III. Some facts of business life

I. STARBUCKS

Read and translate the text:

today's coffee lovers can choose an estimated 8,000 outlets that serve Starbucks, a figure up from 200 in 1989.

According to the company, whose largest competitor is less than half its size, coffee is not a trend, it's a lifestyle. Starbucks has been "elevating the coffee experience" since 1971, when three men opened a gourmet coffee shop in Seattle, Washington. Many people are unaware that Starbucks has been around for so many years. In fact, it wasn't long ago that latte, cappuccino and expresso were not part of America's everyday vocabulary.

Starbuck's success can be attributed greatly to marketing ef­forts. In 1982, the company hired 1 toward Schultz as its marketer. After visiting Italy the following year, Schultz was inspired. The relationship he saw between coffee and people in Italy awakened him to the untapped markets in America. In 1987, Schultz added six Starbucks stores and planned to go national with his ideas. Was he successful? The corporation is now the leading retailer, roaster, and brand of specialty coffee, with 1,401 Starbucks stores in the United States, Canada, Japan, and Hong Kong. Starbucks supplies fine dining, food service, travel, and restaurant accounts with both coffee and equipment. Its ambitions are not small. The company plans to have 2,000 stores by 2000.

Approximately 20,000 employees, known as "partners," un­dergo five sessions of rigorous training. They are taught to edu­cate customers about coffee making, to remind them to purchase new beans weekly, to explain the various blends and beverages, and most important, to serve only the highest quality drinks. Em­ployees learn to make the drinks in an eight-hour seminar that includes lectures, demonstrations, and hands-on experience. They taste beverages that do not meet quality standards so they can be more sensitive to an unsatisfied customer.

The average customer visits Starbucks 18 times a month, and 10 percent of its clientele stop in twice a day. That's big business. A latte and scone per day adds up to $1,400 per year. Starbucks has the best success in its top markets—Seattle, Los Angeles, and Chicago—each of which has approximately 100 stores. Located mostly in urban areas and college towns, Starbucks has also ven­tured into alliances with other companies. It reaches an estimated 80 million travelers per year in a deal with United Airlines. The Starbucks name can be found on mobile coffee carts and in air-ports, bookstores, and fine restaurants. Its extended line of prod­ucts includes a coffee-flavored ice cream from Dreyer's Grand, a coffee-flavored beer from Redhook Ale Brewery, and a bottled ver­sion of its Frappuccino, which was developed with PepsiCo.

Global expansion has been a large success as well. When Star­bucks was introduced in Japan, as many as 200 customers lined up at a time. The company provides informational pamphlets in Japanese and posts menus in both English and Japanese. The world's fourth largest consumer of coffee, Japan is a potential $7 million market for Frappuccino alone.

Despite its rapid growth, Starbucks refuses to compromise quality. The company will not franchise, will not artificially fla­vor its coffee, and is very selective about business alliances. Schultz intends to maintain the Starbucks upscale image. That's why Star­bucks coffee will not be sold in gas stations or convenience stores, among many other places.

From 1992 to 1996 alone, consolidated net revenues of the company grew an astounding 575 percent. How has the name be­come so renowned? Not only has the company put its logo out through its products, accounts, and locations, but Starbucks also has received a significant amount of positive press for commu­nity involvement, charity work, and progressive employee poli­cies. Starbucks uses its $18.75 million in mail orders to bring its name to markets where there are no retail locations. Amazingly, traditional advertising has not played a major role in the com­pany's success.

Starbucks seems to have found its way into coffee cups every­where. Never tried it? Ask one of the three million people who regularly buy Starbucks coffee. They'll probably tell you what you're missing.

Assignments:

1. The definition of marketing describes four types of decisions made by

marketers: product, price, promotion, and place. Identify a place and

promotion decision Starbucks has made.

2. Based on the types of retail locations selected by Starbucks, what customer

characteristics form its target markets?

3. The marketing concept holds that the purpose of marketing is to understand

the needs and wants of customers and create customer value through

satisfaction and quality more effectively and efficiently than competitors?

Summarize how Starbucks implements the marketing concept.

II. NIKE

Read and translate the text:

IN 1964, phil knight and his former track coach, William Bowerman, began selling shoes made by a Japanese company, Onitsuka Tiger Co., out of the back seat of Knight's car. To gain more control of their marketing efforts, Knight and Bower­man developed the Nike brand, named after the Greek goddess of victory. A Portland State University design student created the famous "swoosh" for $35. It represents a wing, to "embody the spirit of the winged goddess who inspired the most courageous and chivalrous warriors." From the onset, Knight's philosophy has been that people root for a favorite team or athlete, not a prod­uct. So Knight sold "the athletic ideals of determination, individ­uality, self-sacrifice, and winning." Beginning in 1973 with track star Steve Prefontaine, Nike has actively sponsored athletes with these attributes. Today, it invests hundreds of millions annually to gain sponsorship of world-class teams and players.

According to CEO Knight, 1997, Nike's 25th year, was the jest year yet. Profitability hit record highs, and revenues were up 42%—to $9.2 billion. Sales were so strong that Nike's increase equaled the total annual sales of the number three company in the industry. Knight attributes success to a number of factors.

• The company is based on one brand, which has a genuine, and distinct personality, and tangible, emotional connections to customers the world over.

• It is rooted in sports, the fastest growing culture, growing so fast that it is becoming the one, true international language.

• Nike has been around 25 years and has grown each year because "our horizon is more than 12 months away."

• It is made up of 17,000 teammates who "stood this in­dustry on its head."

• They include the brightest, most committed, most sought-after people in the industry.

• Nike returns have been 10 times the Standard & Poor's 500 index average over the last ten years. Just $100 invested in Nike in 1987 would be worth $3,094 today!

The company Web site claimed that 1997 "was about doing a lot of things right in a lot of different places: in the research lab and in the warehouse, on billboards in Atlanta and on 57th and Fifth in New York, on the soccer pitch in Germany and in the paint on the playgrounds of Chicago." Moreover, Nike's abil­ity to coordinate integrated marketing communications that really connect with customers is outstanding. For example, the "swoosh" is so familiar that the name no longer needs to appear along with it.

Nike strategically coordinates its television and print ads, sponsorships, Web site, an 800 number, billboards, and other me­dia to form an effective mix of communications. The athletes who deliver its message, are a major factor. For example, Michael Jor­dan is generally considered to be the best basketball player in history. At a time when Nike profits were sinking, Knight selected Jordan to reestablish the company's image. Spike Lee filmed spots depicting Jordan as the basketball player whose talent (and Nike shoes) enabled him to fly. Approximately 35 ads later, Jordan was the most popular athlete in the country, according to New York - based Marketing Evaluations.

A number of other famous athletes have elicited a tremen­dous response from customers, including tennis players John McEnroe and Andre Agassi, baseball player Nolan Ryan, football's Deion Sanders, track stars Carl Lewis and Alberto Salazar, and basketball players like Charles Barkley and Scottie Pippen. And not to be forgotten is the young Tiger Woods, who has a $40 mil­lion contract with Nike. The charisma, talent, expertise, and personality of such athletes delivers Nike's message. According to its I Web site, "Nike exists to be the best sports and fitness company if in the world. We are here to inspire and motivate the athlete in all of us and advocate the love of sports. We live in the heart of sports and the athletes who play them."

And Nike is expanding its total market with integrated mar­keting communications. It is founder of P.L.A.Y. (Participate in the Lives of America's Youth), a multimillion-dollar program to promote healthy, active lifestyles among young people. There's also Niketown, a retailing effort to make a more personal con­nection with customers. Niketown stores feature basketball courts where customers can try out shoes, multiscreen televisions to dis­play Nike promotions, and apparel autographed by Nike athletes.

Nike's June 1996 to May 1997 fiscal year was an amazing year for women's sports, beginning with Olympic gold for the U.S. women's soccer, basketball, and softball teams. Nike was at the forefront in sponsorships and involvement. When the company was launched 25 years ago, a mere one in 30 school-aged girls were involved in sports. Today that number has jumped to one in five. In 1996, Nike spent an estimated $15 million on com­munications directed at women, featuring tennis stars Mary Pierce and Monica Seles and volleyball player Gabrielle Reece. In 1997 its focus on women's sports reached new levels, including sponsorship of the WNBA and multimillion dollar contracts for such players as Lisa Leslie and Rebecca Lobo.

With a marketing budget of more than $250 million, Nike reaches consumers globally with events like Hoop Heroes, where

Michael Jordan, Charles Barkley, and other Nike athletes help raise basketball consciousness in places like Shanghai, Melbourne, and Seoul. In the United Kingdom, Nike has begun expansion of a Customer Service Center, while in Brazil it has formed a part­nership with Confedercao Brasileira de Futbol to sponsor the na­tional soccer team. For World Cup 1998, Nike plans an array of media campaigns, product launches, and team endorsements. The telecasts are expected to draw an audience of 375 billion.

ü CEO - Chief Executive Officer (the USA) = managing director (the U.K.)

Assignments:

1. Discuss how Nike uses IMC to position the company in a manner consistent

with its strategy. Give examples.

2. How does Nike use athletes to influence the communication process? What

characteristics of message senders do you think Mike considers the most

important? Why?

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