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
 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.
 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.
 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.
 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?
 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.
 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.

Coffee
Ambience

Customer
intimacy
 Top five attributes consumers associate with Starbucks Brand
60%

54%

50%

43%
42%
41%
40% 39%

30%

20%

10%

0%
Known for speciality/gourmet Widely available Corporate Trendy Always feel welcome at
coffee starbucks
 Starbucks changing brand image

OLD Image NEW Image

The best quality coffee Good coffee on the run

available
Place to meet and move
A third place on

A sanctuary from the Convenient, accessible

world and consistent
 Why have Starbucks customer
satisfaction score declined? Has the
company service declined or is it
simply measuring satisfaction the
wrong way?
 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.
 Attitude Towards Starbucks
70%

60%
60%

51%
50%
50%
45%
44% 44%
41%
40%
40%
34%
32%
31% 31%
30%
30%
26%
25%

20%
20%
15%

10% 8%

0%
High quality Brand I trust For someone like worth paying known for known as the best-tasting highest-qualtiy Overall Opinion
brand me more for speciality coffee coffee expert coffee coffee of starbucks

New customers (first visited in past year) Established customers(first visited 5+ years ago)
 Starbucks Service Deterioration
Too little Lots of new customer Baristas have no
experienced labor acquisitions time to chat

Desire for Complex

customization Orders

Baristas have no Long

time to chat lines

Grumpy Grumpy Leave before

employees Customers ordering

Dont come back

Employee (as often)
turnover

Less of a third
place attachment

Order simple than

complex (lower
ticket value)
How does the Starbucks of 2002
differ from the Starbucks of
1992?
 Starbucks in 1992
Physical Environment

Consumption Pattern Brand Perception

Tendency to linger, Best coffee,
Ritualistic consumption, classy, upscale,
Looking to self-indulge a third place

Target Customer
Sophisticated, affluent
coffee lover, embracing
the live coffee lifestyle
 Starbucks in 2002
New Acquisitions
Less sophisticated,
In a hurry,
more pragmatic

Physical Environment
Different Different
Consumption Brand
Patterns Perception

Established Customers
Sophisticated, affluent
coffee lover, embracing
the live coffee lifestyle
 Starbucks over the years : Comparison
1992 2002
Sales 50% sales from sale of 77% sales from beverages
whole bean coffees
Menu Whole bean coffee Addition of new items-
Food and new beverages
Ambience Lounge with an Italian Smaller coffee store
coffee culture without lounging
Target audience Mid to upper class Younger and lower income
Professionals 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 going to the
Starbucks customers
Company Image Best quality coffee where Just good coffee, meeting
one can relax people and move on
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?
 THE MOST IDEAL CUSTOMER

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.
 Differences in revenue of a highly satisfied
customer with a satisfied customer
Highly Ideal The total lifetime value of a
Unsatisfied Satisfied Satisfied Custome
Customers customers Customer rs
highly satisfied customer is
Number of Starbucks around $ 3170 while that of
Visits/Month 3.9 4.3 7.2 18 satisfied customer is around $
$ $ $ $ 922 and unsatisfied customer
Average Ticket Size/Visit 3.88 4.06 4.42 4.42 is around $ 200
Average Customer
life(years) 1.1 4.4 8.3 8.3 Thus, the difference of
Revenue generated per $ $ $ $ lifetime value between highly
month 15.13 17.46 31.82 79.56 satisfied and satisfied
Revenue generated per $ $ $ $ customer is:
year 181.58 209.50 381.89 954.72 $(3170-922)= $ 2248
$
Revenue generated over $ $ $ 7,924.1 Also, the difference of
avg customer life 199.74 921.78 3,169.67 8 lifetime value of highly
satisfied and unsatisfied
Thus, it is of utmost importance for Starbucks to raise its customer is:
customer satisfaction scores. $ (3170-200)= $ 2970
 Factors affecting Valued Customers Perceptions
Improvement to service
Improvement to
Service Better Service 2%

28%
34% Offer Better Prices/ More knowledge staff 4%
Incentive Program

Other Personal treatment 4%

21%
Faster.more efficient service 10%
31% Already Satisfied

Friendlier,more attentive staff 19%

0% 5% 10% 15% 20%

Offer Better Prices/
Others
Incentive Program
Offer Promotions, specials 3% More stores/More
2%
convenient loactions

Community
2%
outreach/Charity
Reduce Prices 11%
Series1
Improve atmosphere 8%

Free cup after x number of

19% Better quality/variety of
visits 9%
products

0% 5% 10% 15% 20% 0% 2% 4% 6% 8% 10%

 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

Thank you