Starbucks Case Analysis

Starbucks: Delivering Customer Service Group 16 Manish Ballal (19) Niraj Kothawade (24) Sairam Iyer (34)

What factors accounted for the extraordinary success of Starbucks in the early 1990s? What was so compelling about the Starbucks Value Proposition? What brand image did Starbucks develop during this period? Factors that contributed to Starbucks’ success: • Experiential branding strategy • Reach • Product variety • Customer service • High Quality Coffee • Starbucks ‘ transformed coffee consumption from a picking behavior to an experience with high credence attribute Starbucks’ Value Proposition: 1. To create an “experience” around the consumption of coffee, an experience that people would weave into their lives 2. To create an uplifting experience in “Customer intimacy” 3. To create an “ambience” based on human spirit, sense of community, and the need for people to come together Starbucks’ Brand Image: Anywhere, everywhere, good coffee on the run captures Starbucks image completely. Why has Starbucks CSI scores declined? Has it really declined or is it simply measuring the CSI the wrong way? As per the Service quality and customer satisfaction model, CSI can be measured in terms of following parameters:

Customer satisfaction gap could primarily be attributed to a service gap between Starbucks scores on key attributes and customer expectations. As per above model, Starbucks is measuring customer satisfaction parameters which really do not fall into CSI measurement category. Starbucks is measuring parameters that attribute to product quality rather than service quality. Thus, Starbucks is measuring CSI in wrong way. Describe the ideal Starbucks customer from a profitability standpoint. What would ensure that this customer is highly satisfied? How valuable is a highly satisfied customer to Starbucks? For Starbucks, a loyal represents a profitable investment. Starbucks wants customers to return to the store and spend time so as to ensure more consumption. To ensure customer loyalty, Starbucks needs to focus on Interaction quality, physical environment quality and outcome quality.

Qualitatively every customer is invaluable to Starbucks. But if we want to ascertain a quantitative measure to satisfaction, value from a customer can be measured from Exhibit 9 as follows: Value from customer = Number of Starbucks visits/month * Average customer life * Average ticket size = 4.3 *4.4 *12* 4.06 = 921.7824 Should Starbucks make the $40 million investment in labor in the stores? Is it possible for a mega‐ brand to deliver customer intimacy? Starbucks can come out with following plan of action as outlined below: 1. Proceed with investing the $40 million annually in the 4,500 stores to increase service efficiency (impacting customer satisfaction. Goal ~ customer retention in the competitive coffee house market) 2. While the investment enables additional labor hours, research efforts to increase efficiency through set‐up and equipment (e.g. automated espresso machine, specialized work stations) 3. Use secondary market research data to identify, analyze, and alter product differentiation strategies, with respect to smaller chains and Starbucks obliquities 4. Alter the product mix depending on the store size and location of the outlet (demographics) Sample to find out what customers mainly look for • Sample data results would narrow the customization and train baristas with • those special concoctions 5. Marketing Research showing that existing markets are far from saturation 6. Continue with Product and Service innovation, proactively conduct an environmental scan to launch new products 7. Validate Market Research metrics and methods of sampling, data analysis Service Performance categories • Starbucks needs to find out whether the data translates in to measurable • metrics that can impact sales and profitability.

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Starbucks Case Analysis

by Spartanski on Apr 11, 2009

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Starbucks Case Analysis — Document Transcript