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Starbucks

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Starbucks Presentation

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Starbucks

  1. 1. At the Outset • A market research report indicates – not meeting customer expectations in terms of service • To increase customer satisfaction, company plans to increase labour force in stores thus increasing speed of service • However, this cost ($40m) could hit the bottom line Where it all began… • • • • • 3 coffee fanatics – Gerald Baldwin, Gordon Bowker & Ziev Siegel Specialized in selling „arabica‟ beans Create the 3rd home – Home, Office & Starbucks Coffee Shop By 1992, 140 stores In 1992, decided to go public & raised $25m
  2. 2. Benefits of going public • By 2002, sales climbed at CAGR of 40% • Since IPO, net earnings risen at CAGR of 50% • Now serving 20 million unique customers • 5000 stores around the globe • On an average, it opening 3 new stores a day • Spent almost nothing on advertising: – Focused on point-of-sale branding – Local-store marketing
  3. 3. Store Statistics FY 1998 Total North America (Stores) Company Operated (%) Licensed Stores (%) Total International (Stores) Company Operated (%) Licensed Stores (%) FY 1999 FY 2000 FY 2001 FY 2002 1755 2217 2976 3780 4574 92.42 7.58 91.93 8.07 82.19 17.81 78.60 21.40 76.43 23.57 131 50.38 49.62 281 34.52 65.48 525 32.95 67.05 929 31.75 68.25 1312 29.27 70.73 # Total North America: Steady rise in number of Licensed stores # Total International: Steady rise in number of Licensed stores North America Company Operated Stores (FY2002) Details Average Average hourly rate with shift supervisors & hourly 9 partners Total Labour hours per week, average store 360 Avg. weekly store volume 15400 Avg. Ticket 3.85 Average daily customer count, per store 570 Unit $ Hours $ $ People
  4. 4. Starbucks Value Proposition • Creating an „experience‟ • An experience that could weave into the fabric of their daily life • Their ‘Experiential Branding Strategy’ – Part 1: The Coffee (The Product) – Part 2: Service (Customer Intimacy) – Part 3: The Atmosphere (Ambience)
  5. 5. Channels of distribution • Philosophy – To reach customers where they work, travel, shop & dine • Channels – Starbucks Coffee Shops – Specialty Operations (Retail channels) Product Mix, North America Company-Operated Stores FY2002 Retail Product Mix Coffee Beverages Food Items Whole-Bean Coffees Equipment & Accessories % of Sales 77 13 6 4
  6. 6. Starbucks Partners • • • • Employees called „Partners‟ Hourly-wage employees called „Baristas‟ 60,000 partners worldwide Partner satisfaction leads to customer satisfaction • Lowest employee turnover rates • Company encourages promotion within its own ranks
  7. 7. Delivering on Service • Partners had 2 types of training – Soft Skills • Welcome customer to store, to smile, remember their names etc. – Hard Skills • Use Cash Register, Mix drinks etc. „Just Say Yes‟ Policy • Empowered partners to provide best service possible, even if it meant going beyond company rules • E.g. Customer spills drink & asks for a refill, we give it! • E.g. Customer doesn‟t have cash & wants to pay by check, then we give drink as a free sample • Don‟t want to win argument & lose customer
  8. 8. Delivering on Service • Train Baristas – The complexity of the drink required them to be trained to make it in a given time – But if a customer walks in & asks for customization then the barista must be able to finish it soon without hampering other customer orders • Challenging Role of partners – In early days, easy to strike a conversation with customer & keep them engaged – But today long queues of customers at the door gives less time for a customer interaction
  9. 9. Measuring Service Performance • “Customer Snapshot” – A Mystery Shopper program done 3 times a quarter – Speed of Service • How long did the customer have to wait? (Goal was to serve in 3 minutes from back of line to drink in hand) – Product Quality • Was the order filled accurately? • Was the temperature of the drink within the range? • Was the beverage properly presented? – Cleanliness • Was the store clean? The counters, the tables, the restrooms? – Service • Did the partner verbally greet the customer • Did they make eye contact & say thank you?
  10. 10. Customer Snapshot Scores Service 94.5 94 93.5 93 92.5 92 91.5 91 90.5 90 Cleanliness 93 94 94 93.5 92.5 93 91.6 91.2 91 92.1 90.8 90.5 91.5 90 89.5 89.8 89.9 89 01-Q3 01-Q4 02-Q1 02-Q2 02-Q3 02-Q4 03-Q1 Product Quality Avg. Wait Time (in minutes.seconds) 92.5 92 92 91.5 91.8 91.5 91.2 91 90 92 91.5 92.5 01-Q3 01-Q4 02-Q1 02-Q2 02-Q3 02-Q4 03-Q1 90.5 92.4 92 90.4 90.6 90.2 01-Q3 01-Q4 02-Q1 02-Q2 02-Q3 02-Q4 03-Q1 3.35 3.3 3.25 3.2 3.15 3.1 3.05 3 2.95 3.3 3.25 3.2 3.15 3.1 3.09 3.1 01-Q3 01-Q4 02-Q1 02-Q2 02-Q3 02-Q4 03-Q1
  11. 11. Measuring Service Performance • Parameters of Legendary Service – Initiating conversation with customer – Partners recognizing customer by name or by drink order – Partners being responsive to service problems • “Legendary Service” – A behaviour that created a memorable experience for the customer – That inspired the customer to return – That made the customer tell a friend
  12. 12. Legendary Service Scores 100 90 80 70 60 5* 50 4* 3* 40 1 or 2 * 30 20 10 0 01-Q4 02-Q1 02-Q2 02-Q3 02-Q4 03-Q1
  13. 13. Competition Store Name Caribou No. of Stores No. of States 200 9 Differentiation Aspects Core Environment Look & feel of an Alaskan Lodge Fire Places & Soft Seating Peet's Coffee & Tea 70 5 Freshest coffee in the market Roasting to order (Hand roasting small batches of coffee) Dunkin Donuts 3700 38 Flavoured coffee, Non coffee alternatives Dunkaccino (A coffee & chocolate combo)
  14. 14. CAFFEINATING THE WORLD Two biggest drivers of company growth
  15. 15. Retail Expansion Optimistic Growth Plan because: • Coffee consumption was on the rise in US • Specialty coffee, one-third coffee consumption outside of the home • 8 states in US without Starbucks • Scope for growth in existing markets
  16. 16. Retail Expansion Strategy • Opening stores in new geographical area while clustering stores in existing areas. • Resulted in cannibalization but overall sales increased • Demographics, Competition , real estate • Company‟s goal to have 15000 international stores- UK, Australia, Asia, Japan
  17. 17. Product Innovation • Introduced at least one new hot beverage every holiday season • R & D team: Product formulations, focus groups, in-store experiments, market tests • Drink fit into the ergonomic flow of operations • Importantly- partner acceptance • Most successful innovation- coffee and noncoffee-based line of Frappuccino beverages
  18. 18. Service Innovation • Store-value card(SVC)-launched Nov 2001 • Prepaid, swipeable smart card- used to pay for transactions in any starbucks store • Cardholders- visit Starbucks twice as often • Card given as gifts introduced
  19. 19. MARKET RESEARCH FINDINGS
  20. 20. Starbucks‟ Brand Meaning • Little image differrentiation b/w Starbucks and smaller coffee chains • Starbucks focused primarly on making money and expansion Brand Meaning: • Everywhere- the trend • Good coffee on the run • Place to meet and move on • On the way to work • Accessible
  21. 21. Changing customer • New customers- Younger, less educated, lower income • Less frequent and had different perception of Starbucks brand compared to established customers • Historical customer profile had expanded e.g. large Hispanic customers in California
  22. 22. Driving customer satisfaction • Direct link b/w customer satisfaction and customer loyalty • Customer satisfaction gap due to service gap b/w scores on key attributes and customer expectations • Poll results showed that Starbucks needs to have friendly staff, faster service and better offers for loyal customers etc.
  23. 23. Rediscovering The Starbucks Customers • Relaxing labor-hour controls, add additional 20 hours of labor, per week, per store. • Need to bring service time down to three-minute level • Increase customer satisfaction and build stronger long-term relationships • Improve customer throughput • Starbucks- establish connection between satisfying customers and growing the business
  24. 24. Latte Experience “We Listen to the customer, Acknowledge their complaint, Take action by solving the problem, Thank them, and Explain why the problem occurred”
  25. 25. Creating a difference • Microinteraction • App
  26. 26. THANK YOU

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