DELIVERING CUSTOMER SERVICE

GURILEM

Rany

Reza

Deru

Joddy

VIDEO INTRO

HISTORY

1971
Founded by Baldwin, Bowker, and Siegl

1982
Howard Schultz joined the marketing team

1988
Owned by Schultz

1992
Went public

VISION

To be the third place

BRAND STRATEGY
Creating experience
Product Highest quality coffee from Asia, Central & South America, Pacific Merchandise People Service from partners (barista) Customer intimacy Our goal is to create an uplifting experience Place The atmosphere The aroma Interior, invites people to linger Building a sense of community

PRODUCT

SALES

6% 13%

4%

Coffee Beverages
Food Items Whole Bean Coffees

77%

Equipments & Accessories

(2002, North America)

DISTRIBUTION CHANNEL

Office

Retail

Campus

COMPETITION

Small-scale Specialty Coffee Chains

Independent Specialty Coffee Shops

Donut & Bagel Chains

Regional Differentiation on store environment

Wide range of food and beverages Satellite TV and internet connection

Different product offerings Coffee as complementary product

KEY SUCCESS FACTORS

People

Retail Expansion

Product Innovation

Service Innovation

PEOPLE
Partners = barista 17-23 years old Generous policy
Health insurance Stock option

Lowest turnover rates (only 70%) Knowledge sharing

All senior executives had to train and succeed as baristas

TRAINING

Hard Skills

Partner
Soft Skills

PARTNERS

Partner satisfaction leads to customer satisfaction The success of a new beverage depended on partner acceptance

recognizing regular customers and providing personalized service

RETAIL EXPANSION GOALS

Become the most recognized and respective brand in the world

Ultimately have 15,000 international stores

OPTIMISTIC GROWTH PLANS

The rising of coffee consumption in US 109 million people in US now drank coffee everyday The markets biggest growth to drinkers of specialty coffee Coffee consumption took place outside of the home Still 8 states in US without specialty coffee shop The business was far from reaching saturation levels in existing market

Market share of Specialty Coffee in US (2000)

Starbucks 38% 62% Others

Market share of Specialty Coffee in US (2002E)

42% 58%

Starbucks Others

Market share of Specialty Coffee in US (2005E)

50%

50%

Starbucks Others

SELECTING RETAIL SITES

Area demographic Coffee consumption level Competition intensity Real-estate availability

NEW PRODUCT DEVELOPMENT PROCESS

Conducted in store experiment

Market test

*
Ran focus group Tinkered with product formulation

NEW PRODUCT SUCCESS FACTORS

Ergonomic flow of operation Handcrafting speed Partner acceptance

SERVICE INNOVATION

MAIN PROBLEMS
No unified marketing department

Shifting brand image among customers

Declining customer satisfaction

COMPETITION

Potential New Entrants

Substitutes

Buyers Bargaining Power

Suppliers Bargaining Power

COMPETITION ANALYSIS

New Entrants
Low barriers to entry Generic product Costly in fast retail expansion Different pricing strategy

Substitutes
Various substitutes of coffee (tea, beverages, candies) Low switching cost Lower price offered Healthy issues of coffee

Buyers
Low switching cost Many other choices for coffee products Price sensitivity Searching for different atmosphere

Suppliers
Many suppliers for qualified coffee Low switching cost Volume-based purchasing (volume is important to supplier) cost relative to total purchase Market determines the commodity price

high

high

high

HIGH INDUSTRY ATTRACTIVENESS

The market is still far from saturation Starbucks is not a single-player Drinking coffee becomes part of life-style Opportunity for product differentiation

RESOURCES

Tangible Profitable company Cross-country store location Availability of stores near customers Technology in coffeemaking, payment Supply-chain management

Intangible Human resource capability (skillfully well-trained) &integrity The training (knowledge transfer) Brand image (perception as serving high-quality product with excellent service) Brand value

CORE COMPETENCIES

Product

People

Place

THE BRAND

The combination of those competencies are difficult to imitate by competitors

LACK OF STRATEGIC MARKETING DEPARTMENT

No Chief of Marketing Officer 3 separate groups of marketing department gather and analyze market data develop new products and manage the menu and margins develop the quarterly promotional plans Everyone has to get involved in a collaborative marketing effort

no one was really looking at the big picture

SHIFTING CUSTOMER PERCEPTION ON BRAND

Customer-Oriented

Everywhere Good coffee on the run Place to meet and move on Convenience oriented Accessible and consistent

Capitalist

Starbucks cares primarily about money Starbucks cares primarily about building more stores

THE CHANGING CUSTOMERS

established

newer

Affluent Well-educated White-collar 24-44

Younger Less well-educated Lower income than established customers Visited the store less frequently

CHARACTERS OF GENERATION

Baby Boomers (1946-1964) Work-centric Independent Goal-oriented Competitive

Generation X (1965-1980) Individualistic Tech-adapt Flexible Value work-life balance

Generation Y (1981-2000) Tech-savvy Family-centric Achievementoriented Team-oriented Attentioncraving

legalcareers.about.com

FACTORS DRIVING VALUED CUSTOMER PERCEPTION

How could Starbucks make you feel more like a valued customer? Improvements to Service Friendlier, more attentive staff Faster, more efficient service Personal treatment More knowledgeable staff Better service Offer better prices/incentive programs (total) Free cup after X numbers of visits Reduce prices Offer promotions, specials Other (total) Better quality/variety of products Improve atmosphere Community outreach/charity More stores/more convenient locations Already satisfied/Dont know % 34 19 10 4 4 2 31 19 11 3 21 9 8 2 2 28

THE IDEAL CUSTOMER

Generation X with this demographic
College degree SES AB Regular/social coffee drinker Like to hang out afterwork

The reason
Because the trend is expanding to the younger generation more promising market

HOW TO SATISFY THE IDEAL CUSTOMER

Faster service Internet service Provide atmosphere supporting both relaxing & working environment Better price Membership Special offerings Discounts
Tumbler Credit card Special holidays

THE QUESTION

Should Starbucks make the $40 million investment?

Yes!
Create innovation in coffee making process (coffee machines)
Do store Improvement (interior & facilities) Give privileges to frequent buyers

Add more employees

Maximize the use of database system (sales & customer profile)

RECOMMENDATIONS
Adapt local characteristic / taste (ex : Mexican foods menu on South USA states) Periodic research in consumer behavior & preferences Retain customers by continuous promotion programs (ex : free x after y drinks) Create events to promote and engage customerspartners relationship (ex : coffee tasting)

TODAY AT STARBUCKS
Gen Y College students young office workers Tech savvy Linger for studying, socializing, gathering

LESSONS LEARNED
In service marketing, its important to monitor changes that happen in consumer demographic & behavior to create dynamic, up-to-date strategy. Therefore, company can give better service. Customer engagement is the foundation taking place in every service encounter. Therefore, it is a must that the front-line people represent the value and knowledge of the company at the best level.

VIDEO OUTRO

We are not in the coffee business, serving people. We are in the people business, serving coffee.
- Schultz -

THANK YOU