Future uncertainty, economic downturns, and consumer behaviors are some of the most problematic issues for any company to plan for and execute perfectly. The world is changing at a rapidly with the internet and use of social media influencing the change in consumer behavior. Businesses aim is to maximize profits and expand its operations all over the world as it exploits the opportunities presented. The ability to exploit these opportunities before rivals enables the company to gain competitive advantage in the industry. However, determining such opportunities is not based on luck but on the efforts and ability to predict the future trends and emerging markets (Bradley, 2007). Most businesses have suffered from neglecting to invest in marketing research when they plan for their futures. Negative elements in the company based on change are sometimes ignored as managers believe that the fluctuations of the economy without considering that the losses or decrease in sales is attributed to other factors. According to philosophy of science, everything that happens can be explained by undertaking studies on the issue before dismissing the signs based on optimistic assumptions. Starbucks is one of the most stable and dominant company in the coffee industry (Haskova, 2015). The company has used its effective used quality products and services towards consumer satisfaction. However, for the past three years the trend and loyalty of consumers is fading as more customers opt for beverages from McDonalds and other companies.
Thesis
The company has been dominant and has changed prices at will while maintaining its loyal customers, thus leading to the question, what should Starbucks do to increase and retain customers? Should the company change its strategies? Such questions and the increasing distain from Chinese consumers for the high prices of Starbucks’ products may lead to the management decreasing the prices. However, the company targets who belong to the affluent or in high economic status which has made it essay to sell a mug of cappuccino between the costs of $5 to $20 without encountering such decline in customers (Haskova, 2015). The past successes in increasing prices depict that the decline in consumers is influenced by price and other issues hence the need for a marketing research that will identify the problems and use ethics and psychology to develop a lasting solution.
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Paper Layout
Following the above introduction, the study summarizes marketing research as tool used by companies to identify and exploit business opportunities. The chapter demonstrates that based on scientific research, marketing research plays four primary roles that are essential in the identification of opportunities and risks associated with the opportunities. The summary is followed by discussing the role of ethics incorporating concepts from the field of marketing and psychology. The section will enable the use of marketing and psychology perspective can help in the resolution of the problem discussed earlier. The use of qualitative and quantitative evidence is important in enabling the reliability of the information. Lastly, the solution will project the success if the solution is implemented.
Marketing Research
The concept of marketing research is derived from scientific research thus defined as the systematic gathering and analyzing of marketing-related data aimed at yielding productive information that is critical in the firm’s decision-making. The analysis and interpretation of data enables the company to use the data towards improving the company’s strategies. The approach has four primary functions based on their goals namely; exploratory, descriptive, diagnostic and predictive function (Bradley, 2007). Exploratory function just as the term is the exploring or studying the market to enhance one’s understanding. The increase in studies on the issue makes it easy to undertake this function. The descriptive function of marketing research is to determine a specific trend about consumers of a particular product or service.
Diagnostic function on the other hand, investigates the relationship of different aspects to the situation at hand for instance, Starbucks can use price, consumer satisfaction, or change in lifestyles to determine the decline of its products. Lastly, the ability of a company to dominate an industry and exploit any arising opportunity is based on its forecasting efficiencies, therefore, predictive function involves using data to predict future trends thus help to strategize on the future. The vocal Chinese media has criticized the pricing strategy employed by Starbucks arguing that the company products exploits the consumers (Kamenetz, 2013). Chinese population and economic progress over the past two decades makes it a key investment destination for U.S. and other developed nations’ companies due to the wide unexploited market. However, success of these multinational companies is dependent on the ability to understand the potential customers cultural, political, and lifestyles. Undertaking an exploratory study enables the company to understand that Chinese have strong cultural values and moral views therefore, companies must respect their beliefs and operate in an ethical manner to succeed. China’s political structure is dynamic since it includes communist and capitalist aspects with governance between dictatorial and hybrid regime (Blnakson & Kalafatis, 2007). The information is important in the performance of the descriptive function since it equips the researcher with the knowledge on ways to approach the potential consumers. This description portrays the different ways marketing research enables the companies to identify and exploit the opportunities with the diagnostic and predictive function discussed later in the paper.
Role of Ethics Incorporating Concepts from the Field of Marketing and Psychology
As earlier stated, the primary objective of any business is to maximize profits. The ability to achieve this objective is driven by the marketing strategies that are guided by psychological understanding of consumer behaviors. The use of enticing advertisements or use of influential individuals has over the years influenced the purchasing behaviors of the consumers. For instance, Nike’s choice to use Michael Jordan led to changing the landscape of the sportswear in their favor (Nill, 2003). Human behavior depict that youths are most likely to purchase a product that is connected to their favorite celeb as they associate the product as a proof of their relationship. According to Brenkert (2008), use of deceptive advertisements and pricing products over their quality are some of the normative ethical issues that marketing teams employ to deceive the consumers. The criticism by the Chinese media shows that Starbucks is using its association on being one of the best to exploit the consumers.
However, the constant increment in prices may state otherwise given that the company has always increased its prices and maintained its consumers. These complains can thus be caused by quality issues and expectations of the consumers. Business ethics warns against increasing price of goods and services if the quality is not improved. However, it is justifiable to increase price if costs of production have increased. The annual raise in costs by Starbucks is one of the ethical problems that has led to the dissatisfaction of the Chinese consumers among other consumers in the country. The use of marketing ethics enables the companies to refrain from exploiting the customers thus is important providing the moral guideline that marketing and psychology may use as loopholes to exploit the clients.
Combining Marketing and Psychology to solve the Starbucks’ Problem
Psychology provide the sales department with the strategies to employ to promote and trap clients to their products but with the use of deceptive adverts being unethical, understanding the company’s internal and external environment complimented by social contact and consumer purchasing behaviors, it is possible to solve the problem. Starbucks is known for its quality and segmentation prowess with its brand name increasing its competitive advantage over other companies in the industry. However, the entry of McDonalds, a leader in the fast food industry who have the financial power and produce in large scales to result in price wars. McDonald’s strategy to enhance its brand name by producing healthy food may affect Starbucks more than anticipated. Psychology theories depict that cultural differences lead to misconception to the rival culture. For instance, the Chinese media views Starbucks as an illustration of a multinational company exploiting Chinese by providing them with expensive low quality products which they cannot provide to American clients at the price (Kamenetz, 2013).
Since the rapid expansion of Starbucks into China, the training and use of consumer-oriented strategies have declined with complains even in other complains concerning the quality of the products. Various studies on the company argue that unlike in the past where the firm enhanced or differentiated their products before increasing prices, the service provision is poor thus leading to dissatisfaction and choosing rivals who have similar services at lower prices (Bradley, 2007). The negative image perpetuated by the media must be changed before the rival companies acquire a bigger market share (Kamenetz, 2013). It is evident that price is not the only reason for the change in brand loyalties but service provision. The influence of social media provides the company with the best platform to set the record straight. The company should engage its audience with improved products and apologize for the lapse in service provision. Loyal customers are always willing to return if they are assured of enhanced products and customer services. Price is not essential because most of the consumers are wealthy and choose the brand due to its high standards.
The continued failure to implement the strategy can result in Starbucks losing its market and brand name in all the countries it has opened coffee stores. Social media provide the platform to connect the global community and with the influence of media, peers, and families to influence consumer purchasing behavior, the company will lose about 100 loyal clients annually in China and about 300 in all other countries. The 400 loss of frequent and loyal consumers is a huge blow give the high economic consumers the company targets. Therefore at the average cost of $15 used by each consumer for an average of four days per week the figure below depict the decline in revenue for the day, week, month and a year.
The above illustration demonstrate that by the end of the financial year, the company will have lost an average of $1.152 million which at such a rate and other risks the company would have lost its market share and ability to be the price setter in luxurious beverage sector. Implementing the proposed solution would result in gains and loyalty in the future helping the company continue with its pricing strategy.
References
Blnakson, C. and Kalafatis, S.P. (2007). Positioning strategies of international and multicultural-oriented service brands, Journal of Services Marketing , 21(6). pp. 435-450.
Bradley, N., (2007). Marketing Research Tools and Techniques . Oxford, England: University Press.
Brenkert, G., (2008). Marketing, Ethics, and Morality . Malden, MA: WileyBlackwell.
Haskova, K., (2015). Starbucks Marketing Analysis. Degruyter CRIS Bulleting . Retrieved March 26, 2018 from, https://www.degruyter.com/downloadpdf/j/cris.2015.2015.issue-1/cris-2015-0002/cris-2015-0002.pdf
Kamenetz, A. (2013, October 21). Starbucks is too damn expensive, says Chinese media', Fast Company . Retrieved March 26, 2018 from, http://www.fastcompany.com/3020281/fast-feed/starbucks-is-too-damn-expensive-says-chinese-media
Nill, A., (2003). Global Marketing Ethics: A Communicative Approach. Journal of Macromarketing , Vol.23, No. 2: 90-104. Sage Publications, Inc.
