Chapter 7: Business Marketing

This chapter, the final chapter of the semester, is on business marketing.  This specific type of marketing is of goods and services to individuals and organizations for purposes other than personal consumption.  An example of business marketing are the market for the Starbucks coffee machines which are used to make the coffee for their customers.  Since these machines are not being used by the Starbucks customer themselves but instead it creates the product which their customers consume, it is a business product and is marketed to the Starbucks business.  They are also business products since it is used to manufacture other products, being the coffee which is then sold to the consumer.

After the launch of the new Verismo machine, which is a multi-purpose, single serve, coffee machine by Starbucks, and the larger model carries more water to make multiple cups, it may become easier for small offices and people of small businesses to create their own coffee.  This makes it convenient for them and overall may be more cost efficient then purchasing a specialty coffee everyday.

Now business products generally fall into one of 7 categories, depending on their use.  These 7 categories are: major equipment, accessory equipment, raw materials, component parts, processed materials, supplies, and business services.  For Starbucks, an example of a business product are the coffee machines mentioned earlier.  These are part of the major equipment category, since it's a capital good.  Another business product of Starbucks are the coffee beans used to make the coffee, which is a type of raw material.  Raw materials are unprocessed extractive or agricultural products.    These are also business products because it becomes a part of another product, in which the organization sells.  Other examples of raw materials for other businesses are items such as corn, wheat, fruits, and vegetables.

The use of strategic business alliances, which is a cooperative agreement between business firms and may take form of: licensing or distribution agreements, joint ventures, research and development consortia, and partnerships, is an area of marketing strategy that Starbucks frequently uses.  According to chron.com, which is the Houston premier local news provider, the list of business alliances Starbucks has includes Barnes and Nobles, PepsiCo, United Airlines, Kraft, and NAACP.  "According to Rebecca Larson, assistant Professor of Business at Liberty University, Starbucks partnered with Barnes and Nobles bookstores in 1993 to provide in-house coffee shops, benefiting both retailers.  In 1996, Starbucks partnered with PepsiCo to bottle, distribute, and sell the popular coffee-based drink, Frappacino.  A Starbucks-United Airlines alliance has resulted in their coffee being offered on flights with the Starbucks logo on the cups and a partnership with Kraft foods has resulted in Starbucks coffee being marketed in grocery stores.  In 2006, Starbucks formed an alliance with the NAACP, the sole purpose of which was to advance the company's and the NAACP's goals of social and economic justice," stated within the Houston Chronicle piece.

Chapter 8: Segmenting and Targeting Markets

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.