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Rock Street, San Francisco

1200955-914399
STARBUCKS:
DELIVERING CUSTOMER SERVICE
SUBMITTED BY: GROUP 3
RUKHSHAR JAHAN: 18A2HP442
SAI BHARADWAJ: 18A3HP645
ANURAG: 18A1HP097
SHEETAL BHARDWAJ: 18A1HP645
SANCHITA THAKUR: 18A3HP644
SHUBHANGI KHANDELWAL: 18A1HP066
NISHANT SHARMA: 18A3HP631
SUBMITTED TO:
DR. RAMBALAK TADAV1200955-914399

Executive Summary

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Objective: Establish the brand as the most recognized and respected brand globally
Initially, Starbucks specialized in selling Arabica beans to a narrow market of coffee purists. Under Schultz, Starbucks became the most successful company to sell coffee in the world without using any advertising methods. Schultz used a mix of three components for his branding strategy; highest quality of coffee, service and lastly appealing ambience. The company still holds a dominant position in the coffee market, it operated through stores located in crowded areas such as corporate buildings and shopping centers. The company delivered its service through employee engagement which in turn enhanced customer satisfaction level. Starbucks held a good market share irrespective of its competitors, which were a variety of small-scale coffee chain stores.

Starbucks also monitored the service performance using various metrics such as; self-reported checklists and monthly status reports. An additional metric of measuring service performance was Consumer Snapshot which measured the services on four basic criteria: Service, Cleanliness, Product Quality and Speed of service; this proved to be a highly effective measuring trend over the quarter. Starbucks expanded its service through retail expansion, product and service innovation.

Despite of having one of the most effective marketing strategies and a high Customer Snapshot score, Starbucks weren’t able to meet their customer satisfaction standards. While, conducting a market research they found that their customer base was evolving, the newer-customers tended to be younger, less educated and belonged to the middle-income bracket. Responding to the market research findings it was decided to bring down the duration of delivering the service to increase the consumer satisfaction and build a strong long-term customer relationship.

Q1. What factors contributed for extraordinary success of Starbucks in the early 1990’s? What brand image Starbucks develop during this period?
Ans. Factors leading to extraordinary success of Starbucks in the early 1990’s:
High Quality Coffee:
Starbucks provided the highest quality coffee in the world, sourced from Africa, Central America, South America ; Asia Pacific Regions.

Different Experience: Starbucks came up with an excellent branding strategy of proposing coffee as an experience by the “live coffee” mantra.

Moving away from the tangible benefits of the coffee, it also focused on the emotional aspects of the customers through quality service and experience.

Third Place: At that time, apart from home and work, people didn’t have a place to relax and enjoy. So, Starbucks served as a third place, meaning different things for different people.

Ambience: The atmosphere of Starbucks was designed as universally appealing, encouraging lounging and layouts, making them want to stay.

Customer Service: Starbucks provided an uplifting experience to the customers, every time they walked in. They delivered on service through adopting the “just say yes” policy and excellent speed of service.

Partner Satisfaction: The employees were known as Partners. Starbucks partner satisfaction rate was as high as 80-90% and employee turnover was the lowest.

Distribution Channel: Starbucks outlets were in high-visibility location settings like offices, university buildings etc. offering a wide variety of beverages. They operated in areas where people travel, shop and dine.

First Mover Advantage: When Starbucks initially entered into the market, there was no such existing concept in the market and therefore, no competitors. Thus, it had the first mover advantage.

STARBUCKS Brand Image:

During the early 1990’s, Starbucks was known for providing the highest quality coffee in the world, both in varieties and specialties.

Customer satisfaction was on point during that period. They were satisfied with the product, service and experience offered by the stores.

Starbucks outlets were available widely, covering all the commonly accessible and high-visibility areas. There were 140 stores in the Northwest and Chicago, successfully operating against other small-scale coffee chains.

Q.2 Why have Starbucks customer satisfaction scores declined?
Ans. Given below are certain causes which might have led to a decline in customer satisfaction of Starbucks-
Exhibit 11 shows that 34% of the customers wanted Starbucks to improvise service to make them feel a valued customer. This was a service gap as customers wanted friendlier and more attentive staffs to attend them.

Starbucks was more concerned about the quick expansion with less attention to its customer demand. This made it lose the track of customer intimacy that the company initially believed in.

Exhibit 11 also shows that 31% of the customers believed that Starbucks should offer better prices. It can be inferred that according to the customers, Starbucks gradually shifted its focus from “offering experience” to “making money”.

Customer satisfaction was also declined because of the low service speed (due to drink customization) and how quickly the customer receives their coffee.

Competition increased over time, leading to less perceived differentiation between Starbucks and others.

A company’s service is determined from the view’s and the satisfaction of the customers and Starbucks was slowly declining on the same.

Q 3. How does the Starbucks of 2002 differ from Starbucks of 1992?
Ans: Around 50% of the sales in 1992 was from the sale of the whole bean coffee, whereas in 2002, 77% of the sales were from the beverages in general.
Starbucks in 1992 had only 140 stores in total, whereas in 2002, the number of stores were increased, which constituted to more than 5000 stores across the whole world.
The process of Starbucks in 1992 was simple, whereas the process of Starbucks in 2002 was more complex. The reason behind this was the addition of various new products in the menu.

Customer demographics was changed in 2002, as earlier only well-educated and high-income group of people visited the place, but after 2002, there was another group of people who were frequently visiting Starbucks, younger and lower income group.

In 1992, there were few drink combinations which resulted to fewer beverages. But in 2002, due to addition of new products, there were many drink combinations which resulted to too many beverages.

The major difference between the 1992 and 2002 was “customer satisfaction”, which declined with the growth of the company.

Q 4. Should Starbucks make a $40 million investment in labor in the stores? What is the goal of this investment?
Today’s marketplace has become very competitive. The buying and selling experience has thus become quite impersonal. Businesses have resorted to staff sparsely to reduce overall costs. Nowadays, customers can just walk into stores and not ask for assistance. They can easily purchase whatever they want to, with least human interaction. We are unfortunately used to this, which is sad because the art of personal selling has become lost.

Part of Starbucks’ success was driven by its customer service. They are not the only place that consumers can buy a cup of coffee, but they are one of the few that can get away with charging 8 bucks for it. Starbucks manages this by creating an atmosphere and an experience worth paying for. One of the crucial elements of this is how their partners interact with their customers. The level of service partially justifies the price of their product and helps reinforce the experience. Coming to the question of whether $40 million in additional labour would be beneficial to the company has a more complex answer than a mere yes or no. There are certain major assumptions that are being made in this case. The first assumption is that the speed of service is the number one influencer of satisfaction and that the additional labour will result in an increase of speed of service. However, this is not true since the rankings of the key attributes by Starbucks customers suggest that fast service ranks number 6 in importance. A second assumption is that all stores are equal in size, number of customers they attend, prices, and that all the stores need this additional investment.  A final assumption is that satisfaction is correlated with loyalty and that if a satisfied customer becomes highly satisfied, the number of visits per month to the store will increase substantially, thereby augmenting the sales revenue for the company.

INVESTMENT ANALYSIS
Assumption Each store is equally important
Investment per Annum $40,000,000
Total No of Stores 4,500
Investment in one store 8888,88889
1 year 52 Weeks
1-week investment 170.9401709

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