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Starbucks Market Research Strategy: What It Is & Why It Works

by Kaitlyn Bretagne

Posted at: 2/10/2023 1:30 PM

There’s no doubt that coffee is a staple in the lives of many consumers.

But, despite the many options at home and in-store, our research shows that 39% of Americans enjoy Starbucks coffee over any other brand. 

That’s because Starbucks is another famous brand that depends on market research to understand its customers’ needs, wants, and preferences.  

As a result of Starbucks’ market research strategy, they have grown the brand to have nearly 16,000 locations across the United States. 

Keep on reading to learn the market research methods that Starbucks uses and how they’ve won the hearts of coffee lovers everywhere. 

Method #1: Customer Segmentation

The first methodology heavily involved in Starbucks’ market research strategy is segmentation. 

Grouping your customers into market segments lets you discover key insights about the specific groups within a brand’s audience. 

In fact, segmentation is one of the best tools for market research because it provides unique data on demographics that can be used to create audience-specific marketing strategies.

For instance, Starbucks utilized a psychotropic segment to gain insights into customers’ personal tastes, values, and lifestyle choices. 

With this market research, Starbucks found a segment that prioritizes:

• Sustainability
• Health consciousness
• Plant-based lifestyle 

As a result, Starbucks was then able to cater to that group through organizational values for sustainability and multiple options for non-dairy milk at each location. 

Going one step further, they evaluated customer feedback to learn what locations required more non-dairy options than others.

This insight helped Starbucks to determine where they needed to purchase more non-dairy inventory and where they could purchase less.

Drive Research often conducts customer segmentation for our clients. Download an example customer segmentation report of U.S. grocery shoppers to learn what types of insights it can uncover.

💡 The Key Takeaway: Segmenting audiences based on shared needs and behaviors point to beneficial business decisions. Through using market segmentation, Starbucks caters to marketing strategies and product availability based on customer values and lifestyle choices. 

Method 2: The My Starbucks Idea Platform

In 2008, Starbucks rolled out its “Transformation Agenda.” This used new market research methods to gain feedback from potential customers, existing customers, and employees. 

This classic Starbucks market research strategy is a fantastic example of how consumer feedback is used to drive decision-making – rather than making assumptions about what customers want.

On The My Starbucks Idea blog, customers submitted ideas for new menu items or requests for retired products to be brought back on the platform. 

Every post was public and ranked on a leaderboard, creating a community for users to comment and share ideas. 

In the first five years, the My Starbucks Idea platform amassed over 150,000 responses and engaged customers across the country. 

Customers had opinions that they wanted to share, and Starbucks showed them they valued those opinions. 

Image Source: TechXB

How the PSL Born 

The pumpkin spice latte, one of Starbucks’ most popular seasonal items, was recommended and rolled out based on countless recommendations on My Starbucks Idea. 

Each Fall, the pumpkin spice latte returns and has earned recognition as a cultural zeitgeist. 

By implementing this unique market research strategy , Starbucks knew that its menu item would perform well. In turn, this showed customers their opinions mattered. 

💡 The Key Takeaway: Using the My Starbucks Idea platform, Starbucks identified consumer needs and acted on them, building customer loyalty and engagement. 

Method #3: In-Store Product Testing

Rolling out new products is necessary to keep Starbucks top-of-mind for their audiences, but factors like cost and time often loom over its decisions. 

To decide which products will be the most beneficial to the brand, part of Starbucks’ market research strategy is to regularly utilize product testing. 

Product testing is the process of determining how products will perform among a target audience. This market research strategy is conducted with in-home usage tests for their at-home coffee pods as well as in-store product tests.

For instance, Starbucks strategically designates “secret” locations across the United States to organically measure the appeal of new product concepts . 

In December 2022, Starbucks locations in Delaware, Maryland, and Virginia offered customers 18 new products. 

The conceptual new breakfast and lunch items included: 

• Mocha Coconut Boba Bites
• Plant-Based Sous-Vide “Egg” Bites in partnership with JUST egg
• Plant-Based Chicken Sausage and Pepper Sous-Vide Bite 
• Plant-Based Smoky Poblano & Black Bean Sous-Vide Bite
• Plant-Based Chicken Sausage & Pepper Sandwich Mini 
• 5-Cheese Pasta Bake

Image source: Vegcomonist  

Unlike in-home tests, this type of market research allows Starbucks to observe the product in real situations and find potential product design flaws, and cost savings to improve products before launching them globally (or choosing not to invest in the new menu item). 

Our market research company, Drive Research finds that in-store product tests are a cost-effective alternative to conducting a focus group. 

This is a useful type of market research to consider for testing new items and consumer demands, along with the likelihood of purchase before the official launch. 

💡 The Key Takeaway: Starbucks’ market research strategy prioritizes in-store product testing to inform the decision-making process for new products.

Method #4: Social Media Monitoring

While it may seem impossible to read every social media post or comment about a brand, Starbucks has consistently utilized social media monitoring to understand consumer needs, concerns, and feedback. 

Social media monitoring is the process of identifying what is being said about a brand or product across social channels. 

This component of Starbucks’ market research strategy is an opportunity for online reputation management (ORM) to ensure customer satisfaction. 

While monitoring, Starbucks analyzes the social media sentiment , or the mood that is portrayed through the engagement to make it actionable feedback. 

Image Source: The Medium

Social media monitoring can flag situations with consumers including:

• Responding to or repairing negative customer service experiences that are shared on social media
• Identifying consumer needs and wants. For example, changes to menu items that could generate leads
• Following trends on the rise that may pertain to Starbucks products and offerings
• Analyze what competitors are doing, and what Starbucks could do to differentiate

No matter what market research strategies a company uses, it must incorporate some form of social media monitoring. It is a strong indicator of customer values and opinions on your products or services.

Simply searching keywords and reading comments and mentions are cost-effective ways to dig into social media monitoring. 

However, tools like Hootsuite , Sprout Social , and Meltwater can supplement that search and include advanced insights for analysis. 

💡 The Key Takeaway: The Starbucks market research strategy utilizes social media monitoring as an effective market research tool to identify areas that the brand can improve, along with increasing customer loyalty strategies. 

Contact Our Market Research Company

Now that we’ve uncovered the secret to Starbucks’ massive success, it’s time to consider market research for your own business.

Drive Research is a full-service market research company . Our team will work with yours to deliver key predictive data that can boost your outreach strategy. 

If you’d like to learn more about our market research services , get in touch with us today!

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Starbucks Coffee Company: Transformation and Renewal

• Format: Print
• | Language: English
• | Pages: 71

Starbucks Coffee Company: Transformation and Renewal analyzes the turnaround and reconstruction of Starbucks Coffee Company from 2008 to 2014 as led by CEO and co-founder Howard Schultz. The case offers executives and students an opportunity to examine in depth how Schultz and his team saved Starbucks from near-collapse, by both executing a deep, comprehensive return to its core values and, at the same time, investing in a range of new products, customer experiences and organizational capabilities designed to make the company fit for enduring success in a turbulent global economy. Set against the backdrop of the Great Recession, the case also considers the impact of unprecedented important shifts in consumer spending and confidence as well as new competitive forces on Starbucks' transformation. The case concludes by examining Schultz's own leadership journey, the lessons he learned personally during Starbucks transformation, and how he is using these lessons—within Starbucks and on the national stage—to redefine the roles and responsibilities of a public corporation in the 21st century.

Based on extensive interviews conducted with Schultz and other Starbucks executives from 2011 to 2014, the case offers a range of vital lessons on leadership, organizational transformation, restructuring, strategy, innovation, entrepreneurial vision, and customer service.

About The Author

Nancy F. Koehn

Related work.

• June 2014 (Revised March 2016)
• Faculty Research
• Starbucks Coffee Company: Transformation and Renewal  By: Nancy F. Koehn

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Financial information

• Premium Statistic Global revenue of Starbucks 2003-2023
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Quarterly revenue of Starbucks Corporation worldwide from 2009 to 2024 (in billion U.S. dollars)

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Number of Starbucks stores in China from fiscal year 2005 to 2023

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Starbucks: a brief strategy overview

Starbucks Coffee Company is a global coffee company and a coffeehouse chain headquartered in Washington, the US, and the company operates 18,000 retail stores in 60 countries (Starbucks Company Profile, 2012, online). Starting operations in Seattle in 1971, adherence to its mission statement of ‘ to inspire and nurture the human spirit – one person, one cup and one neighbourhood at a time ’ coupled with an aggressive utilisation of international market expansion strategy have contributed to net revenues of more than USD11.7 billion generated during the financial year of 2011 (Fiscal Annual Report, 2011).

Since entering the UK market in 1998, Starbucks currently operates 607 stores in the UK, and there are 128 Starbucks licensed stores in the country (Fiscal Annual Report, 2011). However, the company is faced with significant challenges in the UK market that relate to tax issues, and these challenges are threatening with negative implications on  Starbucks growth prospects in the UK.

Starbucks operates in a highly competitive industry with the top competitors including Costa, McDonalds, Dunkin Brands Group and others. Moreover, the company faces stiff competition from local cafes as well.

Starbucks has licensing agreements with a wide range of companies and “the company’s significant licensing agreements include the North American Coffee Partnership, a joint-venture with the Pepsi-Cola Company in which Starbucks is a 50% equity investor, manufactures and markets ready-to drink beverages, including bottles Frappuccino beverages and Starbucks DoubleShot espresso drinks in the US and Canada” (Company Description, online, 2011).

Starbucks Corporation Financial Analysis

A brief Starbucks Corporation financial analysis for the year of 2010 will ensure greater depth to the current report. Starbucks faced serious financial difficulties at the end of 2007 and beginning of 2008 partially associated with the global financial crisis. However, the company performance started to improve the following years once Howard Schultz was appointed as Starbucks CEO, Chairman and President in 2008 (Annual Report, 2010).

Namely, during the fiscal year of 2010, Starbucks achieved record revenues of $10.7 billion, with the operating income of $1.4 billion ($857 million increase from 2009) (Annual Report, 2010). Moreover, $600 million cost savings have been implemented in the fiscal year of 2010 compared to the previous fiscal year through a range of measures.

In total 52% of sales took place within company-operated stores, whereas the remaining 48% of sales have been generated through licensed stores. Within company-operated stores 76% of revenues were generated by the sales of beverages, 17% through the sale of food, 3% through the sale of whole bean and soluble coffees, and the remaining 4% of sales were generated through the sales of coffee-making equipment and other merchandise (Annual Report, 2010).

Moreover, “the operating margin expansion was driven by increased sales leverage and the continued benefits from operational efficiencies. Comparable store sales growth at company-operated stores was 7% in fiscal 2010 compared to a decline of 6% in fiscal 2009” (Annual Report, 2010, p.28).

Major Challenges Facing Starbucks

A set of major challenges faced by Starbucks Corporation have been identified as a result of the above conducted analysis. Specifically, these challenges can be summarised into the following five points.

• Market saturation . The catering market in general and Starbucks niche market in particular is highly saturated in developed countries with a range of global brands such as Costa, McDonald’s, and Dunkin Donuts and numerous small local cafes and coffee shops.  This situation presents a massive challenge for Starbucks in terms of increasing its revenues through attracting new customers.
• Increasing dependence on suppliers . Starbucks has a high level of dependence on its suppliers, because coffee beans suppliers can only be contracted from specific regions favourable for coffee production in terms of climate.
• Increasing prices of coffee beans . The price of coffee beans is increasing and this fact puts pressure on cafes in a global scale (Tesslar, 2010). However, Starbucks is more vulnerable to be negatively affected by this increase in price than others, because Starbucks prices are already considerably above the market average.
• The emergence of new competitors . New competitors are emerging for Starbucks in forms of energy drinks produced by increasing numbers of companies, especially leading supermarket chains as well as increasing numbers of bars and pubs that offer the services of ‘third place’ experience.
• Frequent changes in the market trends . Population is increasingly becoming aware of the downsizes of caffeine in terms of negative effects to health through various channels and this tendency presents a considerable challenge to Starbucks in terms of ensuring the long-term growth of the company.

Evaluation of Current Situation within Starbucks Corporation

The plan formulated above represents an effective strategy for achieving a long-term growth for Starbucks Corporation. However, the current situation within the company also needs to be taken into account upon the implementation of the plan and if necessary alternative approaches available to the company need to be explored or necessary modifications need to be introduced to the existing plan.

Nevertheless, the following points represent the most noteworthy aspects of the current situation within Starbucks that might affect the implementation of the above proposed plan.

v  Starbucks has a leadership position in the market .  This position has been achieved through concentrating on offering good quality products and excellent level of customer services. Moreover, the company has achieved record sales of $10.7 billion, for the fiscal year of 2010 (Annual Report, 2010). The current position of the company might prove to be an obstruction on the way of implementation of proposed plan because the management might consider the plan to be unnecessary being confident of their strong position in the marketplace.

Nevertheless, the leadership position in the marketplace should not be taken for granted by Starbucks management and they are recommended to implement the proposed plan in order to gain further competitive edges in the marketplace and achieve long-term growth for the company.

v  Starbucks Corporation has been around for 40 years . The rationalised plan that has been proposed for Starbucks in this report implies some changes in corporate culture as well. For instance, the shift from Laissez Faire management style to inspirational management would involve significant changes in Starbucks corporate culture. However, the changes in corporate culture might prove to be extremely challenging to implement, because the current corporate culture in Starbucks has been formed for as long as 40 years and has been solidly established among employees.

v  Starbucks has faced the accusations of supporting the Israeli Army . Although more than two years have passed since there were protests against Starbucks brand in general, and it’s CEO, Chairman and President Howard Schultz in particular for allegedly supporting Israeli Army against its long-term conflict with Palestine its damage to the Starbucks brand has not been fully recovered. The company has released official statement saying that it does not support Israeli Army, but nevertheless, the impact of the incident might still be an obstruction in the way of implementation of the proposed plan.

Alternative Approaches Available for Starbucks Corporation

On the face of the weaknesses of the proposed plan that have been discussed in the previous section a set of alternative approaches available for Starbucks Corporation need also to be discussed and to be taken into account.

One of the most appropriate alternative approaches for the company would involve extending its product ranges dramatically and offering various types of foods within Starbucks stores. Specifically, Starbucks can offer specific types of fast food in addition to its current range of products and thus dramatically increase its sales volume. It has been estimated that more than 50 million people in US alone depend on fast food and the amount of money spend on fast food by Americans alone exceed 110 billion USD annually (Fast Food Statistics, 2011, online).

Moreover, another alternative approach for Starbucks would relate to adopting franchising model of the business. “A franchise is the agreement or license between two legally independent parties which gives a person or group of people (franchisee) the right to market a product or service using the trademark or trade name of another business (franchisor)” (Pradhan, 2009, p.188). So far Starbucks Corporation has preferred to operate under licensing business model mainly because this model provides the opportunity of better quality control of products. However, franchising business model can also be integrated into Starbucks operations with the same high level of quality control like it is done in McDonald’s, and thus the amount of revenues for Starbucks can be dramatically increased.

Recommendations: Rationalised Set of Approaches for Starbucks Corporation

On the basis of above discussions general recommendations can be formulated for Starbucks Corporation that can assist in long-term growth for the company upon successful implementation. Specifically, these recommendations can be formulated in the following six points:

First, Starbucks management should increase its focus on the quality of customer services. Offering a high level of quality of customer services has already been adopted as one of the main sources of competitive edge by Starbucks Corporation. However, sometimes this principle is compromised for cost-saving purposes. Specifically, currently it is a common practice for some of the stores to reduce the number baristas on the floor and thus compromise the quality of customer services.

Such a practice has to be abandoned by Starbucks management and the level of customer services has to be dramatically increased by a set of other related means. The store manager has to be made responsible to ensure the excellent level of customer services and the members of staff who received compliments from customers have to be duly rewarded.

Second, the inspirational management style should be promoted among Starbucks managers. The current Laissez Faire style of management has to be replaced with inspirational style of management within all Starbucks stores in order to achieve greater efficiency in many levels. Along with other numerous benefits inspirational management style would provide the opportunity of increased level of employee motivation with less financial resources.

Third, Starbucks senior level management should adopt an innovative approach towards all business processes. This report has identified the current marketplace to have become highly competitive due to a range of specific reasons. Therefore, Starbucks senior level management should actively promote innovativeness towards any business processes at all levels within the company in the search for competitive edge in the marketplace. Employees at all levels have to be encouraged to make suggestions regarding the better ways of doing things, and the store manager are recommended to experiment with these suggestions, and implement the ones that prove to be beneficial in terms of increasing efficiency in one way or the other.

Fourth, Starbucks management should increase their focus on the creation of ‘third place’ environment . The creation of ‘third place’ environment, a place outside of home and work environments formally has been adopted as one of the main strategies by Starbucks. However, not enough initiatives are being introduced to use the full potential of the concept. In other words, a range of changes have to be introduced within Starbucks stores in order to promote them as ‘third place’ environment in a more effective manner.

Specifically, playing areas for children have to be introduced within the stores, as well as the density of the positioning of tables have to be re-arranged in order to ensure the privacy of each individual or group of customers. However, it has to be acknowledged that the level of implementation of this specific recommendation depends on the area and other specific characteristics associated with each individual store.

Fifth, Starbucks should own coffee plantations . The current report has identified that the prices of coffee beans are increasing on the global scale and this tendency is most likely to continue. Accordingly, Starbucks Corporation is recommended to work towards buying plantations within a set of coffee producing countries. Such a strategy will prove to be beneficial mainly in two ways. Firstly, upon developing expertise after a specific period of time Starbucks would be directly able to control the quality of coffee beans being produced.

Second, having bought the coffee plantations for many years, Starbucks would gain the advantage of remaining unaffected of increasing prices of coffee in the years to come, and thus the company would have a strong competitive edge in the marketplace in terms of offering lower costs than the competition.

Sixth, Starbucks should increase its presence in Chinese and Indian markets . Starbucks has already some stores in Chinese and Indian markets, but the company is strongly recommended to increase its presence in both countries because the rapidly increasing standard of life in China and India coupled with the increasing forces of globalisation creates demand for western style coffee houses. The implementation of this recommendation is going to prove highly beneficial in terms of increasing the revenue of the company through market expansion.

  Factors Affecting the Implementation of Recommendations

Upon the implementation of recommendations specified above the following factors need to be taken into account and appropriately addressed:

v  Another global economic crisis . Although the majority of countries and businesses have fully recovered from the negative consequences of the global economic crisis of 2007-2010, there is no guarantee that an analogue of the crisis is not going to take place in the foreseeable future. Nevertheless, if another global economic crisis takes place in the foreseeable future then the recommendations formulated for Starbucks that require considerable amount of financial investments like market expansion and redesigning of the stores may have to be delayed until indefinite period of time.

v  Draught or other environmental crises on African continent . The impact of environmental factor on the implementation of recommendations is great, because any cases associated with draught or other types of environmental crises on African continent is going to delay the implementation of the recommendation related to the purchase of plantations until the consequences of the environmental crisis are fully eliminated.

v  The level of economic policies in China and India. The recommendation related to increasing the presence of Starbucks in Chinese and Indian markets is subjected to the level of economic policies in these countries. Specifically, Chinese or Indian government may introduce specific regulations negatively affecting the operations of multinational businesses like Starbucks operating in the country in order to protect local businesses and other considerations.

Starbucks Corporation Report uploaded on April 2017 contains the application of the major analytical strategic frameworks in business studies such as SWOT, PESTEL, Porter’s Five Forces, Value Chain analysis and McKinsey 7S Model on Starbucks. Moreover, the report contains analyses of Starbucks’s business strategy, leadership and organizational structure and its marketing strategy. The report also discusses the issues of corporate social responsibility.

• Annual Report 2010, Starbucks Corporation
• Company Description: Starbucks Corp, Bloomberg Businessweek, Available at: http://investing.businessweek.com/research/stocks/snapshot/snapshot_article.asp?ticker=SBUX:US  Accessed July, 3, 2011
• Fast Food Statistics, 2011, Available at: http://www.myfit.ca/nutrition/fast_food_statistics.asp  Accessed July 5, 2011
• Pradhan, P, 2009, Retailing Management, 3 rd edition, Tata McGraw-Hill Education
• Starbucks Company Profile, 2011, Available at: http://assets.starbucks.co.uk/assets/aboutus-companyprofile-q1-2011-final-3-8-11.pdf  Accessed July, 1, 2011
• Tresslar, T, 2010, Coffee Prices Rise as Cost of Beans Increases, Dayton Daily News

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Yekaterinburg , city and administrative center of Sverdlovsk oblast (region), west-central Russia . The city lies along the Iset River, which is a tributary of the Tobol River , and on the eastern slope of the Ural Mountains , slightly east of the border between Europe and Asia . Yekaterinburg is situated 1,036 miles (1,667 km) east of Moscow .

Near the village of Shartash, which was founded in 1672 by members of the Russian sect of Old Believers, an ironworks was established in 1721 and a fortress in 1722. In 1723 the new settlement was named Yekaterinburg in honor of Catherine I , the wife of Peter I the Great . The town grew as the administrative center for all the ironworks of the Urals region, and its importance increased after 1783, when the Great Siberian Highway was built through it. After 1878 the Trans-Siberian Railroad linked the city with Siberia. After the Russian Revolution of 1917 (October), Yekaterinburg achieved notoriety as the scene of the execution of the last tsar , Nicholas II , and his family in July 1918. In 1924 it was renamed Sverdlovsk in honor of the Bolshevik leader Yakov M. Sverdlov, but the city reverted to its original name in 1991.

Modern Yekaterinburg is one of the major industrial centers of Russia, especially for heavy engineering. The Uralmash produces heavy machinery and is the city’s largest enterprise; it once employed some 50,000 workers, though it now has a small fraction of that number. Engineering products manufactured in the city include metallurgical and chemical machinery, turbines, diesels, and ball bearings . During the Soviet period the city was a major center of biological and chemical warfare research and development . There is a range of light industries, including a traditional one of gem cutting. Food processing is also important. The city, laid out on a regular gridiron pattern, sprawls across the valley of the Iset—there dammed to form a series of small lakes—and the low surrounding hills.

Yekaterinburg is an important railway junction, with lines radiating from it to all parts of the Urals and the rest of Russia. The city is the leading cultural center of the Urals and has numerous institutions of higher education , including the Urals A.M. Gorky State University (founded 1920), a conservatory, and polytechnic, mining, forestry, agricultural, law, medical, and teacher-training institutes. The Urals branch of the Russian Academy of Sciences and many scientific-research establishments are also located there. Boris Yeltsin , the first democratically elected president of Russia, was educated and spent much of his political career in the city. Pop. (2005 est.) 1,304,251.