Marketing: Summary the Starbucks Value proposition: Please give all the important points not too much short. Give the points: Channels of Distribution and Starbucks Partners

The Starbucks Value Proposition I Starbucks' brand strategy was best captured by its "live coffee" mantra, a phrase that reflected the importance the company attached to keeping the national coffee culture alive. From a retail perspective, this meant creating an "experience" around the consumption of coffee, an experience that people could weave into the fabric of their everyday lives. There were three components to this experiential branding strategy. The first component was the coffee itself. Starbucks prided itself on offering what it believed to be the highest-quality coffee in the world, sourced from the Africa, Central and South America, and Asia-Pacific regions. To enforce its exacting coffee standards, Starbucks controlled as much of the supply chain as possible it worked directly with growers in various countries of origin to purchase green coffee beans, it oversaw the custom-roasting process for the company's various blends and single-origin coffees, and it controlled distribution to retail stores around the world. The second brand component was service, or what the company sometimes referred to as "customer intimacy." "Our goal is to create an uplifting experience every time you walk through our door," explained Jim Alling, Starbucks' senior vice president of North American retail. "Our most loyal customers visit us as often as 18 times a month, so it could be something as simple as recognizing you and knowing your drink or customizing your drink just the way you like it. The third brand component was atmosphere. "People come for the coffee," explained Day, but the ambience is what makes them want to stay." For that reason, most Starbucks had seating areas to encourage lounging and layouts that were designed to provide an upscale yet inviting environment for those who wanted to linger. "What we have built has universal appeal," remarked Schultz. "It's based on the human spirit, it's based on a sense of community, the need for people to come together."3 Channels of Distribution Almost all of Starbucks' locations in North America were company-operated stores located in high-traffic, high-visibility settings such as retail centers, office buildings, and university campuses. In addition to selling whole-bean coffees, these stores sold rich-brewed coffees, Italian-style espresso drinks, cold-blended beverages, and premium teas. Product mixes tended to vary depending on a store's size and location, but most stores offered a variety of pastries, sodas, and juices, along with coffee-related accessories and equipment, music CDs, games, and seasonal novelty items. (About 500 stores even carried a selection of sandwiches and salads.) Beverages accounted for the largest percentage of sales in these stores (77%); this represented a change from 10 years earlier, when about half of store revenues had come from sales of whole-bean coffees. (See Exhibit 4 for retail sales mix by product type; see Exhibit 5 for a typical menu board and price list.) Starbucks also sold coffee products through non-company-operated retail channels; these so- called "Specialty Operations" accounted for 15% of net revenues. About 27% of these revenues came from North American food-service accounts, that is, sales of whole-bean and ground coffees to hotels, airlines, restaurants, and the like. Another 18% came from domestic retail store licenses that, in North America, were only granted when there was no other way to achieve access to desirable retail space (e.g., in airports). The remaining 55% of specialty revenues came from a variety of sources, including international licensed stores, grocery stores and warehouse clubs (Kraft Foods handled marketing and distribution for Starbucks in this channel), and online and mail-order sales. Starbucks also had a joint venture with Pepsi-Cola to distribute bottled Frappuccino beverages in North America, as well as a partnership with Dreyer's Grand Ice Cream to develop and distribute a line of premium ice creams. Day explained the company's broad distribution strategy: Our philosophy is pretty straightforward-we want to reach customers where they work, travel, shop, and dine. In order to do this, we sometimes have to establish relationships with third parties that share our values and commitment to quality. This is a particularly effective way to reach newcomers with our brand. It's a lot less intimidating to buy Starbucks at a grocery store than it is to walk into one of our coffeehouses for the first time. In fact, about 40% of our new coffeehouse customers have already tried the Starbucks brand before they walk through our doors. Even something like ice cream has become an important trial vehicle for us. Starbucks Partners All Starbucks employees were called "partners." The company employed 60,000 partners worldwide, about 50,000 in North America. Most were hourly-wage employees (called baristas) who worked in Starbucks retail stores. Alling remarked, "From day one, Howard has made clear his belief that partner satisfaction leads to customer satisfaction. This belief is part of Howard's DNA, and because it's been pounded into each and every one of us, it's become part of our DNA too." The company had a generous policy of giving health insurance and stock options to even the most entry-level partners, most of whom were between the ages of 17 and 23. Partly as a result of this, Starbucks' partner satisfaction rate consistently-hovered in the 80% to 90% range, well above the industry norm, and the company had recently been ranked 47th in the Fortune magazine list of best places to work, quite an accomplishment for a company with so many hourly-wage workers. In addition, Starbucks had one of the lowest employee turnover rates in the industry-just 70%, compared with fast-food industry averages as high as 300%. The rate was even lower for managers, and as Alling noted, the company was always looking for ways to bring turnover down further: "Whenever we have a problem store, we almost always find either an inexperienced store manager or inexperienced baristas. Manager stability is key-it not only decreases partner turnover, but it also enables the store to do a much better job of recognizing regular customers and providing personalized service. So our goal is to make the position a lifetime job." To this end, the company encouraged promotion from within its own ranks. About 70% of the company's store managers were ex-baristas, and about 60% of its district managers were ex-store managers. In fact, upon being hired, all senior executives had to train and succeed as baristas before being allowed to assume their positions in corporate headquarters. The Starbucks Value Proposition I Starbucks' brand strategy was best captured by its "live coffee" mantra, a phrase that reflected the importance the company attached to keeping the national coffee culture alive. From a retail perspective, this meant creating an "experience" around the consumption of coffee, an experience that people could weave into the fabric of their everyday lives. There were three components to this experiential branding strategy. The first component was the coffee itself. Starbucks prided itself on offering what it believed to be the highest-quality coffee in the world, sourced from the Africa, Central and South America, and Asia-Pacific regions. To enforce its exacting coffee standards, Starbucks controlled as much of the supply chain as possible it worked directly with growers in various countries of origin to purchase green coffee beans, it oversaw the custom-roasting process for the company's various blends and single-origin coffees, and it controlled distribution to retail stores around the world. The second brand component was service, or what the company sometimes referred to as "customer intimacy." "Our goal is to create an uplifting experience every time you walk through our door," explained Jim Alling, Starbucks' senior vice president of North American retail. "Our most loyal customers visit us as often as 18 times a month, so it could be something as simple as recognizing you and knowing your drink or customizing your drink just the way you like it. The third brand component was atmosphere. "People come for the coffee," explained Day, but the ambience is what makes them want to stay." For that reason, most Starbucks had seating areas to encourage lounging and layouts that were designed to provide an upscale yet inviting environment for those who wanted to linger. "What we have built has universal appeal," remarked Schultz. "It's based on the human spirit, it's based on a sense of community, the need for people to come together."3 Channels of Distribution Almost all of Starbucks' locations in North America were company-operated stores located in high-traffic, high-visibility settings such as retail centers, office buildings, and university campuses. In addition to selling whole-bean coffees, these stores sold rich-brewed coffees, Italian-style espresso drinks, cold-blended beverages, and premium teas. Product mixes tended to vary depending on a store's size and location, but most stores offered a variety of pastries, sodas, and juices, along with coffee-related accessories and equipment, music CDs, games, and seasonal novelty items. (About 500 stores even carried a selection of sandwiches and salads.) Beverages accounted for the largest percentage of sales in these stores (77%); this represented a change from 10 years earlier, when about half of store revenues had come from sales of whole-bean coffees. (See Exhibit 4 for retail sales mix by product type; see Exhibit 5 for a typical menu board and price list.) Starbucks also sold coffee products through non-company-operated retail channels; these so- called "Specialty Operations" accounted for 15% of net revenues. About 27% of these revenues came from North American food-service accounts, that is, sales of whole-bean and ground coffees to hotels, airlines, restaurants, and the like. Another 18% came from domestic retail store licenses that, in North America, were only granted when there was no other way to achieve access to desirable retail space (e.g., in airports). The remaining 55% of specialty revenues came from a variety of sources, including international licensed stores, grocery stores and warehouse clubs (Kraft Foods handled marketing and distribution for Starbucks in this channel), and online and mail-order sales. Starbucks also had a joint venture with Pepsi-Cola to distribute bottled Frappuccino beverages in North America, as well as a partnership with Dreyer's Grand Ice Cream to develop and distribute a line of premium ice creams. Day explained the company's broad distribution strategy: Our philosophy is pretty straightforward-we want to reach customers where they work, travel, shop, and dine. In order to do this, we sometimes have to establish relationships with third parties that share our values and commitment to quality. This is a particularly effective way to reach newcomers with our brand. It's a lot less intimidating to buy Starbucks at a grocery store than it is to walk into one of our coffeehouses for the first time. In fact, about 40% of our new coffeehouse customers have already tried the Starbucks brand before they walk through our doors. Even something like ice cream has become an important trial vehicle for us. Starbucks Partners All Starbucks employees were called "partners." The company employed 60,000 partners worldwide, about 50,000 in North America. Most were hourly-wage employees (called baristas) who worked in Starbucks retail stores. Alling remarked, "From day one, Howard has made clear his belief that partner satisfaction leads to customer satisfaction. This belief is part of Howard's DNA, and because it's been pounded into each and every one of us, it's become part of our DNA too." The company had a generous policy of giving health insurance and stock options to even the most entry-level partners, most of whom were between the ages of 17 and 23. Partly as a result of this, Starbucks' partner satisfaction rate consistently-hovered in the 80% to 90% range, well above the industry norm, and the company had recently been ranked 47th in the Fortune magazine list of best places to work, quite an accomplishment for a company with so many hourly-wage workers. In addition, Starbucks had one of the lowest employee turnover rates in the industry-just 70%, compared with fast-food industry averages as high as 300%. The rate was even lower for managers, and as Alling noted, the company was always looking for ways to bring turnover down further: "Whenever we have a problem store, we almost always find either an inexperienced store manager or inexperienced baristas. Manager stability is key-it not only decreases partner turnover, but it also enables the store to do a much better job of recognizing regular customers and providing personalized service. So our goal is to make the position a lifetime job." To this end, the company encouraged promotion from within its own ranks. About 70% of the company's store managers were ex-baristas, and about 60% of its district managers were ex-store managers. In fact, upon being hired, all senior executives had to train and succeed as baristas before being allowed to assume their positions in corporate headquarters