Experiential Marketing – A case study of Starbucks

Experiential Marketing – A case study of Starbucks Abstract We extend our heartfelt thanks to our instructor, Ling-Hui Hsu, Ph.D., the assistant professor of Department of English at Ming Chuan University who herein her expertise and always provide support and opinion for our study at the leisure time, and with her professional skill and experience shared for us Her valuable suggestions helped all of us to apply and comprehend the theories and help us to get more details for our paper Starbucks is the top to become the most famous coffee chain store in the minds of customers These researchers attempt to find out why Starbucks has been able to gain a lead in coffee chains This research aims at verifying that the experiential marketing is not only a theory, but a practical strategy which can help an international coffee chain stabilize the repurchasing rate of customers and reach operational success Table of contexts Abstract…………………………………………………………………………… .1 Chapter One: Introduction 1.1 Background…………………………………………………………………….3 1.2 Motivation…………………………………………………………………… 1.3 Purpose of This Study………………………………………………………….5 1.4 Value of This Study……………………………………………………………6 Chapter Two: Literatures review 2.1Coffee Chains………………………………………………………………… 2.2Marketing Strategies………………………………………………………… 2.3Customer Relationship Management………………………………………… 2.4Schmitt’s 5-Stages Experiential Marketing Strategy………………………… 2.5 Consumer Behaviors Analysis…………………………………………… 14 2.6 Customer Satisfaction………………………………………………………….15 2.7 Customer Loyalty…………………………………………………………… 16 2.8 Satisfaction Affects Loyalty………………………………………………… 16 2.9 Hypothesis…………………………………………………………………… 19 Chapter Three: Mythology 3.1 Participants…………………………………………………………………….21 3.2 Procedure………………………………………………………………………21 3.3 Material……………………………………………………………………… 22 3.4 Statistical Treatment ………………………………………………………… 22 Chapter Four: Data Analysis 4.1 Reliability Analysis…………………………………………………………….23 4.2 Demographic variable………………………………………………………….27 4.3 Testing hypotheses … 28 Chapter Five: Discussion and Conclusion 5.1 Discussion………………………………………………………….………… 32 5.2 Further Suggestion………………………………………………………….….35 References Attachment1 CHAPTER ONE INTRODUCTION 1.1 Background In recent years the growth of coffee shops has been accelerating in Taiwan According to TCFA statistics, there were between 5,800 and 6,000 coffee shops in each county of Taiwan in 2005 However, more and more coffee chains such as Starbucks, Is Coffee, Ikari and Dante have established their distinct features Coffee chain stores have resorted to effect gathering, selecting, using and retaining the relevant knowledge from the varied types of internal stakeholders and external sources to become more competitive (David, 2007) Furthermore, relation between coffee chains marketers and customers is getting closer today Transactional marketing or benefits marketing, focuses on price competition and individual transactions (Strazdina, 2000) Coffee marketing environment is changing Marketers have been using scientific strategies to determine their marketing strategy Experiential marketing emphasizes customers’ action in marketers’ strategy making Figure1.1: The flow chart of research processes In this research, the first step is to define the focus of the study The second is an attempt to review literatures on experiential marketing Following the review is design of questionnaires Finally, data collected will be analyzed to explore how Starbucks influences purchasing behavior of customers 1.2 Motivation Experiential marketing is a study of the gap between the intended effect and actual response of customer Starbucks uses experiential marketing as a case example to affect customer loyalty in their products (Li, 2007,) In recent years, coffee has gradually accounted for a larger percentage in beverage market More and more coffee chain stores are around in the city to form fierce competition Those coffee shops have lots in common When it comes to coffee chain store, what comes to mind for most people is a goddess image, the logo of Starbucks Starbucks has made it to the top to become the most famous coffee chain store in the minds of customers It might be easy to name a couple of reasons behind the success of Starbucks, such as nice store design and good advertising programs However, it is believed that the success of Starbucks is not quite straight forward as it seems These researchers attempt to find out why Starbucks has been able to gain a lead in coffee chains Nowadays, society is a huge experiential machine The goods should contain the elements of experience and the process of shopping also needs (Liou, 2004) The pleasant experience through shopping process is the major trend of the marketing in the future Experience is the result of a certain product brings out people’s identity of that product and it can totally show their style and taste In sum, the Experiential Marketing helps the marketer to demonstrate their style and taste and it is going to be the essential marketing strategy in the future 1.3 Purpose of This Study Experiential marketing is an interaction among customers, marketing team, and products It’ not based on traditional expectation What has been created is true brand loyalty from customer to gain the ultimate competitive advantage (Reichheld and Schefter, 2000) There is little information available on how experiential marketing is directly related to the coffee chain store Starbucks Most of the research conducted previously on Schmitt’s experiential marketing is related to hospitality To minimize the selected range by focusing on the operation of Experiential Marketing in one chosen coffee chain store, Starbucks, the other coffee chain stores have been excluded in our research The purpose of this research is to explore the relationship between the reasons for customers’ loyalty to Starbucks and the theoretical concepts of Schmitt’s experiential marketing so as to determine whether experiential marketing can be used to explain Starbucks’ success 1.4 Value of This Study The trend in experiential marketing has broken away from the traditional marketing strategies to create a new relationship between customers and marketers (Grundey, 2008) The key concepts of experiential marketing are to include customers in decision making and put customers as the focus in strategies forming This research aims at verifying that the experiential marketing is not only a theory, but a practical strategy which can help an international coffee chain stabilize the repurchasing rate of customers and reach operational success CHAPTER TWO LITERATURE REVIEW 2.1 Coffee Chains Each Starbucks chain insists on giving consistent quality service According to studies, coffee chains have enabled the creation of large numbers of similar outlets that deliver relatively standardized products and services in an efficient way (David, 2007) Coffee chain means that every coffee shop of the organization carries the same products and services People can visit any coffee shop of the organization and enjoy the same products The key to competitiveness is to effectively gather, select, use and retain the relevant knowledge from various types of internal stakeholders and external sources (David, 2007) The success of the coffee chain is that they integrate the internal and external sources 2.2 Marketing Strategies A marketing plan contains a set of specific actions required to successfully implement a marketing strategy Marketing strategy determines the choice of target market segment, positioning, marketing mix, and allocation of resources (Peter & James, 1987) Once relationship marketing starts to become a trend, many try and offer to provide a framework for it, and most of them simultaneously (Strazdina, 2000) Strategy marketing is called the strategies of 4P’s product, price, promotion and place (Chiou & Jyh-Shen, 2001) 2.3 Customer Relationship Management Customer relationship management is related to customer life (acquire, enhance, maintain) (Kalakota & Robinson, 1999) Starbucks provides a humanized leisure place where customers can enjoy the relaxing store atmosphere Transactional marketing or benefits marketing, focuses on price competition and individual transactions (Strazdina, 2000) In order to compete with other coffee shops, Starbucks provides some rewards to customers frequently For example, during anniversary celebration periods, customers are rewarded by “the buy one get one free” campaign 2.4 Schmitt’s 5-Stages Experiential Marketing Strategy Sense Sense marketing focuses on five senses, which are vision, hearing, smelling, taste and touch (Schmitt, 1999) Senses are transducers from the physical world to the realm of the mind Sensory systems code for four aspects of a stimulus: type (modality), intensity, location, and duration Certain receptors are sensitive to certain types of stimuli Receptors send impulses in certain patterns to send information about the intensity of a stimulus The location of the receptor that is stimulated gives the brain information about the location of the stimulus The duration of the stimulus is conveyed by firing patterns of receptors (Kolb & Whishaw, 2003) The satisfactions and joy from sense perception create not only supplementary value for products but also experience of sense perception If managed well, sense marketing makes it possible for customers to distinguish company and product, stimulating customers' sense experiences and delivering values to customers In order to create a positive image, marketing personnel need to pay attention to the main elements, styles and theme The visual identity of a corporation or a brand is often the most important component in invoking attitudes, associations, and customer responses, a phenomenon that Louis Cheskin called “sensation transfer.” Therefore, it is often the sensory experience that attracts a customer to a corporation or brand and that needs to be considered in making a strategic decision The key strategic objects can motivate its’ customers to buy its product, and deliver value to customers’ recognition The key success of sense experience is to assure consistent provision of positive impressions and to create diversity (Schmitt, 1999) For example, interior design, decoration, and jazz music in a Starbucks coffee shop Feel “Feel marketing is the strategy and implementation of attaching affect to the company and brand via experience providers (Schmitt, 1999, p118).” Clearly, positive or negative feeling will affect the product or service which is consumed According to Schmitt, affective experiences have mood and emotion “Moods are inspective states (Schmitt, 1999, p122).” For example, employees at a Starbucks store would remember the names of customers and the preference of each frequent customer That usually makes consumers surprised and brings customers good feelings Such a nice gesture is all the better since it is was unexpected on the part of the customers Mood may occur in specific stimuli, even consumer can’t discover that For example, noisy music in a coffee shop puts customers in a bad mood “In contrast to moods, emotions are intense and stimulus-specific affective states (Schmitt, 1999).” Based on the Schmitt theory, there are two types of emotion: basic emotion and complex emotions Basic emotions comprise the base of our affective lives, such like chemical elements Basic emotions can be found in every part of the world For example, different cultures have similar facial expressions Complex emotions are blends and combinations of basic emotions Most marketing-generated emotions are complex ones (Schmitt, 1999) Schmitt suggested sixteen types of consumption emotions Such as anger, discontent, worry, sadness, fear, shame, envy, loneliness, romantic, love, peacefulness, contentment, optimism, joy, excitement, and other items (gully, proud, eager) In Starbucks, face to face interactions are important between consumers and employees Consumers feel comfortable and relaxed when they enter the Starbucks Customers can find comfortable sofas and warmhearted service which make consumer feel good Think “The objective of Think marketing is to encourage customers to engage in elaborative 10 Frequency Percentage （％） Male 55 54.46 Female 46 45.54 Under 14 0 15-19 1.98 20-24 75 74.26 25-29 14 13.86 30-34 8.91 35-39 0 40-44 0 Over 45 0.99 Unemployed 2.97 70 69.31 Public-service 3.96 Technology 6.93 Commercial Industry 7.92 Service 3.96 Others 4.95 Variable Gender Age Occupation Category Student Table 4.2 4.3 Testing hypotheses H1 Five senses and customer satisfaction have positive correlation The second hypothesis test whether the five senses (feel, think, sense, act, relate) and customer satisfaction have related positively The results of a regression analysis show that the five senses together predict customer satisfaction very well, F=105.635, p < 001 (see Table 4.3).Second results of regression analysis show that the four senses (feel, think, sense, act) together predict customer satisfaction, F=80.389, p < 001 (see Table 4.4) Third results of regression analysis show that 26 relate predict customer satisfaction, F=128.790, p < 001 (see Table 4.5) ANOVAb Model Sum of Squares df Mean Square Regression 21.981 Residual 19.768 95 Total 41.749 96 F 21.981 105.635 Sig .000a 208 a Predictors: (Constant), five senses b Dependent Variable: mean satisfaction Table4.3 ANOVAb Model Sum of Squares df Mean Square Regression 19.135 19.135 Residual 22.613 95 238 Total 41.749 96 a Predictors: (Constant), four senses b Dependent Variable: mean satisfaction Table 4.4 27 F 80.389 Sig .000a ANOVAb Model Sum of Squares df Mean Square Regression 24.026 Residual 17.723 95 Total 41.749 96 F 24.026 128.790 Sig .000a 187 a Predictors: (Constant), mean related b Dependent Variable: mean satisfaction Table 4.5 The table 4.6 shows the result of a agression which compare of the three items, the fist item is four senses(feel, think, sense, act) together predict customer satisfaction, F=80.389 Next item is five senses (feel, think, sense, act, relate) together predict customer satisfation, F=105.635.The final item is relate predict customer satisfaction, F=128.790 From F value of the regression analysis, researchers found that relate has more positive correlation with customer satisfaction than five senses Base on Schmitt’s theory, People were got together to a group by Starbucks which is different from another group From questionnaires, there have high agreement about that “Starbucks is parts of my life”; “I think people who shop in Starbucks have the same taste.” It means that relate play an important role in Experiential Marketing means that relate is more positive influence customer satisfaction H1 Five senses and customer satisfaction have positive correlation is accepted 28 Analysis of regression Predictors & Dependent Variable Sig F 80.389 Four senses and Customer satisfaction Five senses and Customer satisfaction 105.635 Relate and customer satisfaction 128.790 P