Question

Would you pay \(\$ 12\) for a cup of coffee? Starbucks is betting enough people will say "yes," as it launches a chain of luxury coffee shops called Starbucks Reserve. Which generation(s) do you expect Starbucks Reserve to attract: baby boomers (ages 53 and over), generation \(X\) (ages 33 to 52), or millennials (ages 13 to 32)? Briefly explain. To be successful as a luxury coffee bar, how does Starbucks need to distinguish Starbucks Reserve coffee shops from its standard Starbucks coffee shops? Source: Julie Jargon, "Middle- Market Woes Inspire Starbucks's Bet on Luxury Coffee," Wall Street Journal, December 5, 2016 .

Short answer

While age might play a role in choosing to pay for a luxury cup of coffee, it is not the only determining factor. Generally, Generation X and millennials, being more exposed to the culture of coffee drinking and having a greater interest in distinct coffee experiences, are more likely to appreciate Starbucks Reserve. Starbucks Reserve should distinguish itself by enhancing the coffee drinking experience - through creating a high-end store ambience, providing exclusive coffee selections and top-tier service. However, this answer could differ based on different perspectives.

Step-by-step solution

Identify Target Audience

Consider the general behavior, habits and differentiating factors of the three generations. Analyze which generation is most likely to appreciate and pay for a luxury coffee experience. Characteristics to consider may include income levels, interest and attention to luxury experiences, coffee consumption rates etc.

Rationalize Choice

Based on the analysis in Step 1, choose the generation(s) that seem most likely to patronize Starbucks Reserve. Provide concrete reasons to justify this selection. Compare and contrast the different factors that might influence each generation's likelihood to pay for a luxury coffee.

Suggest Strategies for Success

Suggest how Starbucks Reserve could differentiate itself from regular Starbucks stores. This could be in terms of environment, service, coffee selection, branding etc. This strategies should be tailored to attract your chosen generation in Step 2

Key concepts

Target Audience

Understanding the target audience is crucial for any successful marketing strategy. It allows businesses to tailor their offerings to meet the specific needs and desires of different consumer groups. In the case of Starbucks Reserve, the target audience might vary depending on several factors.

To determine which generation is most likely to appreciate and pay for a luxury coffee experience, marketers must consider:

• Income levels: Higher income brackets can often afford luxury items.
• Interest in luxury: Some generations place more value on luxury and premium experiences.
• Coffee consumption rates: Frequent coffee drinkers might be more willing to invest in a premium coffee experience.

For Starbucks Reserve, older generations like baby boomers may have higher incomes to spare on luxury, but millennials might be more inclined to indulge in unique experiences, seeking high-quality rather than traditional luxury.

Generational Marketing

Generational marketing involves creating strategies that appeal to specific age groups based on their unique preferences and behaviors. Each generation has distinct characteristics that influence their purchasing decisions.

For example:

• Baby Boomers (ages 53 and over): They often have disposable income and may value traditional luxury. However, they might require motivation to change their established habits.
• Generation X (ages 33 to 52): Typically financially stable, they value quality over quantity and appreciate good service.
• Millennials (ages 13 to 32): This tech-savvy group seeks authenticity and unique experiences. They value social responsibility and experiential purchases.

With Starbucks Reserve, millennials might be the primary target due to their love for distinct, high-quality experiences, while Generation X may be targeted due to their appreciation for premium products.

Luxury Branding

Luxury branding focuses on creating a perception of exclusivity and superior quality. Starbucks Reserve aims to position itself as a high-end option within the overall Starbucks portfolio.

Important aspects of luxury branding include:

• Exclusive offerings: Unique menu items that cannot be found at regular Starbucks stores.
• Premium pricing: Higher prices to emphasize quality and exclusivity.
• Upscale environment: A luxurious and comfortable ambiance that enhances the premium experience.

By adopting these strategies, Starbucks Reserve can cater to consumers craving not just coffee, but an elevated lifestyle experience.

Consumer Behavior

Consumer behavior examines how individuals make decisions to spend their resources. For Starbucks Reserve, understanding why people choose luxury items is essential.

Several factors influence this decision:

• Perceived value: Do consumers believe the coffee is worth the cost?
• Social influence: Do their peers frequent luxury coffee shops?
• Personal satisfaction: Does the experience align with their personal desires and values?

A successful marketing strategy would leverage these insights to encourage potential customers to perceive Starbucks Reserve as a valuable investment in their daily routine.

Differentiation Strategy

A differentiation strategy involves making a product or service stand out from the competition. For Starbucks Reserve, standing out from standard Starbucks stores is key.

Possible approaches include:

• Enhanced service: Offering personalized coffee brewing techniques or barista-led coffee tastings.
• Product innovation: Introducing rare coffee beans or special roasts exclusive to Starbucks Reserve.
• Unique atmosphere: Designing stores with luxurious interiors and offering exclusive seating arrangements.

These strategies will not only attract a niche market seeking luxury but also reinforce the brand's premium status within the coffee industry.