Extended Essays 2021

Starbucks ’ Market Segmentation and Target Market

In order to analyse Starbucks’ marketing strategy, Starbucks’ market’s segmentation will be considered

alongside its target market. Identifying the market is crucial when analysing the effect of Starbucks’ marketing

strategies as it may highlight possible flaws in Starbucks’ understanding of the Australian consumer and the

market, leading to Starbucks’ failure.

Starbucks’ market can be segmente d by its demographic, psychographic and geographic consumer profiles.

Starbucks is situated between mass marketing and segment marketing; with its target market being a broader

public of higher incomes and younger ages. The largest portion of Starbucks’ demographic market

segmentation is held by 25 to 40 year-olds with high incomes 6 . Psychographic segmentation indicates that

customers belong to the upper-middle class and generally have a college education. When expanding into

Australia, Starbucks failed to consider geographical market segmentation; where a company will segment

groups according to distinct geographic preferences based on values, attitudes and lifestyle 7 . When marketing

Starbucks ’ “high - end chain” approach , as seen in Figure 1, Starbucks failed to adapt this approach to suit the

preferences of Australia’s local culture . The Australian coffee consumer opts for a more refined and

sophisticated beverage, compared to the sugary drinks and higher priced offerings of Starbucks. Starbucks ’

market share was approximately 40% in the US 8 compared to Australia, where Starbucks occupied less than

2% of the Australian coffee market share 9 . This demonstrates Starbucks failure in applying the appropriate

market research on the Australian target market.

A positioning map as seen in Figure 1 can be applied to Starbucks to illustrate where the company falls

amongst popular American coffee brands, in terms of how customers perceive them. Positioning maps are

crucial to identify gaps in the market and customer desires 10 .

6 Haskova, K. (2015). Starbucks Marketing Analysis. CRIS - Bulletin of the Centre for Research and Interdisciplinary Study , [online] 2015(1), pp.11 – 29. Available at: http://archive.sciendo.com/CRIS/cris.2015.2015.issue-1/cris-2015-0002/cris-2015-0002.pdf. 7 Cronk, T. (1993). Marketing management . South Melbourne: Thomas Nelson Australia. 8 Statista. (2019). U.S. coffee chains market share 2019 | Statista . [online] Available at: https://www.statista.com/statistics/250166/market-share-of-major-us- coffee-shops/ [Accessed 17 Jul. 2021]. 9 My Virtual Marketing Manager. (2019). Starbucks Lessons from Australia - My Virtual Marketing Manager . [online] Available at: https://mvmm.com.au/lessons-from-starbucks-failure-in-australia/ [Accessed 17 Jul. 2021]. 10 Cronk, T. (1993). Marketing management . South Melbourne: Thomas Nelson Australia.

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