Starbucks
- 1. 8/16/2010 BACKGROUND • Starbucks, the dominant specialty coffee brand in North America must respond to recent market research indicating Starbucks: that the company is not meeting customer expectations in terms of service Delivering Customer • To increase customer satisfaction, the company is debating a plan that would increase the amount of labor in its stores and Service theoretically increase speed of service Prepared By • The impact of the plan which would cost $40 million annually UB 0710218 SANGEET KAUR GILL on the company’s bottom line is unclear. KJC0850122 SAMUEL LAI KJC0850155 TAN MIN CHIE INTRODUCTION INTRODUCTION Starbucks’ stores worldwide • Howard Schultz’s idea with Starbucks in the mid 1980’s was to create a chain of coffeehouses with a product differentiation of specialty “live coffee”, service or customer intimacy with an “experience”, and an atmosphere of a “third place” to add to their work and home alternatives. • The original stores sold whole beans and premium-priced coffee beverages by the cup and catered primarily to affluent, well educated, white-collar patrons (skewed female) between the ages of 25 and 44. • By 2002, there were over 5,000 stores around the globe. • The company spent minimal dollars on advertising to promote a brand concept. • Enforced exacting coffee standards by controlling the supply chain as much as possible, and maintain control over the operations at the retail level. INTRODUCTION INTRODUCTION Starbucks’ store Starbucks’ store 1
- 2. 8/16/2010 INTRODUCTION INTRODUCTION Starbucks’ Product Mix Starbucks Competitors QUESTION 1 QUESTION 1 What factors accounted for Starbucks’ success in the early 1990s and what was What factors accounted for Starbucks’ success in the early 1990s and what was so so compelling about its value proposition? What brand image did Starbucks compelling about its value proposition? What brand image did Starbucks develop develop during this period? during this period? The factors accounted for Starbucks’s success in the early 1990s are: The Starbucks value proposition : • High quality coffee • To place importance in keeping the national coffee culture alive by creating • Customer service an experience around the consumption of coffee, an experience that people Clean environment could weave into the fabric of their everyday lives Product quality Trained employees • To create an uplifting experience every time a customer walks through Hospitality Starbucks store by emphasizing on customer intimacy. Customer intimacy is • Good compensation system portrayed by recognizing, knowing their customer’s taste well and • Availability customizing the customer’s drink just the way the customer likes. • Experiential branding strategy • To create an ambience based on human spirit, sense of community and the • Service innovation need for people to come together • Target customer The brand image did Starbucks develop during this period: • Product variety Anyway, everywhere, good coffee on the run captures Starbucks image effectively. QUESTION 2 QUESTION 2 Why have Starbucks’s customer satisfaction scores declined? Has the company’s • Marketing responsibilities are managed by all senior executives service declined or is it simply measuring satisfaction the wrong way? - due to the redundancy in collecting data, market and customer related The factors of Starbucks’s customer satisfaction scores declined are: trends sometimes is overlooked. Ineffective in analyzing data for decision • Customer have changed over the years and the trend has changed making purpose - contributed to the change of consumer behavior and preferences • Service gap factors between Starbucks scores on key attributes and • Change in the market segment customer expectations - newer customer have a very different perception on Starbuck’s brand meaning - this resulted in the customer satisfaction gap in Starbucks. Through the • Complexity of barista’s job has increased over time and created tension between research it is known that Starbucks were not meeting customer’s product quality and customer focus expectations in terms of customer satisfaction ;in term of speed of service. This - this is due to new products were launched on a regular basis. is due to the key attributes focus of Starbucks which focuses more on product - the barista’s fail to practice on Starbucks’s value proposition -customer intimacy and tangibles. • Starbucks lost the connection between satisfying their customers and growing the business. The strategy of product expansion resulted in management stop talking about the customers 2
- 3. 8/16/2010 QUESTION 3 QUESTION 3 How has Starbucks changed since its early days? How has Starbucks changed since its early days? Change in customer segment Brand has become more accessible and there are more stores worldwide • Starbucks has expanded from local to international ,operates 5,886 stores • Starbucks’s products are available at own stores and other retail stores • Partnership with other brands to boost the brand and service value Change in customer base Service innovation • Introduction of stored value card that acts as a swipeable smartcard that provides convenience to customers • T-Mobile HotSpot wireless internet service that offers high speed access to Internet in 2000 Starbucks stores. Change in Business Strategy Change in customer preferences • Main focus on aggressive growth strategy in 2002 compared to broad distribution • In year 2002, beverages accounted 77% of the revenue compared to 6 % of strategy whole-bean coffee sales.10 years ago, whole-bean coffee contributed half of their • Product innovation total revenue QUESTION 3 QUESTION 3 How has Starbucks changed since its early days? How has Starbucks changed since its early days? Increase in product diversity Channel of distribution • Expanded the product from coffee into varieties such as chocolate and tea. • Starbucks was popular from the conventional coffeehouse only before they foray • With the product proliferation, there are hundreds of combinations of drinks into other channel of distribution that we see today like: available. Hotels, airlines, restaurant • Innovation has brought the company to have different product lines. Grocery stores and warehouse clubs • Partnership with Dreyer’s Grand Ice Cream ,developed a line of premium ice Online and mail order creams • Other available product mixes Increase in pressure on baristas • The complexity of job has increased over time and created tension between product quality and customer focus • Need to serve the large customers with long working hours • Need to manage the customer out of offer menu and service, additional top up ice cream ,more chocolate taste, etc. QUESTION 4 QUESTION 4 Describe the ideal Starbucks customer from a profitability standpoint. What would it Describe the ideal Starbucks customer from a profitability standpoint. What take to ensure that this customer is highly satisfied? How valuable to Starbucks is a would it take to ensure that this customer is highly satisfied? How valuable to highly satisfied customer? Starbucks is a highly satisfied customer? In order to ensure that this customer is highly satisfied, Starbucks is fully focus on the key attributes of the following: • Clean store • Convenient location • Friendly barista • Coffee taste and flavor • High quality coffee • Appropriate price • Freshest coffee • Speed of service • Service quality 3
- 4. 8/16/2010 QUESTION 4 QUESTION 4 Describe the ideal Starbucks customer from a profitability standpoint. What Describe the ideal Starbucks customer from a profitability standpoint. What would it take to ensure that this customer is highly satisfied? How valuable to would it take to ensure that this customer is highly satisfied? How valuable to Starbucks is a highly satisfied customer? Starbucks is a highly satisfied customer? QUESTION 5 QUESTION 5 Should Starbucks make the $40 million investment in labor in the stores? What’s the Should Starbucks make the $40 million investment in labor in the stores? What’s goal of this investment? It is possible for a mega-brand to deliver customer the goal of this investment? It is possible for a mega-brand to deliver customer intimacy? intimacy? Yes, Starbucks should invest $40 million in labor in the stores because of the The goals of this investment are: following justification: • Enhance the customer satisfaction by offering a comfortable place to enjoy • This will result in a relaxed labor- hour controls in the stores to add an additional 20 hours of labor, per week, per store will allow Starbucks to bring the coffee and as for relaxation service time down to the 3 minute level in all their stores, regardless of the time • Provide efficient customer service by providing sufficient baristas to serve of day. This will also allow an increase in the customer satisfaction rate and build a stronger long term relationship with their customer. high traffic customers • This move will also indirectly motivate the baristas to be more productive in • Reduce customer waiting time to boost the sales and profit serving the customers effectively by maintaining the quality of taste and flavor of the drinks, not forgetting the fact that it will increase the speed of delivery, within 3 minutes. • Move away from seeing labor as an expense to seeing it as a customer oriented investment. • With more labor hours baristas can spend a little more quality time with their customer and this will help them to increase the customer intimacy. QUESTION 5 QUESTION 5 Should Starbucks make the $40 million investment in labor in the stores? What’s Should Starbucks make the $40 million investment in labor in the stores? What’s the the goal of this investment? It is possible for a mega-brand to deliver customer goal of this investment? It is possible for a mega-brand to deliver customer intimacy? intimacy? Starbucks has a tendency to deliver customer intimacy via this investment by • Review the key attributes of measuring customer satisfaction between its value outlining the strategic action plan as follows: and market search value to close the gap of analysis that provide effectively situation to improve the products and services • Use secondary market research data to identify, analyze and structure their strategies so that additional labor hours can be used effectively and know- • Source the automate machine to simplify and shorten the process of making how to improve the customer satisfaction coffee • Customize the product mix based on customer behavior of the each store so • Rewarding customers for free cup after every 10 times-visit can improve that quality of taste and speed drink delivery are manageable as well as customer satisfaction. In fact this will encourage customer to have more visits utilize the number of baristas effectively • Routine and regular training for the baristas to improve their service skills, • Continue with product and service innovation by proactively conducting an friendliness and to build the relationship with customers environmental scan to ensure successful new products launch. Invite customers to provide feedback on new products. • Implement CRM to know every customer preferences with their stored-value card (SVC) 4
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