The Effect Of Starbucks In Kuala Lumpur Marketing Essay

Starbucks is a multi-national company which paid much attention to work-of-mouth marketing. This study is to realize the effect of word of mouth marketing on Starbucks in Kuala Lumpur and Nigeri Sembilan, Malaysia through research and analysis.

Schultz who is the CEO of Starbucks said that the branding of Starbucks was not depended on advertisement. Starbucks emphases customers’ experience and create a comfortable atmosphere for customers to enjoy Starbucks coffee. Starbucks is not simply selling products and service; it demonstrates its own coffee culture to customers. (Bill, 2012)

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Statement of the Problem

‘Traditional marketing including advertising, public relations, branding and corporate communications is dead.’ Bill (2012)

According to Bill, buyers are not paying much attention to traditional marketing. They are checking out product and service information in their own way by the word of mouth from Internet or customer reviews that often from sources outside the firm. As Joe Girard said, ‘It has 250 hidden customers behind every customer; do not offend anyone of your customers’ (Sharon, 2012). It proves the massive power of word of mouth. This study takes Starbucks as an example to research the effect of word-of-mouth marketing.

Conceptual Framework

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Figure 1.5: the Conceptual Framework

Source: own source

In the conceptual framework, the center of the round is Positive Word of Mouth in target group. The three smaller rounds around the center are the three factors in word of mouth marketing of companies to create positive word of mouth. Therefore, attractive features, amazing products and service, and to win faith and respect are the independent variable. Positive word of mouth is dependent variable.

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No consumer wants to discuss a boring company or product. If the company wants to be the hot spot among customers, it has to do something distinctive. For example, the company should let people talk about it with a reason. Furthermore, to satisfy the customers, they will be the best propagandists. Amazing products and service can excite customers and make them intensely transfer the information to their friends or family. At last, a company cannot be with positive word of mouth without customer’s faith and respect from the public. The company must keep its good credibility and do anything legally and morally. Meanwhile, it has to know how to treat its customer wholeheartedly.

Research Questions

How is word-of-mouth marketing affecting Starbucks in Malaysia?

How success did Starbucks utilize word of mouth marketing in Malaysia?

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What is the most important factor of word-of-mouth marketing at Starbucks?

What are the potential problems of word-of-mouth marketing at Starbucks in Malaysia?

Research Hypotheses

Hypothesis 1

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Ho: there is no significant relationship between attractive features in Starbucks and positive word of mouth.

H1: there is significant relationship between attractive features in Starbucks and positive word of mouth.

Hypothesis 2

Ho: there is no significant relationship between outstanding product and service in Starbucks and positive word of mouth.

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H2: there is significant relationship between outstanding product and service in Starbucks and positive word of mouth.

Hypothesis 3

Ho: there is no significant relationship between faith and respect in Starbucks and positive word of mouth.

H3: there is significant relationship between faith and respect in Starbucks and positive word of mouth.

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Objective of the Study

The brand communication of Starbucks was not simply depended on investment of costly advertisement and huge promotion. Starbucks had its own outstanding way to achieve brand communication, word-of-mouth marketing. It used word of mouth from customers to develop the growth of target group.

Schultz explained: the success of Starbucks proved an advertisement which cost multimillion was not the prerequisite to create a national brand, abundant financial capability was not the uniqueness condition to build a famous brand. It can work in step by step, one time one customer, one time one shop or one time one market (Grace, 2012). Actually, it may was the best method to obtain the trust and faith of customers. It is the objective of study to prove Starbucks how to implement that.

Significance of the Study

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The inception of study is based on traditional marketing is dead and the success of Starbucks. The significance of the study aims to discover better and more effective marketing from now on through the analysis of transitional marketing and a company which utilized word-of-mouth marketing to succeed.

the report plan

Chapter

Description

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Introduction

To illustrate the background of

Literature review

Methodology

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Analysis and findings

Conclusion

literature review 1250

2.1 Background of Word of Mouth Marketing

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“Word of mouth” was put forward by mass communication studies (Nhpr, 2012). Afterwards, it was mainly applied in marketing and build up word-of-mouth marketing as be known now. (Mark, 2011)

According to Andy (2006), word-of-mouth marketing creates a reason and let people talk about the product or service. Moreover, it provides an opportunity to make people feel free when they talk about the product or service. However, Andy preferred to the definition which explained all contents of word of mouth marketing was making people talk about you. Word of Mouth Management Association (WOMMA) defined word of mouth marketing as a knowledge and art of communication. It is a positive and communication method between consumer and consumer and between consumer and marketing people (Womma, 2012). Other definition (Andy, 2012) is word of mouth marketing creates a bridge for the second “C” in “B2C2C” (Business to Consumer to Consumer). In researcher’s opinion, sales are the result of work-of-mouth marketing. Positive work of mouth leads to considerable sales; it is a nature reaction process. Only consumers trust the brand and give the product or service a positive word of mouth, the company will win in the market. On the contrary, it is not a smart plan that simply goes through low price strategy and advertisement strategy to attractive consumers. Depended on Andy, positive word of mouth is based on a good quality of product or service. (还有äºå“çš„适应市场æ€)

2.2 Word-of-mouth marketing and traditional marketing

Figure 2.2 : the process of traditional marketing

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Source: Socialquickstarter, 2011

In order to attract new prospects, traditional marketing will invest a large number of human resource and a lot of money in advertisement and sale promotion. From the figure above can know the quantity of people is decreasing step by step. Finally, a few consumers will stay under traditional marketing campaign. It is disequilibrium between inputs and outputs and waste organization resource. (Socialquickstarter, 2011)

Word-of-mouth marketing costs less money in advertisement and promotion. It aims to create some tenique features to attract consumers and convert them by excellent products and service, then they will be kept because of the faith and respect to the company. At last, they will talk about what they experience with their friend, colleuege and family. It never be a up side down triangle, it is sand timer as following. (Ivan, 2002)

Figure 2.2.1: the process of word-of-mouth marketing

Source: Socialquickstarter, 2011 and own source

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2.3 Word-of-mouth marketing, buzzing marketing or viral marketing

Buzz marketing and viral marketing are similar mode to word-of-mouth marketing has similar mode to buzz marketing and viral marketing, but they are distinct. According to Dave (2005), buzz marketing aims to produce buzz to attract people and make the people who experienced the buzz and discuss each other. Finally, the company advises the success of the buzz and makes itself be the point of the discussion. Buzz marketing pays much attention to how huge the buzz is instead of products or service. It looks like an extreme marketing. That is absolutely different purpose to word-of-mouth marketing. Viral marketing is quite a different animal from buzz marketing as well. Its method is to create a marketing message online, usually in some tangible form such as a video chip or an email, which can spread quickly and exponentially among consumer (Dave, 2005). It is same to buzz marketing; the audience always focuses on and debates the tangible form how excited instead of merchandise or service. Few companies obtained success by viral marketing; some of them even destroy their reputation, because viral marketing had invisibility what customers never want. There are some similar points among those marketing, but from the purpose and organization, work-of-mouth marketing is the best marketing method. Word-of-mouth marketing focuses on a long term development instead short-term success or buzz.

2.4 Research gap (search something in myathens ) not enough

In Rick’s (2008) research, it focused on the principle of word of mouth. It analyzed word of mouth by social network. In the research of Xuehua (2011), it paid more attention to word of mouth activities during the service encounter and it found out how word of mouth influenced service quality and purchase intention. According to Jillian’s research, there were similar to this study, both of them discussed the relationship between word of mouth and traditional advertisement (Jillian et.al, 2012). The difference is Jillian’s research measured more about the power of individual messages. The research of Bee (Bee et.al, 2007) emphasized the importance of word of mouth, it considered word of mouth campaigns have become a standard part of many companies’ marketing plans. It provided insight into how to design more effective word of mouth campaigns.

Further investigation

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Overall, the four research mentioned above and most research about word of mouth discuss the most details about word of mouth, the begin of word of mouth, the principles of word of mouth and the relationship between word of mouth and consumer behavior and so on. They are qualitative research. However, this study tried to explain word of mouth marketing through the marketing of Starbucks and the investigation for Starbucks’ customers. It not only paid attention to the theory of word of mouth, but also matched the word of mouth practices of Starbucks to analyze.

Background of the industry or business (critical evaluation of their role in the research problem)

Through some critical evaluation of its role in the research problem How starbucks is relevant to the project’s topic (word of mouth marketing)

Methodology (扩展多200å­-)

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research approach

The researches utilized quantitative research as the research approach. On one hand, even though quantitative research is harder to start, it is easier to conduct the analysis and write the research because the highly structured. On the other hand, the scale of this research is more than 100 respondents, quantitative research is easier to handle and collect data.

sampling methodology

Due to the target of respondents was Starbucks’ customers; the researcher locked the location in Berjaya Times Square and Aeon (Seremban) shopping center. Thus, random sampling could adequately achieve the data collection assignment in the target research area.

3.2.1 Population, sample size

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According to the observation, the customer flow volume in Starbucks (Berjaya Times Square) and Starbucks (Aeon Shopping center) was about 400 on 4 Nov, 2012 and 650 on 7 Nov, 2012. The research conducted the survey from 13hrs to 17hrs in the day by random sampling. 112 copies of questionnaires were sent out and 98 copies of them were valid.

Starbucks Coffee

(Berjaya Times Square)

Starbucks Coffee

(Aeon Shopping center)

Date

4 Nov, 2012

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7 Nov, 2012

Time

13hrs – 17hrs

Population

400

650

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Sample size

39

59

sampling techniques

In order to ensure the objective result of research, the researcher selected the respondents according to types of people by the scale of 2:1. It meant 2/3 of respondents were working people and 1/3 of respondents were non-working people. The reason of assigned sampling by 2:1 was the survey conducted in week day, the working people would show up more frequent than non-working people.

data collection instruments used

Based on the time limited and personal financial capability, the researcher mainly utilize interview, observation and survey in the investigation. In the beginning, the researcher prepared the interview content and obtained authority letter from his college to meet the marketing manager of Starbucks head office in Malaysia. Unfortunately, the researches was informed the marketing manager was very busy on that moment and he could send the interview questions part to public relation department to get the feedback. At last, the researcher did not receive any reply after he sent out the question. Anyway, the researcher attached the original email and interview content in appendix part. With the failure of email interview, the research could not be authorized to carry out the survey in particular Starbucks stores. Therefore, the researcher decided to use observation and survey around Starbucks stores which located in Berjaya Times Square ground floor, Kuala Lumpur and Aeon Shopping Center ground floor, Seremban 2, Negeri Sembilan.

statistical tools used

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SPSS was the main statistical tool used in this research. The roles of SPSS in the research were testing the reliability of survey, calculating the demographic data, judging the type of data and evaluating the relationship between the independent variables and dependent variable.

limitation of the study

Limitation

Description

Simple types of respondents

To make sure veracity of data, all the respondents are the customers of Starbucks. It cannot collect broader word of mouth towards Starbucks.

Narrow research area

Due to the researcher conducted the research alone; it was not enough people to carry out the research in more places.

Limited Time

The research was conducted in working time; it might cause simple differentiation of respondents.

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Lack of communication with Starbucks Head Office in Malaysia

It would be more rigorous with the secondary data provided by Starbucks. Moreover, the survey would be greater by some suggestion or advice from Starbucks.

Table 3.5: Limitation of the Study

Source: own source

4. Analysis and findings

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4.1 Preparation

Reliability Statistics for Pilot Study

Cronbach’s Alpha

N of Items

.803

24

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Due to the survey scale is 100 respondents, it carried out a pilot study survey before the formal survey launched. The researcher invited 16 respondents who known about word of mouth to fill up the first 16 copies questionnaires and found out the weakness of the survey. Meanwhile, the 16 copies questionnaires provided primary data to do reliability test for pilot study. The result was 0.803>0.7. It means the value is moderate-high reliability.

Reliability Statistics

Cronbach’s Alpha

N of Items

.883

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24

After pilot study, the researchers did some modification with questionnaire and officially conducted the survey in public. 120 copies of questionnaires sent out and 98 copies were valid. After made sure the reliability test of data was 0.883>0.7. The value is considered in moderate-high reliability level.

Tests of Normality

Kolmogorov-Smirnova

Shapiro-Wilk

Statistic

df

Sig.

Statistic

df

Sig.

Attractive features

.189

98

.000

.888

98

.000

Amazing products and service

.259

98

.000

.870

98

.000

To win faith and respect

.225

98

.000

.850

98

.000

Positive word of mouth

.196

98

.000

.890

98

.000

a. Lilliefors Significance Correction

The researcher used normality test to verify the type of coding data. All results were more than 0.05. There was parametric data. It would use Pearson’s correlation to test association between two quantitative variables.

4.2 Statistics of Demographic data

Gender

Frequency

Percent

Valid Percent

Cumulative Percent

Valid

male

45

45.9

45.9

45.9

female

53

54.1

54.1

100.0

Total

98

100.0

100.0

Table: the gender information of the respondents

Age

Frequency

Percent

Valid Percent

Cumulative Percent

Valid

15-20

5

5.1

5.1

5.1

21-25

29

29.6

29.6

34.7

26-30

28

28.6

28.6

63.3

31 andabove

36

36.7

36.7

100.0

Total

98

100.0

100.0

Table: the age information of the respondents

From the above two tables, there are 98 respondents in the survey; 45 males and 53 female. 36 of them is more than 31 years of age and above, 57 of them is 21 to 30 years of age, the rest of them is below 20 years age. It shows the target group of Starbucks focused from 20 to 30 years old people.

How did you know Starbucks

Frequency

Percent

Valid Percent

Cumulative Percent

Valid

from the family

1

1.0

1.0

1.0

from friends

49

50.0

50.0

51.0

from TV commercial

2

2.0

2.0

53.1

from magazine and newspaper

8

8.2

8.2

61.2

saw Starbucks coffees

37

37.8

37.8

99.0

other

1

1.0

1.0

100.0

Total

98

100.0

100.0

Table: the channel to know Starbucks by the respondents

The table above indicates how the respondents knew Starbucks. The people who known Starbucks from friends were more than saw it by themselves. This is the preliminary effect of word of mouth. Much information is heard from the people who are around.

4.3 Hypothesis Test

Correlations

Attractive features

Positive word of mouth

Attractive features

Pearson Correlation

1

.839**

Sig. (2-tailed)

.000

N

98

98

Positive word of mouth

Pearson Correlation

.839**

1

Sig. (2-tailed)

.000

N

98

98

**. Correlation is significant at the 0.01 level (2-tailed).

Correlations

Positive word of mouth

Amazing products and service

Positive word of mouth

Pearson Correlation

1

.856**

Sig. (2-tailed)

.000

N

98

98

Amazing products and service

Pearson Correlation

.856**

1

Sig. (2-tailed)

.000

N

98

98

**. Correlation is significant at the 0.01 level (2-tailed).

Correlations

Positive word of mouth

To win faith and respect

Positive word of mouth

Pearson Correlation

1

.865**

Sig. (2-tailed)

.000

N

98

98

To win faith and respect

Pearson Correlation

.865**

1

Sig. (2-tailed)

.000

N

98

98

**. Correlation is significant at the 0.01 level (2-tailed).

Independent variables

Pearson Correlation

P-Value

Result for hypothesis

Attractive features (H1)

0.839

0.000

Accept H1 and reject H0

Amazing products and service (H2)

0.856

0.000

Accept H2 and reject H0

Faith and respect (H3)

0.865

0.000

Accept H3 and reject H0

Dependent variable: positive word of mouth

Table: correlation for independent variables and dependent variable

The table above displays the relationship between the independent variables and dependent variable. All the significance level of them is below 0.05 and correlation indexes are between 0.8 and 0.9. It indicates that independent variables and dependent variable have very high positive relationship. In other words, the positive word of mouth for Starbucks is closely related to Starbucks’ word-of-mouth marketing. Therefore, the word-of-mouth marketing practiced by Starbucks is successful.

4.4 Findings for research questions

What is the most important factor of word of mouth towards Starbucks for customers in Malaysia?

There are 19 ranking questions in the survey. The ranking is from 1 to 5, ‘5’ represents the highest mark and ‘1’ represents the lowest mark. In total, there are 95 marks if all those questions market as 5. From the above table, the mean mark given by respondents is 65.2 which take up 68 per cent of full mark. It proved the appraisal level of Starbucks was moderate to high. Meanwhile, few respondents gave marks below 56.

Recommend Starbucks to Others

Frequency

Percent

Valid Percent

Cumulative Percent

Valid

average

52

53.1

53.1

53.1

agree

43

43.9

43.9

96.9

strongly agree

3

3.1

3.1

100.0

Total

98

100.0

100.0

Based on the high appraisal level, 47 percent customers would like to recommend Starbucks to others. It proves Starbucks’ word-of-mouth marketing is working. Positive word of mouth attracts more customers experience in Starbucks. That is a virtuous cycle to keep Starbucks develops.

As the matter of fact, Starbucks always practices its social responsibility. However, the above statistical data demonstrates many respondents had no idea with the effort what Starbucks did even though over 60 percent respondents gave neutral mark. The products and service of Starbucks have won customers’ faith but respect, Starbucks should provide a communication channel for customers to know about social responsibility of company.

Although the communication with customers is not good, Pearson correlation (0.865) proved the faith and respect from customers to Starbucks is the strongest relationship with positive word of mouth among three independence variables.

From the survey, the researcher found several potential problems in word-of-mouth marketing of Starbucks. Firstly, the respondents did not satisfy to the attractive features at Starbucks because some chain coffee shop also with the similar features to Starbucks, but the respondents still praise the specific reading area. Secondly, Starbucks did its best to practice its social responsibility. In fact, few respondents know a lot of that. To let consumers know what company does for society is a good way to enhance positive word of mouth.

Conclusion

Refer to the objective of the study in introduction part and depended on the analyzing part, it could know some compliment for Starbucks implementation. Starbucks has a good reputation and positive word of mouth in Malaysia, especially the aspect of products and service quality. In addition, over 45 per cent customers like to recommend Starbucks Coffee to others is the biggest success of Starbucks. However, its shortcomings are slow new product process and weak communication with customers about its social responsibility activities. 78.6 percent thought the frequency of promoting new products in Starbucks is average level. Over 70 percent customers do not know ‘helping children to get clean water’ plan and over 60 percent customers do not know ‘reducing waste’ activities in Starbucks.

Most of literature searched by the researches focus on the theory of word of mouth, they analyzed much theory related word of mouth and figured out the nature of word of mouth. Different from those, this study analyzed word of mouth through Starbucks and feedback from customers. It provides the primary work to research how some companies utilize word-of-mouth marketing. The researcher hopes other workers and researchers can understand something and create a value project for the world.

This study just investigated the phenomenon of word of mouth; in fact, word of mouth includes many kinds of relationship with other factors. For instance, word of mouth has a close relationship with sales and the relationship between word of mouth and consumer. Moreover, the study is lack of specific analysis to Starbucks word of mouth marketing; it only classifies them as three factors what create positive word of mouth. In order to investigate depth word of mouth in the future, it can change the direction of investigation related to the nature of word of mouth such as why consumers prefer to the product or service which have positive word of mouth or what extent is sales development supported by word of mouth marketing. Those need more details and time even money in the investigation.

All in all,

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