Starbucks demand drivers

Consumer decision making process involves various stages and is determined by various factors that they look into. Consumers will decide to buy the brands that best suit them after they have valued every stage.  Need recognition is a major stage for customers in making their decision to buy Starbuck’s products (Calvo & Stanton, 2017).  Starbucks’ coffee brand is among the major brands in the market, and customers will generally relate to the products in their attempt to satisfy their needs.  The unique ambient offered by the firm’s stores makes the consumer to relate the product to high quality. Consumers normally search for information regarding the various products offered by a company and the involvement level and purchase complexity will influence to seek out more information regarding the firm (Calvo & Stanton, 2017). The buyers will look for such information both externally or internally while trying to make decision on the product to buy. This means that the experience the consumers had in the past with the company like customer service, good ambient and even the attractiveness of the product such as coffee aroma in various shops will influence the decision they make.  The external information obtained by consumers comes from the experience of other buyers such as friends and families also play a major role. Starbucks coffee products consumers have  at many times comprised of those who have had a good experience in various shops and  information they have received from experiences of others about quality and improved customer services offered (Team, 2016). The firm believes that these consumers’ makes up a large portion of the customer base and the referrals have been related with increased performance of the company. The increase in the net income of the firm to $983.1 million from $540.7 million has been attributed to customer experience and the good quality of the brand (Wahba, 2016).

 The demand for Starbucks coffee products has barely been affected by the pricing strategy of the firm, which has seen consistent rise in prices over the years.  This shows case of inelastic demand curve for the firm, where its customers buying behavior remains almost the same even when the prices are increased. Normally, an increase in the price of a certain product will lead to reduction in the amount of the product sold, unless there is price elasticity of the product (Calvo & Stanton, 2017). The firm is so well positioned that it can manage any price increment because of its brand-equity and even the power to price its menu which is leading in the industry.  The demand for Starbucks coffee is very inelastic such that higher costs can be passed on to the consumers without affecting their buying behavior.  In this case, the demand for the firm’s product seems to be the brand quality which has ensured that customers remain loyal to it .For instance , a previous market research has shown that the brand value of the firm has improved by 44 percent and buy 2015 the brand was worth almost $26 billion (Team, 2016).  The strength of a company’s brand has shown that products will be less commoditized by consumers, which enables the firm to charge higher prices for the same.  Starbucks customers seems not to be balking at the higher prices charged for the products, which is indicated by comparable U.S sales that are seen to have increased constantly especially in the year 2016 (Wahba, 2016).  The pricing power of the company indicates that a player in the industry that is competitive can increase prices without affecting the demand.  Starbucks outlets are seen as places where people decide to meet, that are between work and homes but not just coffee shops.  The customer buying behavior can be attributed to the convenience of the coffee shops, in the way they acts as landmarks, easily spotted and ubiquitous. In addition, the drink and foods offered while one is waiting for their companions’ acts as the modern town square.  In addition, other services offered in the coffee places, though subtle, such as provision smartphones and laptops charging stations make people stick around and use their gadgets and consuming their drinks and foods (Team, 2016).

 Even though Starbucks has a large customer base that is loyal to its brand, the convenience food and coffee industry has a high level of competition among the various providers of the product. The products offered by the firm are normally up against niche players and other major chains and other small firms that the business has to compete against.  The firm has does not face many substitutes on the surface since the breadth of its product covers major drinks including tea , fruit smoothes in addition to coffee. Moreover, there are techniques of brewing the products and ways of preparation that can influence the decision of the buyers and hence, the ability of the firm to compete (Geereddy, 2013).  While the possibility of a new or existing product disrupting the firm’s loyal customers may appear far-fetched, some products have become so common that the firm had to consider offering them. Firms such as McDonalds are able to offer products that provide options for consumers in the industry.  Moreover, the specialty beverage and gourmet coffee industry appears in various segments. There are some consumers who like to buy these products at coffee houses, restaurants, espresso stands and sports events and inside other establishments that may feature a beverage stand that are independent (Team, 2016).  Even though the industry is big, it continues to growth among the various segments, which provides a lot of choices for the consumers who are likely to base their buying behavior on their preference for places. The demand of the product for various firms is driven by the preferences of customers in terms of the outlets they choose to get their products.

The demand for Starbucks products is driven by consumers who prefer to purchase the products in outlets and shops operated by the firm. This can be proved by the increasing number of stores that a company is opening in different areas as the market grows and the need for its product increases.  The high quality products preferred by consumers present an opportunity for the firm to expand its operations to many places in the market. Moreover the availability of few substitutes means that the firm has an opportunity to expand without facing stiff competition, and charging prices that will ensure profitability (Geereddy, 2013).  However, the firm still faces threats from possible entry of higher quality and innovative substitutes in the market that can reduce its sales and expansion plans. 

References 

Calvo, P. C., & Stanton, J. L. (2017). Principles of marketing.  90-94