Within a market which is defined in our marketing textbook as people or organizations with needs or wants and the ability and willingness to buy, are market segments, which is a subgroup of people or organizations sharing one or more characteristics that cause them to have similar product needs.
Market segmentation is a very resourceful strategy for organizations to fulfill their mission and gain profits. This is the process of dividing a market into meaningful, relatively similar, and identifiable segments or groups. Starbucks uses demographic segmentation (markets by age, gender, income, ethnic background, and family life cycle) as well as geographic segmentation (markets by region of a country or the world, market size, market density, or climate) and psychographic segmentation, which can link with demographics.
According to an article on chron.com (the Houston Chronicle), Starbucks holds around 33% of the market share for coffee in the U.S. Starbucks has been able to accomplish this by catering to a specific target market. Stated in the article, Starbucks' main target market is men and women between the ages of 25-40, which accounts for almost half (49%) of its total business. Customers within this range tend to have high income and professional careers. This group grows at a rate of about 3% annually. Young adults, aged 18-24, are the next large group that Starbucks targets. They bring in about 40% of Starbucks' sales and Starbucks "positions itself as a place college students can hang out, study, write papers, and meet people." They appeal to this group through the growth of technology and innovative ideas. The young adult group grows at about 4.6% each year. The last group which are apart of Starbucks' target market are kids and teens, ages 13-17. This group accounts for about 2% of Starbucks' sales but lots of items are bought from the parents of the kids. Starbucks targets this group by offering certain drinks that appeal to them.
As stated earlier, Starbucks also uses geographic segmentation. Starbucks is located all around, specifically in upscale locations, near offices, and near many college campuses.
After a company decides what is their target market and market segments, it should choose what positions they should occupy within those segments. Positioning within a market is developing a specific marketing mix to influence potential customer's overall perception of a brand, product line, or organization in general. Starbucks has positioned themselves as a highly respected brand. The Starbucks company has become positioned in a way that it can distinguish their products from competition, which gives them an advantage once again. Going back to their mission, they want "to inspire and nurture the human spirit - one person, one cup, and one neighborhood at a time." Their positioning strategy is customer based, which allows them to give the best customer service. As they continue to do this, they hold onto their sustainable competitive advantage in terms of their customer satisfaction as well as their employee satisfaction.