Product Life Cycle in the Starbucks Context - Essay Example

Executive Summary This report focuses on the efficiency of using PLC in coming up with a suitable marketing strategy for business. Crafting the right marketing mix to give maximum value to customers and profit to business organizations is aided by the use of this business tool. The PLC is applied to Starbucks in the US where coffee is in the mature stage as well as in China where it is still in the introductory phase. It was found out that PLC is a tool which can be used to extend the life of products. Table of Contents Titles Pages Executive Summary 1 Introduction 3 The Product Life Cycle: An Overview 4 Product Life Cycle in the Starbucks Context 4 The Role of PLC: Extending Product Life 7 Conclusion 7 References 9 Introduction Marketing, as defined by the marketing guru Philip Kotler (2001), is the "delivery of customer satisfaction at a profit (p. 5)." With this definition, it becomes apparent that marketing is not just about selling goods and services to customers. At the heart of marketing is delivering customer value to satisfy and even delight buyers. This calls for the efficient establishment of a marketing mix which takes into account all the essential factors in marketing commodities. In marketing a product, the extended marketing mix is used and is comprised of seven decision areas (7Ps) namely, product, people, price, promotion, place, process, and physical evidence. The Product Life Cycle (PLC) model is an indispensable model which can be utilized in coming up with a well crafted marketing strategy. It is stated that "the product's current PLC position suggests the best marketing strategies (Kotler and Armstrong 355)" and that "the resulting marketing strategies affect product performance in later life-cycles stages (Kotler and Armstrong 355)." This report will look at the use of PLC model as a tool in crafting an efficient and profitable marketing mix for Starbucks Corporation. The first section will give a more in-depth background of the PLC model. Next, it will be used to come up with a marketing mix for Starbucks in China and US. Another section will also be devoted in explaining how certain strategies extend the life cycle of a product in a certain market. The paper will conclude with its recommendations on using the PLC as a potent aid in making product policy decisions. The Product Life Cycle Model: An Overview The PLC model recognized that the life of a product in the market takes commonly follows five distinct stages. The first course is the product development stage which begins when the company finds and develops a new product idea. Introduction phase is the period where the product is finally launched into the target market. This stage is characterized by huge expenses which significantly drive down profit levels. Next is the growth period where the product goes through rapid market acceptance and increasing profits. The maturity stage is commonly the longest stage in the product life cycle which is characterized by slowdown in sales growth due to its general acceptance. In effect, profits typically level off or decline as the company makes efforts to defend the product against competition. The last stage is decline when the product's sales fall off and profits drop (Kotler and Armstrong 354). Product Life Cycle in the Starbucks Context According to Hoovers, Starbucks is the number one specialty coffee retailer having 10,000 coffee shops around the globe. Contrary to the common knowledge that the main product of Starbucks is coffee, an executive of the company declares that Strabucks doesn't sell coffee. Instead, Starbucks goes beyond selling premium quality coffee but it sells "an experience." According to Howard Behar, "We're not in the business of filling bellies, we're in the business of filling souls (qtd in Kotler and Armstrong 58)." With this in mind, Starbucks has conquered the globe with its coffee shop to share the "Starbucks experience." In this section, we will utilize the PLC in crafting marketing strategies to Starbucks products. As the company presently holds diverse markets, we focus on US where the "experience" is already in the growth stage and in China where Starbucks is still in the introduction process. Starbucks in USA The extended marketing mix used by Starbucks in conquering the US market will be laid in this section. Starbucks' product in the US is basically in the maturity stage as it has already achieved acceptance by most potential buyers. Thus, the main task of Starbucks is retaining its customers and squeezing more revenue from them. Similar to all the Starbucks coffee shop, the main product in the US is the "Starbucks experience" which is achieved by providing premium coffee and good ambiance for coffee drinkers. As the company offers a combination of products and services it makes sure that its staff is making the "experience" better by equipping them with the necessary skills to serve and deliver customer satisfaction. Starbucks pricing is relatively higher than other coffee shops to reflect the excellence of its products. Generally, the process of making and serving good coffee is ensured as the company assures customers of quality coffee which was processed to bring out the best in every bean. The packaging of Starbucks coffee come in cups and bags, stamped with the company logo. However, this general extended marketing mix is modified in order to take into account the changes which are happening in the market of Starbucks. As the company wants to squeeze higher revenue from its visiting customers, the company extended its product line by serving Krispy Kreme doughnuts (New York), Fresh Fields gourmet sandwiches (Washington DC), huckleberry pancakes (Seattle), and others. Currently, the company does not only offer ready to drink coffee but costumers can now have the "Starbucks experience" at their own homes by buying coffee beans and coffee powder. This is made possible by the company's co-branding with Kraft. The place where the products are marketed also changed as the product matured. Starbucks products can now be found in supermarkets (coffee beans and powder) and in the World Wide Web. The maturity of Starbucks products also means a tighter competition with its competitors. With this Starbucks moved to add features to its product offerings by allowing customers to access the internet and listening music at the coffee shops. Starbucks in China The marketing mix pursued in the US is modified in China as coffee is relatively new in the tea country. Though faced by a lot of challenges, Starbucks is determined to give Chinese the "Starbucks experience." The 7Ps pursued by Starbucks in China is almost identical to what was intended for the US in the introduction stage. However, the main difference is how the product is positioned. In the US, Starbucks is a move to slow people down in order for them to "smell the coffee." In China, Starbucks is a positioned as a coffee shop for modern Chinese. In the introduction stage, companies commonly invest a lot of money to finance aggressive marketing to inform the potential market of their presence. Starbucks' marketing involved investing in stores. Lin states that "Our main advertising medium is the store itself." It should be noted that as other competitors invest on less expensive venues, Starbucks choose the most expensive locations. Market researches are conducted to find a high visibility and high traffic place for stores. Other marketing strategies aimed to introduce coffee to the Chinese market are sponsoring an online coffee club and occasional office tower coffee tasting (Fowler). The Role of PLC: Extending Product Life The PLC is a tool which is necessary in order to extend the life of a product in its market. Knowing what stage the product is currently in helps managers in tailoring strategies to efficiently promote and market products in the market. The above information shows understanding PLC and implementing suited strategies extend the life of the product. In China, huge investment is really needed to inform customers and facilitate the entry of the product in the growth stage. Without investment in location, Starbucks will not gain popularity in the market. Meanwhile, the strategies launched in the United States are necessary to ensure that the company will not reach the decline stage. The company makes its products more attractive to coffee drinkers by introducing new features and new product forms. Without these strategies, the coffee drinkers will be satiated with the usual coffee and seek other products from competitors. This will lessen the share of Starbucks in the beverage industry. Conclusion PLC is truly an indispensable tool in crafting effective marketing strategies. As shown in the above examples, PLC answers what modifications it can make to the marketing mix in response to the stages that the product is going through. It was also shown how PLC extends the life of a product by helping managers in establishing suitable and age-defying marketing strategies. However, it should be noted that it is hard to ascertain the stage that the product is in. Therefore, the real challenge for managers is to determine the course of their product. This can be done by market researches which ah the consumer in mind. As the real function of marketing is the satisfaction of customers, it is imperative that managers keep in mind that in the end, the buying public holds the life of their product. Being sensitive to their needs matters most. Bibliography Fowler, Geoffrey. "Converting the Masses: Starbucks in China." Far Eastern Economic Review. May 8, 2006 < http://www.globalpolicy.org/globaliz/cultural/2003/0710starbucks.htm> Kotler, Philip, and Gary Armstrong. Principles of Marketing. 2001. New Jersey: Pearson Education, Inc. Starbucks. May 8, 2006 "Starbucks Entry to the Market." The Center for Hospitality Research at Cornell University. May 8, 2006 Read More