Starbucks Dorosin Case


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Dorosin,who once was a loyal customer of Starbucks turned out to be a pain in the ass for Starbucks. To know more please read the presentation.

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Starbucks Dorosin Case

  1. 1. “Steamed” at STARBUCKS GROUP 5 Marketing of Services AMITY BUSINESS SCHOOL, Noida Sept 15, 2009
  2. 2. Building and Sustaining a Culture of Trust Group members 1. V.Karthik 2. Rohan 3. Sayan 4. Gaurang 5. Arpit 6. Vivek 7. Arijit 8. Surinder 9. Dishant 10. Rahul 11. Siddhartha
  4. 4. Building and Sustaining a Culture of Trust DOROSIN ISSUE – CASE BACKGROUND
  5. 5. Building and Sustaining a Culture of Trust BACKGROUND (Time Line) Prior to April 1995: Jeremy Dorosin bought an Espresso Maker  (Vapore) for $299. April 1995: Returned the machine, it being defective. Received a “ Loaner” , an Estro 410 retailed at $ 189. End of April 1995: Bought a new Estro 410 model as a wedding  gift for the friend ( Had to be ordered as the store didn’t have it  then) A Few days later: Collected the machine which was in a  damaged box, without manual and didn’t have the free coffee and  free mug which should’ve been provided along with the machine.  He was asked by the store manager to come later to collect the  same Some point shortly thereafter: Friend found rust in the  machine and some part of the machine were missing. Complained to store manager, was offered refund which he  rejected. Dorosin proposed replacement of machine by $ 495  machine and a letter of apology to his friend.
  6. 6. Contd…. Sustaining a Culture of Trust Building and May 1, 1995: Dorosin demanded a $ 2495 machine  from Starbucks and threatened to place an ad in Wall  Street Journal, if his demands are unmet. May 2, 1995: Starbucks proposed of sending a $ 269  machine as a replacement to Dorosin’s broken down  machine and also to his friend. The offer was rejected. May 5, 1995: Dorosin Ran his first wall street journal  Ad. Besty Reese, Corporate Customer Relations Manager  talked to him. Demanded a double full page ad in WSJ  apologizing. May 10, 1995: Starbucks sent an apology letter to  Dorosin’s gift recipient Mr. Cohen, explaining that the  2nd machine is on its way. Dorosin ran the 2nd ad in  WSJ.
  7. 7. Building and Sustaining a Culture of Trust Contd. May 18‐25, 1995: Dorosin ran 3rd & 4th Wall Street  Journal ad. May 30, 1995: Dorosin called Reese with a new  demand asking for a collaboration on a juvenile runway  shelter. June 16, 1995: Dorosin wanted Starbuck to underwrite  or sponsor his shelter and didn’t want company to have  a public presence with it. Reese expressed her inability  to meet this demand. Dorosin stated that he was no  longer interested in talking to the company.
  8. 8. Building and Sustaining a Culture of Trust
  9. 9. Dorosin’sand Sustaining a Vs Company’s Efforts Building Dissatisfaction Culture of Trust Dorosin First demanded on phone:- 1) Replace “the Vapore” that was broken the second time. 2) Send an apology letter to his friend and his bride. 3) Sent the bride the next best machine i.e. the $495 model. Demands changed when he met Bill Stein. 1) Asked for the top-of-the-line machine costing $2495.00 should be sent to his friend or he will place an ad in the wall street journal.
  10. 10. Building and Sustaining a Culture of Trust • Company counter proposal 1) Send Dorosin a $269 machine to replace his twice broken machine . 2) Send his friend a $269 for her original one which was priced $189. Dorosin not convinced and then ran his first ad on Wall Street Journal. • Company further negotiated with Dorosin 1. Replace the machine for him and his friend , 2. Offered steaming pitchers and free coffee that was all $175 excess than his original purchase. Dorosin refused this proposal as well. Convinced on donating the money as charity but further conflict contd.
  11. 11. Building and Sustaining a Culture of Trust •Company further tried to satisfy his friend. 1) Sent him an apology letter, explaining that a replacement machine is on the way. 2) Sent a full refund via certified mail. Dorosin not satisfied; ran 2nd ad in Wall Street Journal •Company further tried to convince and sent verification of its previous proposal. Dorosin ran the third & 4th Wall Street Journal and refused the proposal and the check send to his friend. Dorosin ran the forth Wall Street Journal.
  12. 12. Building and Sustaining a Culture of Trust New Demand by Dorosin:- •Collaboration on a juvenile runway shelter •Company refused the demand saying that there is no correlation in the demand and the complains made by him. •Further convincing him to accept at least the refund money. He even refused to meet the president. Dorosin claimed that company did not make any offer before he ran his second ad.
  13. 13. Building and Sustaining a Culture of Trust COMPANY BACKGROUND
  14. 14. Building and Sustaining a Culture of Trust •Founded in 1971 •1982: Howard Schultz joined as Head of Marketing. •In 1987, they sold the Starbucks chain to Schultz's Il  Giornale. •Starbucks opened its first location  outside Seattle •16120 stores in 49 countries
  15. 15. OBJECTIVE Building and Sustaining a Culture of Trust To establish Starbucks as the most recognized and  respected brand in the world. MISSION STATEMENT To inspire & nurture the human spirit – one person, one  cup & one neighbourhood at a time PRODUCTS  OF STARBUCKS 1. Whole bean coffee 2. Boxed tea 3. Made‐to‐order beverages 4. Bottled beverages 5. Baked goods 6. Merchandise 7. Frappuccino beverages 8. Smoothies Services 
  16. 16. SWOT Analysis Building and Sustaining a Culture of Trust Helpful Harmful to achieving the objective to achieving the objective
  17. 17. Building and Sustaining a Culture of Trust CORPORATE SOCIAL  RESPONSIBILITY
  18. 18. Building and Sustaining a Culture of Trust Environmental impact •"Grounds for your Garden“ •Ranked 15 on the U.S. Environmental Protection Agency's list of Top 25  Green Power Partners •Re‐evaluated its use of the dipper well system Recycling •In 2005 Starbucks received the National Recycling Coalition Recycling  Works Award •Gives customers a 10‐cent discount when they bring their own reusable cup Fair trade •Certified Fair Trade coffee •It pays above market prices for all of its coffee
  19. 19. Building and Sustaining a Culture of Trust Staff training "Coffee Master"  Ethos water •label stating "helping children get clean water“ •To raise awareness of third‐world clean water issues  Product Red Supply of AIDS medicine for 3,800 people for a year
  20. 20. Building and Sustaining a Culture of Trust SERVICE RECOVERY
  21. 21. Building and Sustaining a Culture of Trust Service Recovery Service recovery is the effort an organization  expends to win back customers’ goodwill once  it has been lost due to service failure Steps to Service Recovery • Apology • Urgent Reinstatement • Empathy • Compensation • Follow up
  22. 22. Customer Dissatisfaction with a service & complaint  Building and Sustaining a Culture of Trust The Customer Behavior Escalate  Complaint Complaint to Firm  Problem Still  at Local Level Unresolved Complaint to  Head Office Decide to  Complain Complaint to  Outside Organization Seek Legal  Problem Now  Problem  Take No  Action Resolved Arises Action Problem Still  Unresolved Tell Friends of  Negative WOM Bad Experience Switch  Service provider Defection
  23. 23. Building and Sustaining a Culture of Trust Levels of complaints from customers High Level 1: Complaints to company Low Level 2: Complaints to other people Level 3: Complaints to third party PASSIVE VOICERS IRATE ACTIVISTS
  24. 24. •Goal of service recovery – identify customers with  Building and Sustaining a Culture of Trust issues and then to address those issues to  the customers' satisfaction to promote  customer retention.  •A systematic business process •The organizational culture must be  supportive  •Positive approach to complaint handling •Service recovery has a secondary value.  creates positive word‐of‐mouth  minimizes the bad spin  Making the Case for Service Recovery ‐ Customer Retention
  25. 25. Customer acquisition is exciting &  Building and Sustaining a Culture of Trust attractive! 1. Expensive research 2. Sales and marketing programs 3. Spending big bucks on achieving sales growth and  expanding market share.  Service Recovery isn't exciting! 1. Negotiating with angry customers. 2. Customer service department ‐loathsome cost  centers that drain profit. Why Does Service Recovery get No Respect?
  26. 26. In some cases, it probably is. a Culture of Trust Building and Sustaining Some customers cannot be  recovered, only ameliorated so they don't bad‐ mouth the organization. However, most customers can be  recovered through simple application of the  Golden Rule. •recovered and retained customers become profit  centers •most important form of “advertising.” Isn't it easier to just dismiss these upset  customers and move on to greener fields?
  27. 27. The Pyramid of Service Recovery Progression Building and Sustaining a Culture of Trust
  28. 28. Building and Sustaining a Culture of Trust RECOMMENDATIONS
  29. 29. Recommendations of Trust Building and Sustaining a Culture Building Brand Loyalty Starbucks can counter  Dorosin’s attacks  by aggressive  advertising, showing five, or  maybe ten other satisfied  customers Eg: Tata Sky featured  advertisements showing letters of  satisfied consumers
  30. 30. Building and Sustaining a Culture of Trust Recommendations (Contd.) Celebrity Buzz Marketing Celebrity endorsement  by  renowned celebrity‐socialites can  be used to promote the brand and  recover the damage done by  Dorosin Eg: Cadburys  ad featuring  Amitabh Bachchan who ensured  the safety of the product after the  controversy regarding insects  found inside Cadbury Diary Milk
  31. 31. Building and Sustaining a Culture of Trust Recommendations (Contd.) Starbucks can advertise on its defense  by  running print/television commercials. A similar advertisement of ICICI can be  seen here as an example
  32. 32. Building and Sustaining a Culture of Trust
  33. 33. Building and Sustaining a Culture of Trust Starbucks should not be battered for being ethical 1. No correlation between  mistake done and demands  made. 2. Must not succumb to Mr.  Dorosin’s outrageous  demands 3. Otherwise people may take  unfair advantage 4. Starbucks should stand by  its word.
  34. 34. Building and Sustaining a Culture of Trust THANK YOU