SEO Master Class - Steve Wiideman, Wiideman Consulting Group
Starbucks
1. GROUP 4
Paridhi Trived-
Shamli Sharma-19DM190
Sahajdeep Singh-19DM222
Sparsh Kapoor-19DM222
Rajat Chauhan-19DM153
Tuhina
Shubam
Divya Singhal
2. • Founded in 1971 by three coffee fanatics – Gerald Baldwin, Gordon Bowker & Ziev Siegl in Seattle’s
Pike Place Market.
• Starbucks marketing team was joined by Schultz in 1982.
• Few years later, Starbucks founders sold the company to Schultz.
• By 1992, the company had 140 stores in the Northwest & Chicago & was successfully competing against
other small scale coffee chains.
• By 2002, Schultz had established Starbucks as the dominant speciality-coffee brand in North America.
• & It served 20 million unique customers in 5000 stores around the globe & was opening on average 3
new stores a day.
• Starbucks employees were called “Partners”. The company employees 60,000 partners worldwide, about
50,000 in North America.
Introduction
3. Product Mix Offered by Stores ( Exhibit4)
• Coffee Beverages
• Food Items
• Whole bean Coffees
• Equipment & Accessories
Beverages accounted for the largest percentage of sales in these stores which is
77%. About half of the stores revenue had come from sales of whole-bean
coffees.
4. Q1) What factors accounted for the extraordinary success of
Starbucks in the early 1990s? What was so compelling about
the Starbucks value proposition?
The extraordinary success of Starbucks in the early 1990s can be
attributed to Schultz who conceptualized a value proposition
differentiated by means of high levels of service & quality elements
offered to a target audience.
This converted the experience of drinking coffee into social experience, a
concept new to US but which soon caught up.
This led to Starbucks being able to build a brand for itself and differentiate
itself from other coffee chains selling coffee at half the prices.
5. Star Bucks Used 3 main strategies which lead to
there success:
Product Strategy
a) Quality of the Coffee
b) Product Innovation
Service Strategy
a) Service
b) Partner Satisfaction
Place Strategy
a) Store Ambience
b) Distribution Channels
6. Q2) Why has Starbucks customer satisfaction score
declined?
1. Changing Customer Demographics and Expectations
New customers- younger, different perception about brand
Service expectation i.e., Fast service vs customization and Lounging.
2. Service Decline and Measurement Gap
Service area- major improvement.
Lacks personal treatment- Essential part of starbuck’s measurement system.
3. Brand Identity and Image
Little differentiation in the minds of consumers
Limited presence of starbucks
Starbucks can be seen as ‘’corporate- which cared primarily about money making’’
4. Losing Sight of Core Proposition
7. Q3) How does the Starbucks of 2002 differ from
the Starbucks of 1992?
In 1992, right when the company became public, Starbucks had 140 stores located
in the Northwest and Chicago, but in 2002, Starbucks had over 4500 stores scattered
internationally.
Another big difference was the customer base. In 1992, the customer base of
Starbucks consisted of affluent, mid to upper class professionals, but in 2002 it
expanded to a younger, less‐educated and with a lower income customer base.
The Starbucks of 2002 was also more complex than the Starbucks of 1992. In 1992,
about half of the company’s sales came from sales of whole‐bean coffees whereas in
2002 about 77% of the sales came from beverages.
Starbucks also started selling coffee products through non-company-operated retail
channels, called “ Specialty Operations”. It also had joint venture with Pepsi-Cola to
distribute bottled Frappuccino beverages and also with Dreyer’s Grand Ice cream to
develop and distribute a line of premium ice creams.
In 2002, Starbucks started offering T-Mobile Hotspot wireless Internet service to
provide high speed access to the internet to its customers, thus company started
innovating.
8. Q4)DEAL STARBUCKS CUSTOMER
Most loyal or frequent customers(21% for 62% transactions) 18
visits a month , 19 transactions per customer
50% of most loyal customers are highly satisfied
Highly satisfied customers leads to high revenue
9. ENSURING HIGH CUSTOMER
SATISFACTION
Customer intimacy by providing best service
Uplifting experience
KYC
Ambience
Sense of community
faster and attentive service
appropriate prices
Free cups for regular customers
10. VALUE OF HIGHLY SATISFIED
CUSTOMER
7.2 Average Visits per month
$4.2 average expenditure per visit
8.3 years or 100 months average customer life
Value derived for highly satisfied customer => 7.2*4.2*100 = $3182.4 per
customer
11. Q5) Should Starbucks make $40 million
investment in labour in stores?
Goal of Investment: To increase the satisfaction Level among consumers. (Satisfied to Highly
Satisfied).
Let’s understand Statistics behind this…
Total Stores: 4574
Investment for each store: ($40 million)/4574= $8750 approx.
Average ticket size/visit: $4.06(Satisfied Customer) & $4.42 (Highly Satisfied Customer)
Total Revenue/month:$4.06*$4.3= $17.46(Satisfied Customer) & $4.42*$7.2= 31.82 (Highly
Satisfied Customer)
Total Revenue/Year: 17.46*12=$209.52(Satisfied Customer) & 31.82*12= $381.84
Difference b/w revenue of Satisfied & Unsatisfied Customer: $381.84-$209.52= $172.84
Break Even Number: $8750/$172= 50 Approx.
They need to convert at least 50 of 570 consumers (Average daily Customer Count) for break
even point.
12. Continued…
Internal Strategic Marketing Group: Coordinate actions of market research
group, the category group & marketing group.
Investing in beverages which were handcrafted formerly.
Investment in providing soft-skills to its labour.
Investment in adding more labour might work to increase satisfaction
levels. (Specifically investing according to Size & location of store, number
of customers visiting & number of labours working.
Re-evaluation of their Value Proposition.
