A Comparative Study: Consumer's Perception towards Starbucks Coffee and McDonald's McCafé Marketing Strategies in Hong Kong
A Comparative Study: Consumer's Perception towards Starbucks Coffee and McDonald's McCafé Marketing Strategies in Hong Kong
Introduction
This paper presents a proposal to research and explore the similarities and differences of marketing strategies of Starbucks and McCafé and to explore how these marketing strategies drive competitiveness of the two companies as taken from the perspective of the consumers. Perceptions of Hong Kong consumers will be investigated. Starbucks Coffee and McDonald's McCafé both belongs to food and beverages retailing industry. Food and beverage products are developed and marketed to appeal to the preferences of the consumers and to stimulate sales. The marketing environment of such industry capitalizes on the purchasing power of the public hence the high specifications of marketing strategies, tactics and messaging. Use patterns and advertising exposure as well as the range of marketing vehicles and venues used by companies to reach the consuming public with advertising and marketing messages contribute to rate and frequency of spending of the consumers.
More specifically, the coffee retailing industry is a thriving business in Hong Kong. At most, giant coffee chains had shaped an acceptable coffee culture in the place. Hong Kong coffee-drinkers believed that coffee from large international chains is of better quality and provide greater choice (Patton, 2006). In fact, there are 22 McCafés and 62 Starbucks outlets in Hong Kong alone. Along with Pacific Coffee and Delifrance, Starbucks Coffee and McCafé will continue to serve the best quality coffee in Hong Kong. The competitiveness of the two corporations is a good area to examine on how they are going to cope with each company’s strategic marketing moves and their impact on competitiveness and profitability of each other. With this said, the study will investigate the different marketing strategies inherent to Starbucks and McCafé. With taking the differences and similarities of these strategies each company employs, the problem to be explored in this research is to what extent marketing strategies provides competitive advantage to Starbucks and McCafé in Hong Kong.
Further, the study also seeks to address the issue of how important selling strategies are in building brands, creating market share and meeting customer requirements. Two among the key questions are: 1) What are the marketing strategies that Starbucks and McCafé employs? 2) How do Hong Kong consumers perceive these marketing strategies? Specifically, the research will try to answer the following questions:
- What are the similarities and differences of the marketing strategies of the two coffee giants?
- Which marketing strategies are more direct to customers? In what specific ways?
- Which marketing strategies are more advantageous – Starbucks’ or McCafe’s, as according to the consumers?
- Why is that Hong Kong consumers perceive the marketing strategies of one coffee retailer over the other?
- What shapes or influences the perceptions regarding the marketing strategies of either Starbucks or McCafé?
This study will focus mainly on perceptions of Hong Kong consumers on the marketing strategies Starbucks and McCafé implemented in the region. Starbucks and McCafé are two giant coffee retailers which remain to be significant players in Asia Pacific region including Hong Kong. The main aim of this study is to explore the marketing strategies prevalent in coffee retailing industry in Hong Kong through a comparative study of Starbucks and McCafé. The following are the objectives of the study:
- To identify the marketing strategies of Starbucks and McCafé and evaluate their differences and similarities
- To assess whether these marketing strategies are providing the companies the competitiveness, profitability and market share
- To analyze the various perceptions and its indicators of Hong Kong consumers about the marketing strategies of the two coffee giants
Rationale
Marketing purports to build a lasting customer relationship. As such, marketing evolves from a process-centered towards becoming influence-driven which complicate marketing designs and concepts in effect. Marketing necessitates that firms must be equipped with marketing plans and strategies that are data-driven, analytically-based and comprehensive to achieve competitive advantage. Customer perception, on the other hand, primarily defines the quality of the products and secondly, the pricing scheme. Customer perceptions are a key consideration in achieving the objective of quality leadership and price leadership as well. Customer perception is simply the awareness, and in this context, customer perceptions of the marketing strategies will be explored. Starbucks and McCafé is relatively a preferred when doing comparative studies as the dynamics and nature of two corporations are worthy to be compared and draw upon them information that could inform new insights about a phenomena.
Nevertheless, there is no publicly known comparative study that explores the marketing strategies of the two companies with customer perceptions as its main ground, specifically in Hong Kong. This study will be of significant importance to the marketing literature as it will present an in-depth understanding of how marketing strategies move along with coffee retailing industry and with that of customers’ requirements. The evaluation of strategic marketing internal to Starbucks and McCafé from the perspectives of the consumers will be relevant to identify with the challenges, risks and threats faced by coffee retailers and how it could likely be developed. As such, the completion of this research will provide understanding of the concepts presented so as to generate data and information that every organization could use in order to come up with plans and designs that will strategically position them in the highly competitive, diverse, and complex business environment that is experienced at present.
Literature Review
According to Remenyi (2004), knowing customer expectations is possibly the most critical step in delivering quality products and service. Two expectations are desired and actual products and service hence it is a blend of what the customers believe ‘can be’ and ‘should be’. Adequate service is considered the lower level of expectation because of customer’s belief that desired service is not always achievable. With this, customer perceptions are always considered relating to expectations. Customers perceive products and services in terms of the quality of the products and quality of the service. Perceived quality of either products or service, or both, is a component of customer satisfaction. For instance, Jones et al (2002) studied customer perceptions on major fast food retailers and revealed that ideas of focus, consistency and value together with community activities were key.
Diaz-Martin et al (2000) relate that there is the high possibility of classifying service consumers on the basis of their quality expectations. Segmentation proposed is operational and that, in general, the aspects for which the customers have greater expectations are those which influence their satisfaction to a greater extent. Customer satisfaction could be also leveraged through total product quality. Total product quality can provide a new form of competitive differentiation, bearing in mind the move towards product parity. Brooks and Wragg (1992) consider that the role of marketing is vitally important in building TPQ, as a good quality product can be so easily let down by poor service quality. The authors also state that service should be used to sell products in the marketplace and create added value for the customer.
This is in line with Asher’s (1989) assumptions that in maintaining competitive edge, organizations must move quickly to identify and then meet customer satisfaction. This can be done through examining methods of measuring customer satisfaction, measuring and using the results to improve the quality of products and services. Asher (1989) sees customer satisfaction as the end product, advising on how to identify and implement a quality improvement programme. He contends that complete customer satisfaction is only possible when there is full information about customer requirements in the hands of all and everyone who has influence on how they are met.
Marsden (1998) argued that traditional marketing theories based on rational choice theory may rely on an impossible homuncular psychology and it is suggested that a viable alternative would be to understand customer behaviour from a mimetic perspective - the result of contagion rather than conscious choice. From the mimetic paradigm the role of marketing communications becomes one of designing and engineering infectious “mind viruses” that will influence customer perceptions and behaviour. Notably, Toombs and Bailey (1995) explains how routine marketing techniques for measuring customers’ perceptions of value in developing new products and services are now being used by some companies as a means of organizational redesign. Conjoint analysis and focus groups are two such marketing techniques that offer avenues to changes in organizational focus which can meet evolving customer requirements, while also allowing a more objective assessment of value in terms of “customer satisfaction”. Innovative companies are using these measurements of customer perceptions of value to reduce costs successfully while improving customer service and increasing profitability.
Recently, both management and marketing fields have emphasized the importance of a customer orientation. Organizations are striving to increase customer loyalty through relationship marketing program. Holmlund and Strandvik (1999) noted that there is a growing interest in relationships in the marketing literature, which has resulted in increasing attention to relational aspects of business. How the actors perceive the relationship thus emerges as a key issue. Traditionally, customer perceptions, for example, perceived service quality, satisfaction and value have played an important role in service management. However, in a business setting it is more appropriate to study both the seller’s and the buyer’s perceptions. Customer orientation, further, should be examined from the customer’s point of view. Lengnick-Hall et al (2000) assert that customers can enact four specific roles that enable them to create a partnership with firms. Customers can be important resources for the firm. They can actively participate in the firm’s activities as co-producers of the service. As buyers, customers can develop a relationship with a service organization, and as recipients they register evaluations of their encounter.
Moreover, a fundamentally new extension of the marketing paradigm is branding or identity paradigm. The brand identity can be considered the representative of the resource based view since identity will be based on competences and capabilities. Although branding is widely accepted as a marketing issue it has until now not been dealt with within the scope of the marketing paradigm (Alsem and Kostelijk, 2008). Hsieh and Li (2008) also noted that consumers' perception is an antecedent of loyalty. The impact of customer perception on customer loyalty is stronger and more significant when the brand image is favorable hence brand image has a moderating role to play.
Research Methodology
The descriptive approach or method of research will be used for the completion of this study. The researcher finds this the most appropriate approach as this study would mainly employ gathering and classifying data from the selected population. This type of research also utilizes observations in the study. To illustrate the descriptive type of research, Creswell (1994) states that the descriptive method of research is to gather information about the present existing condition. The purpose of employing this method is to describe the nature of a situation, as it exists at the time of the study and to explore the causes of the particular phenomena. The researcher opted to use this kind of research considering the desire of the researcher to obtain first hand data from the respondents so as to formulate rational and sound conclusions and recommendations fro the study.
Primary and secondary research will be conducted in the study. In primary research, the study will survey consumers about their perceptions on marketing strategies of Starbucks and McCafé. A semi-structured questionnaire will be developed and it will be used as the survey tool for the study. It is planned that the questionnaire will have a 5 point Likert Scale, as well as ranking questions. Data on both medium will be compared and evaluated using SPSS. Respondents will be chosen through a convenience sampling. Convenience sampling is picked over types of probability sampling because it will make the survey faster and easier. Convenience sampling means to collect or interview individuals who actually experience the phenomenon. Sampling will be done on places where human traffic is evident like the shopping malls and train stations.
Aside from survey, a secondary research will also be conducted in the study. Sources in secondary research will include previous research reports, newspaper, magazine and journal content, organization statistics, etc. Sometimes, secondary research is required in the preliminary stages of research to determine what is known already and what new data are required, or to inform research design. In this paper, existing findings on journals and existing knowledge on books will be used as secondary research. The findings from the journals and books will be evaluated in the data analysis. Types of research journals chosen are all related to issues in advertisements, specifically television and internet advertising. Basically, interpretation will be conducted which can account as qualitative in nature.
This study will also employ qualitative research method because it will try to find and build theories that will explain the relationship of one variable with another variable through qualitative elements in research. Through this method, qualitative elements that do not have standard measures such as behavior, attitudes, opinions, and beliefs within the organizational domain will be analyzed.
The survey data would be presented using descriptive and inferential statistics, based around a number of propositions that the study identified. With this said, this dissertation will be presented in written format with the addition of data charts, representing study results. Some of the analyzed data will be illustrating using pie charts and network charts but this may not be confirmed until survey data had been analyzed. Further, the study is limited only the pieces of information that the respondents are willing to disclose. It is limited to the respondents’ capability to answer such questions.
Expected Outcomes
It is expected that the customer perceptions regarding the effectiveness of marketing strategies will be equally divided between the two companies. It could be also expected that one company will excel over the other in terms of the four constructs identified. It would be also plausible to expect that culture issues which shape customer perceptions will be touched and emerge as another concept affecting such perceptions.
Based on this proposal, the research paper should have five chapters. The first chapter should present the background of the study, the objectives, research problems, methodology, the study’s scope and limitation and its significance. In the second chapter, literatures pertaining to customer perceptions and marketing strategies in Hong Kong variables are discussed. In chapter three, the methodology used will be discussed for this study. In chapter four, the results of the conducted survey and interview are presented. And in chapter five, the study summarizes the findings and provides conclusion and recommendations.
References
Alsem, K J and Kostelijk, E 2008, ‘Identity based marketing: a new balanced marketing paradigm,’ European Journal of Marketing, vol. 42, no. 9/10, pp. 907-914.
Asher, M 1989, ‘Measuring Customer Satisfaction,’ The TQM Magazine, vol. 1, no. 2.
Brooks, R and Wragg, T 1992, ‘Channeling customer loyalty,’ The TQM Magazine, vol. 4, no. 6.
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Holmlund, M and Strandvik, T 1999, ‘Perception configurations in business relationships,’ Management Decision, vol. 37, no. 9, pp. 686-696.
Hsieh, A T and Li, C K 2008, ‘The moderating effect of brand image on public relations perception and customer loyalty,’ Marketing Intelligence & Planning, vol. 26, no. 1, pp. 26-42.
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Lengnick-Hall, C A, Claycomb, V and Inks, L W 2000, ‘From recipient to contributor: examining customer roles and experienced outcomes,’ European Journal of Marketing, vol. 34, no. 3/4, pp. 359-383.
Marsden, P S 1998, ‘Memetics: a new paradigm for understanding customer behaviour and influence,’ Marketing Intelligence & Planning, vol. 16, no. 6, pp. 363-368.
Patton, D 2006, Coffee culture thriving in Hong Kong, Beverage Technology and Markets.
Remenyi, D 2004, Proceedings of the 5th European Conference on Knowledge Management, Academic Conferences Limited.
Toombs, K and Bailey, G 1995, ‘How to redesign your organization to match customer needs,’ Managing Service Quality, vol. 5, no. 3, pp. 52-56.
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