Introduction
Ashish Vaswani
Founded in 1971 in Seattle, Washington, Starbucks is the world’s largest coffee chain with over 20,000 stores operating in 62 countries. The company entered into a 50:50 joint venture with Tata Global Beverages in 2012 which led to the birth of Tata Starbucks. Starbucks owns and operates its stores in India under the name Starbucks Coffee “A Tata Alliance”.



Soon after the India launch in October last 2012, stores in Mumbai and Delhi opened to long queues with coffee lovers waiting for hours on end to sample the world famous “Starbucks experience”. The twin-tailed mermaid that has been a part of the Starbucks logo since its early days continues to attract loyalists the world over. As of today, Tata Starbucks has stores at 63 locations across 7 cities of the country.

A brief history of the Frappuccino

The word Frappuccino is a portmanteau of frappe and cappuccino. The origin of the Frappuccino dates back to 1992 when George Howell, the owner a café chain called Coffee Connection decided to introduce an icy milkshake during the summer months. The move paid off and close on the heels of the success of the Frappuccino, Howell was able to expand his chain to 23 stores within the next one year.

In 1993, Starbucks bought over Coffee Connection and thereby also gained the rights to use, make, market and sell the Frappuccino beverage. Frappuccinos debuted on the Strabucks menu in 1995 and have been a staple ever since. The Java Chip Frappuccino Blended Beverage is one the highest grossing beverages on the Starbucks menu in terms of sales and continues to attract newbies and coffee connoisseurs alike.
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Creating and Delivering Customer Value
Ashish Vaswani
Being a premium coffee brand, every cup of a Starbucks beverage delivers phenomenal value to customers by just being exclusive. The psychological benefit that a customer derives from every tumbler of the Java Chip Frappuccino is a key takeaway. Loyalists the world over swear by "the Starbucks experience". The coffee chain goes the extra mile in making each customer feel special.

 Simple gestures adopted by Starbucks, such as scribbling the customer's name on on the coffee cup have ensured an unbelievable number of repeat walk-ins. So much so that, die hard enthusiasts will not visit a coffee house unless it's Starbucks.The average Starbucks customer visits the store 6 times per month while a loyal 20% of customers go to the stores 16 times per month.

The ambience that each Starbucks cafe offers adds to the value of every Frappuccino. Here are some additional elements that add to the customer value:
  • Free wi-fi at most outlets
  • Free coffee on birthdays
  • Loyalty cards
  • Seasonal specials
Moreover, Starbucks believes in creating value not just for its customers, but also for its employees. This is reflected in the company's policy of addressing each employee as a "partner". At $300 million, Starbucks spends more on healthcare insurance for its employees than on coffee beans.
Theoretically speaking, customer perceived value is the difference between a customer's evaluation of the benefits of a product or service in comparison to the cost that she may incur to obtain the same.

In our case, though the cost of an average Java Chip Frappuccino may well be higher than any regular cup of coffee, the perceived benefits associated with it, are what make it a high value proposition in the minds of consumers.
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Understanding Consumers and Consumption
Ashish Vaswani
The Tata Starbucks Java Chip Frappuccino is a premium product that is targeted towards the urban, educated Indian consumer. The moment a first timer walks into a Tata Starbucks store, she is sure to be mesmerized by the ambience. The aroma of freshly brewed coffee along with a pleasant staff are the key differentiators of any Starbucks outlet.

Let us take a look at the factors that govern consumer behaviour.

Social factors: For the last one year, the consumers' activity of having visited a Starbucks outlet has been associated with an achievement of sorts. Starbucks is an aspirational brand and consumers love to flaunt their achievements amongst family and friends. This can be explained by the roaring success of hashtags such #PumpkinSpice that accompanied the seasonal drink. Consumers' need to gratify this urge for social belongingness can be linked to their consumption habits.

Cultural Factors: India's youth are adopting the coffee culture with open arms. The 25+ SEC A TG that Starbucks is targeting has a high disposable income at its perusal. Combined with the freedom to socialize over a glass of Java Chip Frappuccino, an outing to a Tata Starbucks outlet serves as a perfect recipe for success.

Personal Factors: Not all Indians are coffee lovers. Hence the decision to purchase a Java Chip Frappuccino is governed, to some extent, by personal factors as well. It is for  this reason that Starbucks is always tweaking and expanding its food and beverage menu to adapt to local palates. The special menu that has been rolled out in stores across India has been welcomed with open arms by consumers.
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Market Structure and Competition
Ashish Vaswani
The Indian coffee store business has the following dominant players apart from Tata Starbucks:


Though Cafe Coffee Day and Barista are not direct competitors since the others are premium chains, the fact of the matter remains that they do grab a considerable chunk of the coffee pie. Costa Coffee is on an expansion spree with more than 200 new stores in the offing by 2015.

On the world map, Starbucks has a tougher competition in the premium breakfast segment from the following:


All these brands are involved in a fierce show of strength, which is usually accompanied by tongue-in-cheek promotional campaigns. Starbucks, on its part, keeps its distance from offensive advertising and continues to maintain its fair share of the market by projecting itself as the "third place" after home and work.

Competition from in-house products


Speaking of the Java Chip Frappuccino in particular, it becomes imperative to account for the competition that its faces from other items on the Starbucks menu. Seasonal specials encourage loyal customers to veer away from regular consumption habits and try newer blended beverages. In spite of minor shifts in consumption patterns that are observed on a seasonal basis, the Java Chip Frappuccino continues to be a favourite. It would be safe to expect continued growth in loyalty so long as Tata Starbucks' cash registers are ringing.

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Life Cycles
Ashish Vaswani
Product Life Cycle

Globally, the Frappuccino sub-category is quite mature with a dedicated fan following to boast of. However, since Tata Starbucks has introduced the product to Indian consumers only in October 2012, the Frappuccino in general and the Java Chip variant in particular will take some time to penetrate the market.

A first time customer is more likely to try the regular coffee offerings that Tata Starbucks has to offer. Chances of  experimenting with the Frappuccino are higher on repeat visits. In other geographies, the Frappuccino sees a minor dip in sales during winter. However, such a phenomenon may not be expected in a hot and humid country like ours.

Industry Life Cycle

India's tryst with stylized cafes started in 1996 when the first Cafe Coffee Day store was opened on Brigade Road, Bangalore. Interestingly, this store also happens to be the first cyercafe in the country, providing internet access on a pay-as-you-go basis. Another early entrant in the coffee space was Barista which launched its first store in New Delhi in early 2000.

Over the years, the industry has evolved leading to some sea changes in market competition. Barista has lost considerable market share due to its inability to create a pan-India footprint. Cafe Coffee Day has gone ahead and created a young image around itself by sticking to low cost menu options that appeal to the 15-24 age group. Costa Coffee is relatively late entrant but has managed to create a niche for itself in the premium coffee segment. The same holds true for Coffee Bean & Tea Leaf.

With the entry of Tata Starbucks into the Indian market, a slew of changes are expected to hit the industry. With growing demand for premium coffee and fewer points of parity among brands, it would be interesting to see how the coffee bar industry in India evolves further.

Brand Life Cycle

As a brand, Starbucks needs no introduction. It is interesting to note that in 2011, Starbucks decided to stop using its name which was a part of its logo thus far. With a trusted partner like Tata Global Beverages, the union is nothing short of a winning team. What remains to be seen is how this collaboration of two giants manages to sustain its India operations in the face of stiff competition from local brands.


The Java Chip Frappuccino will also continue to evolve as a distinct brand as more and more Indians try and experiment with the different customization options that Starbucks has to offer. 
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Product Mix
Ashish Vaswani
The Starbucks product mix differs marginally in various geographies the world over. However, the Java Chip Frappuccino is served in almost all outlets. Starbucks has pursued an extensive product line strategy, creating a variety of products, beyond simply the coffee beans. Through partnerships, it now provides coffee flavour and expertise and its brand name to jazz music CDs, frappuccino beverages, carbonated ready-to-drink (RTD) coffee, flavoured ice creams, and branded coffee sold through supermarkets.
Today, there are more than 36,000 different ways to customize the Frappuccino blended beverage. As Starbucks continues to expand into new markets and countries, the number of Frappuccino blended beverage flavours continues to grow. Flavors such as the Red Bean Green Tea Frappuccino blended beverage in China, the British inspired Strawberries and Cream Frappuccino blended beverage in the UK, and the Brigadeiro Frappuccino blended beverage in Brazil provide culturally-relevant options for Starbucks customers around the world.

Apart from the regular items on its menu, Starbucks offers an impressive range of merchandise which are refreshed every season. Mugs, tumblers, t-shirts and other memorabilia are any collector’s delight. In addition to these, Starbucks also offers a slew of coffee machines and French presses that are available for sale at most retail outlets.

Click to enlarge
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Branding and Brand Management
Ashish Vaswani
Starbucks is an aspirational premium brand that has achieved cult status over the years. The sheer respect that the brand commands is a huge asset for the company. The twin-tailed mermaid and the aroma of freshly brewed coffee are signature statements for Starbucks. The company has stayed with the upper-scale of the coffee market, competing on comfort rather than convenience, which are the case with its closest competitors, McDonald’s and Dunkin Donuts.

What makes Starbucks special is the uniformity of the blends in stores across the world. Irrespective of where the coffee is sourced from, a cup of Java Chip Frappuccino will taste the same in Shanghai as well as Seattle. The company continues to focus on its original product bundle that includes good coffee, quality service, and a nice environment to hang around. They keep their attention on paying attention to the details of great execution and service.


With Starbucks’ entry into the Indian market, the onus lies on the partners to replicate the success of this high value brand, whilst catering to Indian sensibilities.
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Pricing Decisions
Ashish Vaswani
Rather than trying to compete with cheaper chains, Starbucks uses price hikes to separate itself from the pack and reinforce the premium image of their brand and products. Since their loyal following isn’t especially price sensitive, Starbucks coffee maintains a fairly inelastic demand curve, and a small price increase can have a huge positive impact on their margins without decreasing demand for beverages. 


This approach is known as price skimming. In India, the Java Chip Frappuccino is offered in three glass sizes- Tall, Grande and Venti, priced at Rs. 140, Rs. 160 and Rs. 180 respectively.

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Promotion
Ashish Vaswani
Starbucks does not believe in high media spends. Most of the promotions are through word of mouth, although certain print and outdoor activations are done from time to time. In India, we are yet to see a full blown promotional strategy from Tata Starbucks. Otherwise, the brand is pretty active on most social networks.

Starbucks has clearly embraced the digital realm. With a strong presence on multiple social networks, the brand has set a high bar when it comes to being social and engaging its customers. They are at or near the top of nearly every major brand ranking in social media.

One of the earliest adopters of the use of social media for marketing and social commerce, Starbucks has certainly taken a leadership position. Their social media strategy is built around their company web site and most social platforms, including Twitter, Facebook, Pinterest, Google+, YouTube.

Of late, each of the store launches have been accompanied with free giveaways for the first few customers. Such promotions are often promoted through the official Twitter and Facebook pages.



Instead of solely focusing efforts on accumulating new customers, Starbucks believes in cultivating its current relationships. This ensures more fans/followers in the long run, as well as the continued existence of brand advocates. This holds true across the board: In-store experiences are highly valued, along with online engagement, emphasizing the importance of customer service.
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Distribution Decisions
Ashish Vaswani
India

Starbucks’ alliance with Tata Global Beverages in India has ensured that the best quality coffee beans reach the consumer. One-fifth if the company’s expenses are utilized in sourcing the highest quality beans and making them available in-store. This goes miles in strengthening Tata Starbucks’ commitment to quality.


Bottled Frappuccino blended beverages have also been made available in supermarkets such as Godrej’s Nature Basket and Food Hall. Special kiosks have been setup at major airports. Starbucks uses one of its four major store design templates to cater to a location, depending on its culture and uniqueness.

Global Scenario

In terms of global distribution, brewed Starbucks is now available at a variety of places including Barnes & Noble bookstores, United Airlines, Sheraton and Westin hotels, and Holland America Cruise Lines, as well as through licensing and joint venture agreements in 15 countries. The Tata Alliance is one the result of one such agreement.
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STP and Marketing Strategies
Ashish Vaswani
Segmentation
The Java Chip Frappuccino caters to the 25+ SEC A section of the demographic. This TG has the requisite spending capacity to indulge in recreational activities. An outing to Starbucks may not be considered out of the ordinary for this segment. Households with kids may consider spending some quality time since frappuccinos are high on milk content. The aspirational youth segment is also another section of the demographic that this line caters to. Nothing beats a casual date at Starbucks.

Targeting 
Starbucks cannot expect to grow by offering the same products as its competitors. Starbucks must offer “points of difference” that will make customers want to come to Starbucks rather than competitors. The “points of difference” that make Starbucks new Frappuccinos distinctive relative to competitors fall into four important areas: 
• Brand Experience: At Starbucks you aren’t just drinking a beverage, but are undertaking in an emotional experience by the surroundings. 
• Brand Quality: Starbucks has been recognized for exceeding expectations by the quality of their products and their service. This is what will create their loyal customers. 
• Perceived Health: People that are active are perceived to be healthier than those not active. According to surveys, aside from the coffee, Starbucks is perceived as a healthy establishment, which makes the new coffee-free Frappuccinos appear healthy as well.
• Convenient Access: Globally, Starbucks is everywhere and easily accessible. In many locations Starbucks offers drive-thru windows, which are more convenient than its competitors. 


Positioning 
Starbucks products always have been perceived with a prestigious image. With their high quality products, unique tastes, friendly environment, conveniences, customers are willing to pay a premium price for its products. As Starbucks extends their product line with the new Frappuccino flavors, it also faces competitors like Costa Coffee. Therefore, to retain a position in the customers’ minds as high quality, Starbucks needs to enhance its position by making it appear as nutritional. This can be achieved by lowering the calories or by adding real fruit to the product. As the product’s nutrition and taste increase, their perceived quality will also increase. Offering a more quality product for the same price will help increase sales and enable them to be more competitive in the customer's mind. 
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Holistic Marketing
Ashish Vaswani
Starbucks takes a holistic approach using responsible purchasing practices, farmer loans and forest conservation programs. Starbucks is committed to buying and serving high-quality coffee that is responsibly grown and ethically traded. It honours this commitment through responsible coffee purchasing practices, farmer support centres, loan programs and forest conservation efforts. When Starbucks buys coffee this way, they believe that it helps foster a better future for farmers and helps mitigate the impacts of climate change for the planet.

My Starbucks Ideas
The My Starbucks Idea website, where Starbucks does its business crowdsourcing, has been actively engaging customers for over 4 years now. It encourages customers to submit ideas for better products, improving the customer experience, and defining new community involvement, among other categories.

Customers can submit, view, and discuss submitted ideas along with employees from various Starbucks departments ‘Idea Partners’. The company regularly polls its customers for their favorite products and has a leaderboard to track which customers are the most active in submitting ideas, comments, and poll participation. The site is at once a crowdsourcing tool, a market research method that brings customer priorities to light, an online community, and an effective internet marketing tool.

Experience customization
Starbucks provides its unique experience through programs such as My Starbucks Rewards, personalized “signature” drinks, and localized store experiences. Their social sites, in particular Pinterest and Instagram, encourage users to share their Starbucks moments whether it be the return of a favorite holiday drink or just an artsy coffee cup shot.

Taking a stand
Giving consumers a charitable reason to buy that steaming cup is beneficial for all. The takeaway from Starbucks is to know your customer and tie that in with what matters in the world.

Starbucks reflects a mission
Starbucks' mission is “to inspire and nurture the human spirit “one person, one cup, and one neighbourhood at a time.” It believes lifting customers up will lead to more customer loyalty. Starbucks' ‘The Way I See It’ quote campaign is a perfect example.
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