Starbucks, a leading specialty-coffee brand and coffee store chain based in the US was founded in 1971 by Gerald Baldwin, Gordon Bowker, and Ziev Siegl. In 2002, Starbucks had achieved a CAGR of 40% since its IPO and owned approx 5000 stores Its competitors range from small-scale specialty coffee chains to independent specialty coffee shops, and donut and bagel chains. Further growth in untapped national and international markets and unreached saturation levels.

1. Starbucks :
Delivering
Customer Service
Group 7
Divnay Bhutra S 14020841036
Apoorva Namjoshi 14020841124
Yashika Atre 14020841172
Amit Chaturvedi 14020841004
Zaid Shaikh 14020841114
N.Supreeth 14020841146

2. Summary of Case
• Starbucks, a leading specialty-coffee brand and coffee store
chain based in the US was founded in 1971 by Gerald
Baldwin, Gordon Bowker, and Ziev Siegl.
• In 2002, Starbucks had achieved a CAGR of 40% since its
IPO and owned approx 5000 stores
• Its competitors range from small-scale specialty coffee
chains to independent specialty coffee shops, and donut and
bagel chains.
• Further growth in untapped national and international
markets and unreached saturation levels.

3. Continued…
• Starbucks used company-operated stores in areas with high
traffic and high visibility.
• Additionally, Starbucks sold coffee products through retail
channels.
• Joint-venture partnerships to distribute certain products, e.g.
bottled Frappuccino through Pepsi-Cola.
• Starbucks was able to reach customers “where they work,
travel, shop, and dine”.

4. Continued…
• When a partner was hired, he/she had to undergo two types of
training i.e. hard skills and soft skills.
• They tracked service performance using mystery shopper program
called the “customer snapshot”.
• They followed aggressive growth strategy and in 2002 the two
biggest drivers of company growth were retail expansion and
product innovation.
• In 2002, company had gathered evidence that customer satisfaction
is on the decline, its brand image is showing some rough edges and
its customer base has also significantly changed.

5. What factors accounted for the extraordinary
success of Starbucks in early 1990s? What
was so compelling about the Starbucks value
proposition? What brand image did Starbucks
develop during this period?

6. Why Starbucks succeeded in
early years
• 3 components of experimental branding
– High quality coffee: it monitored process of roasting to
distribution around the world.
– Service: practicing customer intimacy regularly and
providing lively experience each time.
– Atmosphere: lounge experience with universal appeal.
• Other factors contributing to early success of
Starbucks
– Attractive market: unexploited by competitors
– Partner satisfaction: low turnover rate and high
satisfaction rate (80%-90%)
– Store location: high customer traffic and high visibility
areas.

7. Core Value Proposition
• Focus on intangibles associated with coffee drinking.
• Focus on overall experience of coffee at a Starbucks
store rather than only taste and quality.
Customer
intimacy
Ambience
Coffee

8. 54%
43%
42%
41%
39%
0%
10%
20%
30%
40%
50%
60%
Known for speciality/gourmet
coffee
Widely available Corporate Trendy Always feel welcome at
starbucks
Top five attributes consumers associate with Starbucks Brand

9. Starbucks changing brand
image
• OLD Image
– The best quality coffee
available
– A third place
– A sanctuary from the
world
• NEW Image
– Good coffee on the run
– Place to meet and move
on
– Convenient, accessible
and consistent

10. Why have Starbucks customer
satisfaction score declined? Has the
company service declined or is it
simply measuring satisfaction the
wrong way?

11. Fall in Customer Satisfaction
Customer Snapshot: The imperfect tool
•Mystery shopper program: 3 times in a quarter.
•Criteria for ratings: service quality, product quality, cleanliness &
speed of service.
•Legendary services: that behaviour which made the experience
memorable for customer.
Outcomes based on research
•Primarily making money and building more stores created a rough
brand image.
•Less differentiation perceived between Starbucks and other.
•Comparatively less trendy.
•Unsatisfactory service of partners.
•Due to drink customisation, speed of service was reduced.

12. 0%
10%
20%
30%
40%
50%
60%
70%
High quality
brand
Brand I trust For someone like
me
worth paying
more for
known for
speciality coffee
known as the
coffee expert
best-tasting
coffee
highest-qualtiy
coffee
Overall Opinion
of starbucks
34%
30%
15%
8%
44%
31%
20%
26%
25%
51%
50%
40%
32%
60%
45%
31%
41%
44%
Attitude Towards Starbucks
New customers (first visited in past year) Established customers(first visited 5+ years ago)

13. Starbucks Service Deterioration
Too little
experienced labor
Baristas have no
time to chat
Grumpy
employees
Grumpy
Customers
Employee
turnover
Lots of new customer
acquisitions
Desire for
customization
Long
lines
Baristas have no
time to chat
Leave before
ordering
Don’t come back
(as often)
Less of a ‘third
place’ attachment
Order simple than
complex (lower
ticket value)
Complex
Orders

14. How does the Starbucks of 2002
differ from the Starbucks of
1992?

15. Physical Environment
Consumption Pattern
Tendency to linger,
Ritualistic consumption,
Looking to self-indulge
Target Customer
Sophisticated, affluent
coffee lover, embracing
the ‘live coffee’ lifestyle
Brand Perception
Best coffee,
classy, upscale,
a “third place”
Starbucks in 1992

16. Physical Environment
Different
Consumption
Patterns
Different
Brand
Perception
Established Customers
Sophisticated, affluent
coffee lover, embracing
the ‘live coffee’ lifestyle
New Acquisitions
Less sophisticated,
In a hurry,
more pragmatic
Starbucks in 2002

17. Starbucks over the years : Comparison
1992 2002
Sales 50% sales from sale of
whole bean coffees
77% sales from beverages
Menu Whole bean coffee Addition of new items-
Food and new beverages
Ambience Lounge with an Italian
coffee culture
Smaller coffee store
without lounging
Target audience Mid to upper class
Professionals
Younger and lower income
demographic profile
Drink Combinations Fewer beverages Too many beverages
Reason: Addition of a new beverage every holiday season
Process Simple Complex
Delivery time Faster service Slower service
Company norm Customers going to the
Starbucks
Starbucks going to the
customers
Company Image Best quality coffee where
one can relax
Just good coffee, meeting
people and move on

18. Describe an ideal Starbucks customer from a
profitability standpoint. What would it take to
ensure that this customer is highly satisfied?
How valuable is highly satisfied customer to
Starbucks?

19. • The most ideal customer of Starbucks will
be the one who will visit the store most
frequently on an average 18 visits a month.
• Also the ideal customer will be the one who
will be highly satisfied. Thus, he/she will
spend $4.42 per visit.
• The ideal customer will have an average
customer life of 8.3 years.
THE MOST IDEAL
CUSTOMER

20. Differences in revenue of a highly satisfied
customer with a satisfied customer
Unsatisfied
Customers
Satisfied
customers
Highly
Satisfied
Customer
Ideal
Custome
rs
Number of Starbucks
Visits/Month 3.9 4.3 7.2 18
Average Ticket Size/Visit
$
3.88
$
4.06
$
4.42
$
4.42
Average Customer
life(years) 1.1 4.4 8.3 8.3
Revenue generated per
month
$
15.13
$
17.46
$
31.82
$
79.56
Revenue generated per
year
$
181.58
$
209.50
$
381.89
$
954.72
Revenue generated over
avg customer life
$
199.74
$
921.78
$
3,169.67
$
7,924.1
8
 The total lifetime value of a
highly satisfied customer is
around $ 3170 while that of
satisfied customer is around $
922 and unsatisfied customer
is around $ 200
 Thus, the difference of
lifetime value between highly
satisfied and satisfied
customer is:
$(3170-922)= $ 2248
 Also, the difference of
lifetime value of highly
satisfied and unsatisfied
customer is:
$ (3170-200)= $ 2970
Thus, it is of utmost importance for Starbucks to raise its
customer satisfaction scores.

21. Factors affecting “Valued Customers”
Perceptions
34%
31%
21%
28%
Improvement to
Service
Offer Better Prices/
Incentive Program
Other
Already Satisfied
Improvement to service
Offer Better Prices/
Incentive Program
9%
8%
2%
2%
0% 2% 4% 6% 8% 10%
Better quality/variety of
products
Improve atmosphere
Community
outreach/Charity
More stores/More
convenient loactions
Series1
Others
19%
11%
3%
0% 5% 10% 15% 20%
Free cup after x number of
visits
Reduce Prices
Offer Promotions, specials
19%
10%
4%
4%
2%
0% 5% 10% 15% 20%
Friendlier,more attentive staff
Faster.more efficient service
Personal treatment
More knowledge staff
Better Service

22. To make customer highly
satisfy:
• Speed up the service
• Focus on friendlier and more attentive staff
• Improving efficiency on services by investing in new
machines
• Focus on better incentives for customers after a
particular number of visits
• Improve efficiency in cleanliness

23. Thank you