Starbucks: Delivering Customer Service

1. Teaching Objectives A. To illustrate the importance of having a tightly-integrated, highlydifferentiated value proposition that is carefully aligned with a wellconceptualized target market. B. To explore the managerial challenges that accompany rapid growth and to reinforce the idea that in order to sustain value, a company must constantly reevaluates its value proposition, competitive positioning, and market strategy. C. To illustrate the difficulties associated with customer relationship management in the context of a diverse customer base. D. To highlight the idea that there is no single definition of great service. Instead, different customers may define service in different, often conflicting, ways. E. To illustrate the importance of measuring the correct drivers of customer satisfaction. 2. Discussion Questions A. What factors accounted for the extraordinary success of Starbucks in the early 1990s? What was so compelling about the Starbucks value proposition? What brand image did Starbucks develop during this period? B. Why have Starbuckscustomer satisfaction scores declined? Has the companys service declined, or is it simply measuring satisfaction the wrong way? C. How does the Starbucks of 2002 differ from the Starbucks of 1992? D. Describe the ideal Starbucks customer from a profitability standpoint. What would it take to ensure that this customer is highly satisfied? How valuable is a highly satisfied customer to Starbucks? E. Should Starbucks make the $40 million investment in labor in the stores? What is the goal of this investment? Is it possible for a mega-brand to deliver customer intimacy? 3. Content of Analysis A. What explains the Starbucks success story? How did Schultz manage to get people to pay so much $$$ for a simple cup of coffee? What were the key elements of the Starbucks value proposition in the

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early 1990s? As a consumer, what were the benefits associated with buying coffee from Starbucks? Who was the original target market? Describe these people in detain. What consumption patterns did they bring to Starbucks? What was Starbucks image during this period? What competition did Starbucks face in the early 1990s? So what is the problem? So what is the problem Starbucks is currently facing? Why have Starbucks customer satisfaction scores declined? Has its service declined? Why? How does Starbucks define customer service? What does Starbucks mean when it talks about customer intimacy? Given this, is Starbucks measuring customer satisfaction correctly? Why is customer service so important to Starbucks? How much more valuable is a highly-satisfied customer to Starbucks, compared to a satisfied customer? How could this happen? How could one of the most successful customer brands of the past decade lose its customer focus? What has changed over the past 10 years? How has Starbucks achieved its extraordinary growth? What have been some of the consequences of that growth? Is it possible for a mega-brand to deliver customer intimacy? What does Starbucks customer base look like today? Are some of its customers different than the ones who made up Starbucks original target market? In what ways are they different? Do the different segments define customer service the same way? How does Starbucks acquire customers today? What determines whether customers return to Starbucks and become regular customers? Does the behavior of one type of customer affect the experience of another? What determines the profitability of a customer? Should Starbucks simply focus on delighting its most profitable customers? What other benefits do the various customer segments bring to the brand? So how to fix the problem? Can Starbucks deliver the best of both worlds? How? Should Starbucks make the $40 million labor investment in the stores? How many customers would it have to delight in order to make this

investment pay off?