MARKETING MANAGEMENT - MBA

Assignment 2 -

1) What are the challenges in marketing luxury brands? According to industry

observers, luxury brands tend to fare better than mass market brands during
times of economic hardship. How do you explain the plight of Starbucks in 2008?

Starbucks

Starbucks Corporation generates revenue both from its company-operated retail

stores and from specialty operations. From 2004 to 2008, Starbucks grew its revenue by
14.5% , culminating in 10.4 billion in sales in 2008. Through its company-operated retail
coffee houses, Starbucks sells high-quality whole bean coffee, freshly brewed coffee,
premium teas, a variety of cold blended beverages, various food/pastry items, and
coffee/beverage related equipment and accessories, as well as a line of CDs.

Brand

The phenomenon of branding is introduced to distinguish the products of different

competitors. The identification of a product is two edged in the sense that it permits satisfied
customers to repeat purchase. Branding is now standard practice for the majority of goods,
although it is most frequently associated with products purchased for personal consumption.
From both the consumers and producers point of view the brand serves as a useful shorthand
expression for a whole collection of attributes and properties associated with a given product.
Brand names may be given to individual products. Individual brand names are expensive to
establish, and usually require a large investment in advertising and sales promotion.

Market Segmentation

The concept of segmentation is based upon consumers, differences in

consumers with respect to the differences in market demand and the segments of consumers
can be isolated within the overall market. The bases of segmentation are the similarity of the
consumers. The uniqueness of the consumers and the differences and similarities. The
segmentation may be demographic segmentation, geodemographic segmentation.
Marketing Mix
If we correlate the luxury brands with the marketing mix then we can
distinguish between the luxury brands and the mass market brands. The marketing mix is the
set of choices which defines the firm’s offer to its target market. Customer research is a key
element in building an effective marketing mix. The knowledge of target market and
the competitors will allow to offer a product that will appeal to customers and avoid costly
mistakes.

Product
The product must have to meet the customer requirements whatever the customer
requirements are. For example, an important aspect is function - products should do what they
say they can do and what they are expected to do. For example, Audi cars are popular because
of their high performance. Product is what you sell, and the variety or range of products you
sell. It may be the in the form of the physical product or the service. This includes the quality,
branding and the opinion the consumers have of the product. For a service, support for the
client after the purchase is important. Apart from the physical product itself, there are
elements associated with the product that customers may be attracted to, such as the way it is
packaged. Other product attributes include quality, features, options, services, warranties,
and brand name. The product’s appearance, function, and support make up what the customer
is actually buying. Successful managers pay close attention to the needs their product bundles
address for customers.

Price
The price needs to be relevant to the product or service and the market. A firm's
pricing decision is often aimed at attracting a particular market segment. For example,
if it wants to sell at the top end of the market it will charge a high price, at the bottom
a low price, and so on. Price refers to how much you charge for your product or
service. Determining the product’s price can be difficult and complex. Many small
businesses feel that the price of their product must be kept low. So they begin their
business by creating an impression of bargain pricing. However, this may be a signal
of low quality and not part of the image you want to portray. Your pricing approach
should reflect the appropriate positioning of your product in the market and result in a
price that covers your cost per item and includes a profit margin. The result should
neither be greedy nor timid. The former will price you out of the market; pricing too
low will make it impossible to grow. (Philip Kotler, Marketing, 2007)
Place
The place refers to the distribution channels used to get your product to your
customers. What the product is will greatly influence how it is distributed. If, for example, in
the case if anybody have a retail store and supplying to the local community then he is at the
end of the distribution chain, and so he will be supplying directly to the customer. Businesses
that create or assemble a product will have two options: selling directly to consumers or
selling to a vendor. The place of luxury brands is in unique stores or retail outlets. As a
producer, you must decide if supplying direct is appropriate for your product, whether it be
sales through retail, door to door, mail order, e-commerce, on-site, or some other method. An
advantage of direct sales would be the contact you gain by meeting customers face to face.
With this contact you can easily detect market changes that occur and adapt to them. You also
have complete control over your product range, how it is sold, and at what price. Direct sales
may be a good place to start when the supply of your product is limited or seasonal. For
example, direct sales for many home-produced products can occur through home based
sales, markets, and stands.

Promotion
The promotion is related with the advertising and selling part of marketing. It is
how you let people know what you’ve got for sale. The purpose of promotion is to get people
to understand what the actual product is, what they can use it for, and why they should want
it. You want the customers who are looking for a product to know that your product satisfies
their needs.The promotion of the luxury brands are through different media. The public
relations focuses on creating a favorable business image. The important components of a
good public relations program include being a good neighbor, being involved in the
community, and providing open house days. News stories, often initiated through press
releases, can be good sources of publicity. Personal selling focuses on the role of a
salesperson in your communication plans. Salespeople can tailor communication to customers
and are very important in building relationships. While personal selling is an important tool, it
is costly. So you should make efforts to target personal selling carefully. Sales promotions are
special offerings designed to encourage purchases. Promotions might include free samples,
coupons, contests, incentives, loyalty programs, prizes, and rebates. Other programs might
focus on educating customers through seminars or reaching them through trade shows. Your
target audience may be more receptive to one method than another. Additional sources of
promotion may be attending or participating in trade shows, setting up displays at public
events, and networking socially at civic and business organizations.
Starbucks

The Starbucks is a brand whose target market is office people having well or
average income.( Marie Bussing-Burks, Starbucks, 2009) The outlets of Starbucks are
normally in those areas where the offices are located. The target market is office people
therefore the economic downturn have not as much effect on it.

Economic effect on luxury brands

The economic downturn has not as much effect on the
luxury brands since the users of the luxury brands belong to such a market which is least
concerned about the price of products. People are reasonably good at forming estimates based
on addition, but for operations such as compounding that depend on repeated multiplication,
we systematically underestimate how quickly things grow. As a result, we often lose sight of
how important the average rate of growth is for an economy.

Economic effect on mass market brands

The implications of globalization for a national
economy are many. Globalization has intensified interdependence and competition between
economies in the world market. “Globalization” is currently a popular and controversial issue,
though often remaining a loose and poorly-defined concept. Sometimes too comprehensively,
the term is used to encompass increases in trade and liberalization policies as well as
reductions in transportation costs and technology transfer. As far as its impact is concerned,
discussion of globalization tends to consider simultaneously its effects on economic
growth, employment and income distribution - often without distinguishing betweencountries
and within-country inequalities – and other social impacts such as opportunities for poverty
alleviation, human and labour rights, environmental consequences and so on.
Plight of Starbucks
The Starbucks faced the recession during the year 2008. The global
economic crisis also affected the Starbucks.( Joseph A Michelli, The Starbucks
Experience, 2006)
The reason of this plight was due to the fact that the target market of Starbucks was the office
people and due to the cuts in the jobs and benefits of the employees there was also the change
in the buying power of the employees. The decrease in the buying power also affected the
turnover. The other reason of the plight of Starbucks is the increase in the number of
competitors and the changes in the marketing strategies. Due to the change in the economic
conditions, the Starbucks has to make changes in its marketing strategies.
2) Evaluate the actions taken to re-invigorate the Starbucks brand.

Introduction
The actions were taken to reinvigorate the Starbucks brand. Personal selling
focuses on the role of a salesperson in your communication plans. Salespeople can tailor
communication to customers and are very important in building relationships. While personal
selling is an important tool, it is costly. So you should make efforts to target personal selling
carefully. Sales promotions are special offerings designed to encourage purchases.
Promotions might include free samples, coupons, contests, incentives, loyalty programs,
prizes, and rebates. Other programs might focus on educating customers through seminars or
reaching them through trade shows. Your target audience may be more receptive to one
method than another. Additional sources of promotion may be attending or participating
in trade shows, setting up displays at public events, and networking socially at civic and
business organizations. Personal selling focuses on the role of a salesperson in the
communication plans. Salespeople can tailor communication to customers and are very
important in building relationships. While personal selling is an important tool, it is costly. So
you should make efforts to target personal selling carefully. Sales promotions are special
offerings designed to encourage purchases. Promotions might include free samples, coupons,
contests, incentives, loyalty programs, prizes, and rebates. Other programs might focus on
educating customers through seminars or reaching them through trade shows. Your target
audience may be more receptive to one method than another. Additional sources of promotion
may be attending or participating in trade shows, setting up displays at public events, and
networking socially at civic and business organizations.

Advertising
Personal selling focuses on the role of a salesperson in the communication
plans. Salespeople can tailor communication to customers and are very important in building
relationships. While personal selling is an important tool, it is costly. So the efforts should be
made to target personal selling carefully. Sales promotions are special offerings designed to
encourage purchases. The promotions have different forms and may include free samples,
coupons, contests, incentives, loyalty programs, prizes, and rebates. The other programs also
focus on educating customers through seminars or reaching them through trade shows. The
target audience may be more receptive to one method than another. The additional sources of
promotion may be attending or participating in trade shows, setting up displays at public
events, and networking socially at civic and business organizations.
Change Management
This was a new scenario for the Starbucks and this was a new
change for the Starbucks. It is admitted that the change is there but the need is there to
manage it. The methods used to manage these changes and the media use to manage change is
important. The need for change stems from different sources that may be external or internal
sources. A roadblock to successful implementation of structural change programs, such as
TQM or re-engineering, is the vulnerability of such initiatives to powerful, yet poorly
understood cultural influences. If we acknowledge the potential causal role of culture in the
success or failure of organization change, then it makes sense to develop strategies for
examining and redesigning cultural systems as an integrated aspect of change management. In
many organizations, systemic change requires a transition period of at least three to five
years. Major factors contributing to the lengthening of this transition are the complexity,
ambiguity, and power of organizational culture. Rapid change in technology, communications
and information mean that organisation leaders must examine the fundamentals of their
organisations. The Starbucks has to manage the changes.

Training and development

The training and development is necessary for the Starbucks
staff in order to gain competitive advantage. Training and Development should be an integral
component of your business activity. It makes good business sense to train your staff. There
are many different types of training. Training should be carefully targeted to ensure that it is
inline with business objectives Training is, of course, an essential part of any job. A strong
training program involves both facility personnel and local law enforcement and first
responders, thus strengthening relationships with the community. Levels of training are
dependent upon the regulatory requirements for the facility as well as the responsibility of the
employee related to security.

SWOT analysis
The Starbucks has to do the SWOT analysis.
• SWOT analysis looks at your strengths and weaknesses, and the opportunities and
threats your business faces. Strengths are usually easy to identify, through your
continuing dialogue with customers and suppliers. Your records (e.g. sales) will also
 help to indicate areas where you are particularly strong (e.g. rising sales for a
particular product). (Dr L M Foong, Understanding of SWOT analysis, 2007)
Weaknesses are often known but ignored. A SWOT analysis should be the starting point
for tackling underperformance. External changes provide opportunities that well-managed
businesses can turn to their advantage. Threats can be minor or can have the potential to
destroy the business.

Customer relationship management

“Globalization” is currently a popular and
controversial issue, though often remaining a loose and poorly-defined concept. Sometimes
too comprehensively, the term is used to encompass increases in trade and liberalization
policies as well as reductions in transportation costs and technology transfer. As far as its
impact is concerned, discussion of globalization tends to consider simultaneously its effects
on economic growth, employment and income distribution - often without distinguishing
between countries and within-country inequalities – and other social impacts such as
opportunities for poverty alleviation, human and labour rights, environmental consequences
and so on. (Paul Greenberg, CRM, 3rd ed. 2004)
“Globalization” is currently a popular and controversial issue, though often remaining a loose
and poorly-defined concept. Sometimes too comprehensively, the term is used to encompass
increases in trade and liberalization policies as well as reductions in
transportation costs and technology transfer. As far as its impact is concerned, discussion of
globalization tends to consider simultaneously its effects on economic growth, employment
and income distribution - often without distinguishing betweencountries and within-country
inequalities – and other social impacts such as opportunities for poverty alleviation, human
and labour rights, environmental consequences and so on.

References
• Michael J. Baker, Marketing, 6th ed. 1996
• Michael, The Marketing, 4th ed. 1999
• Herb Edelstein, “Building profitable customer relationships with data mining”, 2002
• Dr L M Foong, Understanding of SWOT analysis, 2007
• Philip Kotler, Marketing, 2007
• David Mercer, Introduction to Marketing, 1996
• Robert A Paton, Change management, 3rd ed. 2008
• Francis Buttle, Customer relationship management, 2004
• Paul Greenberg, CRM, 3rd ed. 2004
• Joseph A Michelli, The Starbucks Experience, 2006
• Marie Bussing-Burks, Starbucks, 2009