Starbucks has grown significantly since establishing in 1971 and going public in 1992. It has expanded from 140 US stores selling whole bean coffee to over 5,800 stores worldwide offering a large variety of customized drinks. While Starbucks initially targeted affluent, well-educated customers, its customer base has diversified over time. Recent data shows customer satisfaction has declined as expectations have risen and perceived service has slowed, in part due to increased customization options overwhelming employees. Starbucks is analyzing how to improve customer service and regain customer intimacy to increase loyalty.

1. Starbucks: Delivering
Customer Service
Section G: Group 4

2. Executive Summary
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Established in 1971, made public in 1992
Operates 5886 stores all over the world as of FY2002
11th consecutive year of 5% or higher sales growth
Continuously into retail expansion, product and service
expansion
Controlled supply chain to maintain coffee standards
Product Variety – Customized drinks
Specific target audience
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Affluent
Well educated
White‐collar people

3. STARBUCKS - 1992
• Establishment of Brand
• Company became
public
• 140 stores in US
• Major sales from
Whole Bean Coffee
• Less number of Drink
Combinations
• Small customer base
(Affluent , Mid &
Upper class Prof.)
• Third Place, where Best
Quality coffee is served
STARBUCKS - 2002
• 4500 stores in US and
Internationally
• 77% of Sales from
beverages
• Product variety
• Slow and complex
process
• Customer Base (
Younger, Less-educated
and lower income
group)
• Image has changed to
‘Convenient Place’

4. Executive summary (Continued)
• Branding strategy
– Coffee
– Service
– Atmosphere
• Employee relationship
– Lowest employee turnover in the industry.
– Ranked 47th in the list of best places to work by Fortune
• Customer relationship
– Aim to become America’s “Third place”
– “Just say yes”

5. Executive summary (Continued)
Value Proposition
• To create an experience around the consumption of coffee, an
experience that people would weave into their lives
• To create an o uplifting experience in “Customer Intimacy”
• To create an ambience based on human spirit and need to get
people together.
Brand Image
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Present Everywhere
Good Coffee on the run
Place to meet and move on
Convenience oriented
Accessible and consistent

6. Current issue
• Data Research: Changing customer perception
• Goal: Tie customer satisfaction to bottom line
• Is it correct that Starbucks diverted from customer
service to retail expansion and product
diversification ?
• Whether to invest $40 million in 4500 stores?
• Can it be believed what customers are telling about
what constitutes ‘ excellent’ customer service ?
• Heaviest users are most demanding. Customization
lead to slow down of service ?

7. The Mystery Shopper
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Service
Cleanliness
Product Quality
Speed of Service
Over the time, snapshot method is showing
increased positive results.

8. Competition
• Each competitor differentiated in atleast
one factor
• Special attention to the Dunkin Donuts chain
Retail Expansion
The company considered itself a growth company due
to following reasons:
• No presence in 8 states
• Increasing coffee consumption
• Saturation level not yet reached.

9. A look into the issues
• New Customer Baseline
• Values of starbucks was not efficiently visible to
customers
• Direct link between customer satisfaction and
customer loyalty
• Most frequent feedback found to be “increase in
service speed”

10. Declining Customer Satisfaction
• Customer satisfaction gap could primarily be attributed
to a service gap between Starbucks scores on key
attributes and customer expectations
• Premium Starbuck Experience was gone, as now it was
the product for everybody
• High waiting time due to customized drinks
• Increased Competition from Small Specialty stores
• Customer intimacy did not exist anymore
Despite minute flaws in the research methods, customer satisfaction
has declined due to changing expectations of the new customer base
and actual service decline.

11. Qualitative Analysis- SERVICE GAPS
Personal
Needs
Word of
Mouth
Past
Experience
GAP 1
• Management does not always correctly
perceive what customers want
• Exhibit 10
Expected Service
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5.
6.
GAP 5
Perceived Service
GAP 1
Service Delivery ( Pre – Post Contacts)
GAP 3
Transition of perceptions into service quality
specifications
GAP 2
Management Perceptions of consumer
expectations
External
Communication
to consumers
GAP 4
clean store- 83 %
convenient – 77%
Treated as valuable customer – 75%
Friendly staff- 73 %
Taste/flavor – 72%
fast service- 65%

12. Qualitative Analysis- SERVICE GAPS
Personal
Needs
Word of
Mouth
Past
Experience
GAP 2
• Management might correctly perceive customer’s
wants but not a performance standard.
• Well tackled, by giving a performance indicator of
3 minutes
• However, noting was mentioned about
standardization of processes. Case does mentions
about new machines.
Expected Service
GAP 5
Perceived Service
GAP 1
Service Delivery ( Pre – Post Contacts)
GAP 3
Transition of perceptions into service quality
specifications
GAP 2
Management Perceptions of consumer
expectations
External
Communication
to consumers
GAP 4

13. Qualitative Analysis- SERVICE GAPS
Personal
Needs
Word of
Mouth
Past
Experience
GAP 3
• Employees might be poorly trained or incapable of
or unwilling to meet the standards ; they may be
held to conflicting standards, such as taking time
to listen to customers and serving them fast.
Expected Service
• Customers want friendliness and responsiveness
as in exihibit 10 and 11.
• Here dilemma is that customer wants Quick
service as well as discrete level of customization
GAP 5
Perceived Service
GAP 1
Service Delivery ( Pre – Post Contacts)
GAP 3
Transition of perceptions into service quality
specifications
GAP 2
Management Perceptions of consumer
expectations
External
Communication
to consumers
GAP 4

14. Qualitative Analysis- SERVICE GAPS
Personal
Needs
Word of
Mouth
Past
Experience
GAP 4
• Consumer expectations are effected by
statements made by company representatives
and ads.
• Starbucks find usage of ads etc for promotions.
• Outsourced third party to share the same
commitment and values. Aprox 40% converts
are from these sides
Expected Service
GAP 5
Perceived Service
GAP 1
Service Delivery ( Pre – Post Contacts)
GAP 3
Transition of perceptions into service quality
specifications
GAP 2
Management Perceptions of consumer
expectations
External
Communication
to consumers
GAP 4

15. Qualitative Analysis- SERVICE GAPS
Personal
Needs
Word of
Mouth
Past
Experience
GAP 5
• When the customer misperceives the
service quality.
• Tackled well by researching on
• Exhibit 11 ( How could Starbucks make u feel
more like a valued customer)
- friendlier- 19%
- faster – 10%
- incentives- 31 %
Expected Service
GAP 5
Perceived Service
GAP 1
Service Delivery ( Pre – Post Contacts)
GAP 3
Transition of perceptions into service quality
specifications
GAP 2
Management Perceptions of consumer
expectations
External
Communication
to consumers
GAP 4

16. Quantitative analysis
• Opportunity Cost

17. PRIMARY DATA (Present)
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Feedback Link on the bill.
Breaks to Baristas
Best pay in business
Instant replacement
International Training for Managers

18. Primary Survey
• All employees trained for 1 month before joining: Managers go to
Malaysia
• Other employees trained in Gurgaon
• Loyalty Cards will be introduced soon.
• Customer feedback taken in store through Random Sampling, online.
• Weekly internal and Monthly external Audits
• STARBUCKS PHILOSOPHY: "PRESERVE AND NURTURE THE HUMAN
SPIRIT, ONE PERSON, ONE CUP, ONE NEIGHBORHOOD AT A TIME".
• Customer voice survey (customer feebdack program) started 2.5 months
ago.
• Attrition rate is 7%
• Structure of Outlet: Shift Mgr>Asst. Store Mgr>Store Mgr>Area
Mrg>District Mgr
• Staff Rotation is very common (All over Delhi)
CSS
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19. Thank You