T01704225艾可 B99701112 駱柏蓁 B99701141羅文吟 B99701150李韻坊 B99701156張宇婷

Agenda

• Introduction

• Experiment

• Sensitivity

• Further discussion

• International Strategy

• Conclusion

Introduction

The coffee market

A business with a high profit margin

History

Starbucks International

• 17,651 stores in more than 60 countries• International strategy: ‘Blanket’ an area

International Taiwan

Experiment

Promotion Plan

• Time

• Usage

• Precautions

Methodology

• Record real sales data at Starbucks for two periods (Tuesday).

1. Offer Promotion Period:12/4 13:10~15:10

2. Normal Period: 12/11 13:10~15:10

• Information collection is focused on the drinks customers ordered and whether they used the “buy 1-get 1 for free” offer.

• Analyze the data by calculating and comparing the total revenue and profit and the average price and order size.

Methodology

Research Question

Is the special offer beneficial for Starbucks?

Important Assumption

The offer promotion plan has a beneficial impact on Starbucks revenue

Assumptions

• The two hours we recorded are representative.

• The weather and the temperature don’t affect customers buying behavior.

• We assume those who used “buy 1 get 1 for free” during the offer period all used the offer promotion plan; no other promotion plans.

Assumptions

• On a normal Tuesday with no offer promotion, there is still a promotion to “buy 1 get 1 for free” by using an I-bon ticket.

• According to the research on the Internet, the cost for a Starbucks coffee is 30%.

Data Analysis

Offer Promotion period Normal Period

Total Revenue Total Cost Total Profit

11,515.00$ 6,276.00$ 5,239.00$

Amount of Drinks Single Cup 17

Promotion Cup 140

Total 157

Total Revenue Total Cost Total Profit

12,385.00$ 4,818.00$ 7,567.00$

Amount of Drinks Single Cup 71

Promotion Cup 56

Total 127

Data Analysis

Average Price(revenue): Total Amount of Drinks

Normal Day 97.52 127

PromotionOffer Day 73.34 157

Price Elasticity

ϵ = −(157/127)/127

(73.34−97.52)/97.52= 0.95 close to 1

Sensitivity

Sensitivity

•Compare the top-5 products

•Compare the average size

•Compare the average price

Compare top-5 products

The promotion day The normal day

No.1 Caffè Latte (Venti: $135) No.1 Caffè Latte (Venti: $135)

No.2 Toffee Nut Latte (Venti: $155) No.2 Toffee Nut Latte (Venti: $155)

No.3 Green Tea Latte (Venti: $145) No.3 Java Chip (Venti: $165)& Cranberry White Chocolate Mocha

(Venti: $155)No.4 Caramal Macchiato (Venti: $155)

No.5 Cranberry White Chocolate Mocha (Venti: $155)

No.5 Vanilla Caffè Latte (Venti: $150)

Compare the average size

The promotion day The normal day

Promotion Single Total i-bon Single Total

Tall(12oz)

14(cups) 5 19 4 28 32

Grande(16oz)

82 9 91 42 42 84

Venti(20oz)

44 3 47 10 2 12

Average size

16.71(oz) 15.5(oz)

Compare the average size

• Price Sensitivity

Compare the average size

• Time Sensitivity

Compare the average size

Starbucks’ Strategy

Compare the average price

The promotion day The normal day

$73.34/cup $97.52/cup

Further discussion

Cannibalization

Total Total Revenue Total Total Revenue

157 $11,515 127 $12,385

Promotion Nonpromotion

Another phenomenon

SWOT Analysis of Promotion

Strength Weakness

Lower quality of service

-Loss comport and good atmosphere

-Long-time waiting

Opportunity Threat

New source of customer Loss of loyal customer

(college student->loyal customer) Loss of the good brand image

The lowest price compare to other

high-quality coffee shop

International Strategy

International Strategy

• Pricing strategy

• Localization

Price Comparison

• Taiwan v.s. US

Taiwan Tall Grande Venti

Caramal Macchiato 125.00$ 140.00$ 155.00$

Cappuccino 105.00$ 120.00$ 135.00$

Caffè Latte 105.00$ 120.00$ 135.00$

Vanilla Caffè Latte 120.00$ 135.00$ 150.00$

Caffè Mocha 120.00$ 135.00$ 150.00$

Caffè Americano 85.00$ 100.00$ 115.00$

US Tall Grande Venti

Caramal Macchiato 137.70$ 155.70$ 161.70$

Cappuccino 104.70$ 119.70$ 131.70$

Caffè Latte 104.70$ 119.70$ 131.70$

Vanilla Caffè Latte 113.70$ 134.70$ 146.70$

Caffè Mocha 113.70$ 134.70$ 146.70$

Caffè Americano 83.70$ 89.70$ 98.70$

Difference Tall Grande Venti Average

Caramal Macchiato 12.70$ 15.70$ 6.70$ 11.70$

Cappuccino -0.30 $ -0.30 $ -3.30 $ -1.30 $

Caffè Latte -0.30 $ -0.30 $ -3.30 $ -1.30 $

Vanilla Caffè Latte -6.30 $ -0.30 $ -3.30 $ -3.30 $

Caffè Mocha -6.30 $ -0.30 $ -3.30 $ -3.30 $

Caffè Americano -1.30 $ -10.30 $ -16.30 $ -9.30 $

Indian example

Price Comparison

• Price still depends on:

- Customer preference

- Input cost, ex: rental

- Other considerations

Localization

Conclusion

Conclusion

• Promotional offer didn’t increase profit

• Marketing purpose

• Building loyal customer base

Future:

• From 2013/01/01, second cup half price

• Attempt to increase profit?