning statement: Style on a budget Tagline: Expect more. Pay less.
#2. Build Brand Loyalty by Designing a Rewards Program
Selling to a new customer costs up to five times more than selling to a current customer. For most businesses, 80% of their revenue comes from only 20% of their customers. That’s why most successful restaurants have a loyalty program…and so should you.
Starbucks offers many benefits to its customers who join its Rewards program. These include free refills, free drinks, birthday rewards and more. The rewards program keeps people coming back and prompts them to spread a positive vibe about the brand.
The free drink offer also helps Starbucks get more people through its doors. Once they come in, they are likely to buy other products as well.
Before you can create and launch a loyalty program that works, you should have an idea about how much a customer is worth in terms of profits. You should also know your customer acquisition cost (CAC).
Take the following steps.
Find out the customer acquisition cost(CAC). Simply divide all your marketing expenses during the last year (or any particular period) by the number of new customers you acquired during that period. You cans also estimate your CAC if you have no historical data available.
Calculate (or estimate) the total revenue from each customer.Total Revenue = Average Order Value/1-Repeat Purchase Rate
Example: If your average order value is $50 and there’s a 10% chance that your customer will come back to make a repeat purchase. Your total revenue will be $55.56 [50 / (1-0.1)]
Determine the customer lifetime value (CLV). Simply subtract the CAC from the total revenue to have a rough estimate of your average CLV. When you know your CLV, you can decide how much you can afford to reward each customer over a given period of time.This might be an oversimplification of the CLV calculations process, but it can be a good starting point. You can also use the CLV calculator from Demand Metric or Genroe among several other CLV calculation tools.
Assess your customers’ current level of satisfaction. Most of them must be satisfied with your products before your loyalty program can be a success.
Design your customer loyalty program. Shortlist employees who are good at dealing with customers and involve them in the loyalty program. Brainstorm how the program will work, what will the rewards be and how the program will be communicated. Keep your CAC and CLV in sight so you don’t go overboard with the expense. Also factor in the overhead expenses and other costs associated with designing and promoting the rewards program.
Promote your loyalty program. Just like Starbucks, you should use your website, social media, email, mobile and all other channels where your business or its customers have a presence.
Track the results with a CRM. Don’t be scared if you have never used a CRM. There are several free CRM tools available including Hub Spot CRM that takes minutes to learn. You’re going to need a CRM sooner or later if your marketing strategy is even remotely as successful as Starbucks’.
#3. Use Fear of Missing Out (FOMO)
Fear is a powerful action trigger. But it doesn’t mean you make people buy your products at gun point. Only use the fear of missing out or FOMO…like Starbucks does. According to research, 60% of millennials make impulsive purchases driven by FOMO.
Starbucks marketing strategy employs time-barred promotions and seasonal/occasional menus to create a sense of urgency in people’s minds. Avail the offer today (or right now) or it will be gone.
Here is how you can integrate FOMO into your marketing.
Use seasonal menus and offers. For example, Starbucks offers exclusive holiday drinks in red cups. Customers know they must savor their favorite items (such as Toasted White Chocolate Mocha or Gingerbread Latte) before the holidays end.
Use seasonal menus and offers. For example, Starbucks offers exclusive holiday drinks in red cups. Customers know they must savor their favorite items (such as Toasted White Chocolate Mocha or Gingerbread Latte) before the holidays end.
Make special offers time-barred. If the mornings are not as busy as you’d like them to be, you can make a special offer on breakfast and make it time barred.
Use a countdown timer on your website. Show your customers how many hours and minutes remain before the special offer expires.
Show remaining stock levels. Your customers will like to act before you run out of their favorite items.
Use SnapChat for promoting limited-time deals. Your customers will have to rush to your restaurant before the discount coupon disappears. Read how you can use Snapchat for marketing.
#4. Create and Share Great Content
Starbucks heavily relies on killer content marketing strategies to attract customers and keep them engaged. Their content has a certain quality, a certain look and feel to it that portrays a high image of the brand.
In addition to the stunning photos and creative taglines, there are certain principles that make Starbucks’ content so spectacular.
Create a challenge. For example, you can offer a reward to customers who try a new menu item.
Link content with events. First day of school, Christmas, Halloween, etc. Think Pumpkin Spice Latte.
Use storytelling. You can tell stories about how your product is sourced, your cause marketing campaigns, customer experiences, etc.
Educate and inform. Starbucks educates its customers about how the coffee beans are harvested and what are the different types of roasts.
Repurpose content. Once you have created a piece of great content, you should share it through all of your channels. However, you must tailor the content for the channel you’re targeting.
For example, a blog post can become the source of your Facebook or Twitter updates. The photos you post to Instagram ban also be shared via Pinterest and so on.
#5. Create a Consistent Brand Experience
Consistency is the key to building a strong brand. It makes your business instantly recognizable and makes it look more reliable. Contrary to what many believe, consistency doesn’t limit but enhances your brand.
Starbucks utilizes multiple communication channels simultaneously. These include digital channels such as their website, Facebook page, Twitter profile, Instagram as well as conventional media channels such as TV, radio, print, outdoor, in-store promotions etc. The remarkable thing is that you’ll have a consistent experience wherever you come across their brand.
You’ll see the same sizing (Tall, Grande, Venti) on their menu. Their restaurant will have the same atmosphere. It’s one consistent experience whether you’re reading their Twitter feed, watching their TV ad, waiting in line or ordering at the table. You will get the same taste, look and feel even if you walk into a Starbucks on the moon.
Here’s what you can do to offer a consistent brand experience with your restaurant.
Turn your marketing team into the most ardent brand ambassadors. They must believe in the benefits that consistency will bring to your brand.
Develop brand guidelines or a brand handbook. It should specify the use of your logo, color palette, fonts, and taglines.
Adopt a zero tolerance policy to brand compliance. You must ensure that the brand is not undermined by your own team.
Keep it simple. Don’t complicate things by using a dozen different brand elements that might be difficult to replicate everywhere. Keep your brand simple and clean. Remember what Steve Jobs said: Simplicity is the ultimate sophistication.
Incorporate a system of quality assurance. Regularly test your products to make sure the taste stays consistent. Read this article to learn how to ensure a consistent food quality.
#6. Focus on Your Target Market and Work Out the Marketing Mix
Starbucks’ core target market consists of men and women aged 25 to 40. It primarily caters to high income customers (Avg income $90k) but also targets middle-income consumers who are dispensed to spend their disposable income on high-end coffee and drinks.
PRODUCTThe products have to be high quality or their target customers wouldn’t buy it.PRICEStarbucks coffee is at least 25% more expensive than value brands such as McDonald’s. Their high-income target customers are willing to pay the premium price for premium coffee.PROMOTIONStarbucks uses consistent messaging across all major marketing channels including digital, social and conventional media. A multi-channel presence increases their reach and makes the brand more recognizable.PLACEStarbucks restaurants epitomize the concept of ‘the third place’. It offers a consistent space for their customers to hang out and relax.Actions
Before you can determine the four Ps your marketing mix (product, price, promotion and place), you need to understand your target customers.
Take a look at your current customers and write down the answers to the following questions.
Who are your customers? Consider their demographics—age, gender, income, religion, race, education, ethnicity and family size.
Why do they buy from you? Write down the benefits your product offers to the customer. Then, write down the benefits of those benefits. For example, people buy Starbucks coffee because it tastes great. But Starbucks is more than just coffee. It’s a whole experience. The benefit of the great taste and environment is that customers feel good about themselves.
Analyze the psychographics of your customers. These are the personal qualities of a person, such as personality, attitude, interests, opinions, values, lifestyles and behavior. For example, Starbucks customers are café-goers (lifestyle) who appreciate gourmet coffee (attitude) and the contemporary look and feel of the restaurant (behavior).
What are their common interests and characteristics? Now that you know the characteristics of your target customers, you can list down their common attributes such as income, lifestyle, age, gender, etc.
Prepare your ideal customer personas. These are generalized, fictional depictions of your ideal buyers that enable you to understand and relate to the customers you’re trying to attract. You can download this persona template from Hubspot to make your job easy.
You’ll know your target audience much better after you have completed the above steps. So, you’re in a much better position to decide your marketing mix.
Here are a few guidelines.
Product: What is your core product and extended product? What do you need to do in order to make your offer more enticing for customers? Does your product fulfill the needs of your customers on a physical and psychological level?
Price: If your customers are value seekers or have lower incomes, price your products lower than the competitors. If they are pleasure seekers who are willing to spend more, you can charge a premium price.
Promotion: Your promotional strategy will depend on the media habits of your target audience. If they are digital natives or millennials, social and digital media might be more effective. TV, outdoor media, magazines etc might work better for baby-boomers or older consumers.
Place: Does the environment really matter for your buyers or are they more inclined to take out their food? Do they like a classical or contemporary ambiance? What are their geographic locations? These questions will help you decide what kind of a place you would like your restaurant to be.
You might be thinking it seems complicated. Believe me, segmentation and targeting is no rocket science. You just have to take the time to think about your customers and you’ll get it right.
#7. Use a Multi-Channel Promotional Strategy
Starbucks predominantly uses its website, social media channels and in-store displays to promote the brand and the products. It also uses sales promotions, events, direct marketing, print media, and PR in an integrated manner to multiply the impact of its promotions.
Big brands like Starbucks can afford to be pervasive. They have the budget and expertise to do pretty much whatever they please. But, which particular marketing channel should a business like yours choose?
Once again, the answer is with your customers.
Generally speaking, the following channel marketing strategy works for most restaurants.
For most cafes and restaurants, Facebook, Instagram, Twitter and Pinterest are the best social media channels to target. Yes, you should be present on all of these channels. If you have to drop one of them, drop Pinterest.
You can also use email, SMS, mobile app, in-store media, and out-of-home media. If you have to choose one of them, choose email because it has a greater ROI.
Develop a media strategy for your brand. Consider your buyer personas and the media habits of your customers. List down all the channels that you want to target. Then, decide how much budget you will spend on each channel.
Develop a content marketing strategy. Decide what you are going to publish and how often. Gather a team of social media managers, email marketers, photo/videographers, copywriters and other talent you need in order to plan and execute your strategy. The other option is to hire a digital marketing agency.
Maintain ‘content-consistency’ across all of your channels. Starbucks uses a similar voice and imagery on Facebook and Twitter. Their messaging is also consistent.
#8. Innovate Constantly
Starbucks, like other top brands, continuously innovates in order to maintain its position in the market. New products, new recipes, new restaurant décor ideas, new deals, new flavors, new lands, new locations…they just keep going.
Not all of their innovations are successful. They have had their share of failed products and failed restaurants. Yet, innovation is at the heart of Starbucks’ marketing strategy.
In 2010 the Harvard Business Review wrote that Starbucks’ creativity has set off a chain reaction of innovation in the once sleepy industry. They called it the Starbucks Effect.
Steal someone’s idea. Good artists copy. Great artists steal. One of the easiest ways to innovate is to copy an idea that has worked elsewhere and make it your own.
Ask people. Ask you your customers and employees for ideas. Listen to their suggestions and complaints. Or just observe them without asking anything.
Combine two things. Starbucks offer several combinations of two or more different things such as its famous gingerbread latte.
Brainstorm. Involve your employees and customers in the innovation process. Invite them for brainstorming specific ideas that you can apply to your business.
Maximize or minimize. Take a standard practice from the market. Then, maximize or minimize it. For example, Starbucks maximizes customer experience and price. White Castle, on the other hand, minimizes the price.
Have a culture of innovation in your business. Innovation indicates thought leadership. And thought leadership leads to industry leadership.
#9. Engage Your Customers by Sharing their Stories
Customer participation is an extremely important part of the Starbucks marketing strategy. Starbucks keeps its customers engaged by inviting them to share their stories and photos.
The stories are then published through Starbucks’ marketing channels. This allows them to keep the customers engaged while sourcing user-generated content.
The following photo was shared by one of Starbucks’ customers.
Invite customers to share their experience that they had with your brand or products.
Use social media, email, in-store displays and other channels to invite your customers.
Offer an incentive for participating. It can be anything from a discount to just the promise that their story/photo will be published if it’s good.
Screen the stories or photos for new product ideas.
Make it customer stories and photos a permanent feature of your marketing strategy.
10. Train Your Employees
You have a great marketing strategy. You have planned an awesome customer experience. But do your frontline employees know how to implement your strategy and deliver that experience?
Starbucks, like all other successful restaurant brands, has an elaborate employee training program in place. They have professional training programs for new baristas, shift supervisors, store managers, and district managers.
They call their employees partners. And more than 200,000 partners provide the experience that compels customers to pay a premium price for Starbucks coffee.
Here are a few Starbucks training practices that you can ‘steal’ and apply to your business:
Hold 24 hours of in-class training during which you tell your employees about your brand’s history, product details, your vision for the brand and for the employees, and the kind of customer experience you are looking to deliver.
Train experienced employees as ‘Learning Coaches’ or trainers to instruct new or inexperienced employees.
Prepare training manuals and self-guided booklets that employees can use independently. However, have the Training Coach check their progress periodically.
Follow a Tell, Show, Do learning process for training new baristas, waiters, chefs or other staff. Tell them what they have to do, then demonstrate how to do it before you ask them do the action.
Make training fun. Starbucks uses several interesting tools such as the ‘Drink Dice’, a rolling dice that comes up with different flavors and sizes of different drinks. The trainee rolls the dice and learns how to spell, write and create that order.
Acknowledge—Tell the customer you have understood the problem.
Take—Take action to resolve the problem.
Thank—Thank the customer for highlighting the problem and for their patience.
Explain—Explain (don’t justify) the reason for the problem.
#11. Think “Brand Extension”
Starbucks started by selling coffee. Sensing customer demand, they extended their brand to bakery items, sandwiches, breakfast, snacks, and more. Through continuous brand extension, Starbucks has transformed itself from a bare bones coffee joint to a complete restaurant with a delectable menu.
If you think you already have a brand, you can consider ‘brand extension’. It’s a strategy that involves extending your brand to a new product that may or may not be related to your current products.
Collect customer feedback about what other products they would like to have on the menu.
Consider your expertise with the new product. There is no use extending the brand to a product you’re not good at.
Answer these questions before you start planning a brand extension.
Will it be cost effective to offer the new product?
Do you already have the equipment for preparing the new product?
Will there be a complementary effect on sales, i.e. will your current customers also buy the new product?
Will the new product cannibalize the sales of an existing product?
You can extend the brand to related or unrelated product. For example, Starbucks has extended its brand to espresso machines that it supplies to other businesses.
You may also consider launching a completely new brand that will complement the core brand. Starbucks uses the brand FontanaTM for syrups and sauces and Tazo® for tea.
#12. Get into Cause Marketing
Starbucks uses cause marketing quite effectively to attract customers, maintain a cool image and justify its premium pricing. According to a Nielsen study, 42% of people would pay extra for products associated with a positive social impact.
Select a cause you believe in. It’s better if the cause is related to the brand in some way.
Reach out to a non-profit working for the cause you have selected.
Create a media strategy. You can use anything from point-of-sale display to social or outdoor media depending on your budget.
Starbucks has perfected customer service and relationships to the extent that the baristas know the names, personal details and previous orders of their loyal customers. Customer feedback is collected through all marketing channels and the product is continuously improved to meet customer expectations.
It’s their stellar customer service that has enabled Starbucks to add (on the average) 2 stores a day since 1987.
Include your customers, employees, suppliers, local community, association members, and other stakeholder in your follow up list.
Communicate constantly. Miss no opportunity to send a thank you message or congratulations email.
Use email marketing to stay in the mind of your customers. Employ email programs such as MailChimp to automate your email sequences.
Use comment cards inside the restaurant to collect customer opinions and feedback. Or if you can afford it, use touchscreen tablets for customer feedback.
Build a rewards program for your loyal customer. It will play an important role in cultivating long term relationships with your most frequent buyers.
#14. Do Seasonal and Occasion Based Marketing
People eat by occasions and not by demographics or psychographics. Starbucks has expanded its business considerably by relying on seasonal and occasion-based marketing. For example, it offers a breakfast and lunch menu to reign in consumers who eat out at these times. The more effectively you link a product to an occasion, the more you can sell.
Be it Christmas, Thanksgiving, Independence Day or any other occasion, you can expect Starbucks to come up with a special product and promotion tailored to that occasion. Starbucks also offers seasonal products that are only available till the season lasts. For example, the legendary Pumpkin Spice Latte and the red cups is only available during holiday season.
Offer a Free Giveaway: You can make it a tradition to give away a complimentary product during certain seasons and occasions.
Run a Photo Contest: Photo contests are always entertaining and exciting. For example, you can ask your customers to share their photographs in their Halloween costumes.
Stand Out from Competitors: Don’t just focus on major occasions. Starbucks promotes some very unique occasions such as first day of school or first day of summer.
Limit Product Availability: Just like Starbucks, you can limit the supply of seasonal or occasional items in order to create a sense of urgency or FOMO.
Promote Like Crazy: After you have decided what to offer for which occasion, promote your traditions consistently through all of your marketing channels. Before long, customers will start looking forward to various occasions and word of mouth will spread.
#15. Create an Awesome Brand Identity
The name Starbucks is inspired from Starbuck, the name of a character in the nineteenth century classic Moby Dick. And the Starbucks logo, the Siren according to Norse marine folklore is a two-tailed mermaid whose singing lures unwary sailors to the rocks.
Starbucks successfully created a compelling brand identity fit for their origin—a small coffee shop on the Seattle waterfront. Both the name and the logo tell a story about the sea.
Understand your target customers, your products, vision and mission
Look for a name that relates to what you do and appeals to your customers. Here are a few options you have:
The founder’s name such as Gloria Jean’s Coffee
A descriptive name such as Burger King
A location based name such as Arizona Grill
An acronym such as KFC or TGIF
A funny name such as Heart Attack Grill
Join two words like Thaitanic Restaurant
An out of context word such as Lord of Fries or…Starbucks!
Discuss the names with your staff, partners, friends or family
Test the names in a focus group interview or brainstorming session
Here you are then, with enough food for thought to keep you going for months, as far as marketing your restaurant is concerned. As you may see, following in Starbucks’ footsteps doesn’t necessarily require a million dollar promotion budget. You can start small and smart. Remember that it took Starbucks almost a decade to start churning out some serious profits. So be patient. Be ready to wait and stick to your guns. Success is bound to follow.