STARBUCKS: Delivering Customer Service

ALEENA AHMED RUWAIL KHWAJA SAAD TARIQ MAHAM NASIR MADIHA SHAHID SALMAN YAQUB SHAHRAIZ CHISHTI

BBA III Section G

Marketing for Services 2 STARBUCKS: Delivering Customer Service

Q1. 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? A1. When it comes to Starbucks success following are the factors that contributed mainly: y Firstly and fore mostly customer service y Experimental branding strategy y Reach of their outlets, leading to ease of availability y Variety of offerings/products y The high quality of their coffee that they have been able to maintain over the years y Starbuck s transformed coffee consumption from a picking behavior or simply a wakeup call in the morning to a complete different experience When it comes to Starbucks Value Proposition, their main promise consisted of the following three attributes. Firstly to create an experience around the consumption of coffee, an experience that people would weave into their lives. Secondly to create an uplifting experience in Customer intimacy and lastly to create an ambience based on human spirit, sense of community, and the need for people to come together. Starbucks Brand Image: Anywhere, everywhere, good coffee on the run captures Starbucks image completely.

Marketing for Services 3 STARBUCKS: Delivering Customer Service

Q2. Why has Starbucks CSI scores declined? Has it really declined or is it simply measuring the CSI the wrong way? A2. As per the Service quality and customer satisfaction model, CSI can be measured in items of following parameters: Reliability Responsiveness Assurance Empathy Tangibles Reliability Responsiveness Assurance Empathy Tangibles Reliability Responsiveness Assurance Empathy Tangibles

Interaction quality

Situational factors Physical environment quality Service quality

Customer Satisfaction Outcome quality Product quality

Price

Personal factors

Customer satisfaction gap could primarily be attributed to a service gap between Starbucks scores on key attributes and customer expectations. As per above model, Starbucks is measuring customer satisfaction parameters which really do not fall into CSI measurement category. Starbucks is measuring parameters that attribute to product quality rather than service quality. Thus, Starbucks is measuring CSI in wrong way.

Marketing for Services 4 STARBUCKS: Delivering Customer Service

Q3. How has Starbucks changed since its early days? A3. What started as a small idea off a few coffee enthusiasts has today become an acronym for coffee. Star bucks started as a skeptical idea, not many were in favor of having expensive coffee, with ethnic names in America, but that did not dissuade Schultz from making the company. Starbucks owners sold the company to Schultz, who then made this small privately owned company, public. Hence the primary change that star bucks has made since opening is expanding itself, it lived up to the dream of becoming America s third home, and soon opened all over the country. But the expansion did not end here, star bucks went international as well, and is today available in many countries around the globe. Star bucks initially used to sell only whole coffee beans, which were sold only at the store. Today you fins star bucks coffee beans in super markets, separate retail stores as well as the company s own outlets. The coffee place, which once concentrated only on whole coffee beans, has evolved and today has a diverse menu, with innovative drinks that coffee lovers around the globe love. Star bucks has also changed the customer segment it targets, what started as targeting to the rich and educated, sophisticated coffee drinkers, now caters to the middle income group, less educated, working on the go young adults.

Marketing for Services 5 STARBUCKS: Delivering Customer Service

Q4. Describe the ideal Starbucks customer from a profitability standpoint. What would ensure that this customer is highly satisfied? How valuable is a highly satisfied customer to Starbucks? A4. For Starbuck, a loyal represents a profitable investment. Starbucks wants customers to return to the store and spend time so as to ensure more consumption. To ensure customer loyalty, Starbuck needs to focus on interaction quality, physical environment quality and outcome quality. Qualitatively every customer is invaluable. But if we want to ascertain a quantitative measure to satisfaction, value from a customer can be measured from Exhibit 9 as follows: Value from customer = Number of Starbucks visits/month * Average customer life * Average ticket size = 4.3 / 4.4 * 12 * 4.06 = 921.7824

Q5. Should Starbucks make the $40 million investment in labor in the stores? Is it possible for a mega-brand to deliver customer intimacy? A5. Starbucks can come out with following plan of action as outlined below: 1. Proceed with investing the $40 million annually in the 4500 stores to increase service efficiency (impacting customer satisfaction. Goal ~ customer retention in the competitive coffee house market)

Marketing for Services 6 STARBUCKS: Delivering Customer Service

2. While the investment enables additional labor hours, research efforts to increase efficiency through set-up and equipment (e.g. automated espresso machine, specialized work stations) 3. Use secondary market research data to identify, analyze, and alter product differentiation strategies, with respect to smaller chains and Starbucks obliquities 4. Alter the product mix depending on the store size and location of the outlet (demographics) y Sample to find out what customers mainly look for y Sample data results would narrow the customization and train baristas with those special concoctions

5. Marketing Research showing that existing markets are far from saturation 6. Continue with Product and Service innovation, proactively conduct an environmental scan to launch new products 7. Validate Market Research metrics and methods of sampling, data analysis y Service Performing categories y Starbucks needs to find out whether the data translates in to measurable metrics that can impact sales and profitability.