Starbucks: Delivering Customer Services

Group 3 and 4

Synopsis

Starbucks – dominant specialty brand more than 4500 retail outlets in 2002

Aggressive expansion strategy requires additional 750 retail outlets

Market research shows customer satisfaction is on decline

Brand image to is showing rough edges

Directions to solve

? What factors accounted for SB success in early 90’s

? Why have SB customer satisfaction scores decline

? How does the SB of 2002 differ from 1992

? Describe the ideal SB customer from profitability point of view

? Should SB made the $40m investment in labour

Starbucks success

Megabrand image- without mass advertising

Sales growth 5% for 11 consecutive years

Serving 20m customers in more than 5000 stores

Tightly integrated value proposition perfectly aligned with target market needs

Competitive landscape when SB was introduced

As a result the following consequences evolved:

Starbucks

Dunkin Donuts

Consequences

CONSUMPTIONS PATTERNS

Customers tend to overstay

Ritualistic consumption

Choose SB for leisure with friends or being alone

Chat with baristas

DISTINCT PERCEPTIONS

Best coffee in the market

Upscale and classy

Social reinforcement

Starbucks in 2002

Brand – more accessibleo Introduced drive throughs (50%)o Non company operated retail chains (15%)

Customer base has been changedo Massive store expansiono Non coffee house channelso Non coffee productso Other mechanisms

Increased product diversity▪ Exhibit 5 shows a typical menu board and the price

list of the store Increased pressure on baristas

Customer Behavior by Satisfaction Level

Challenges faced by Starbucks

Highly satisfied customer - $172 and $200 more than unsatisfied

Lifetime value of highly satisfied customer is $2248

$2970 more than satisfied and unsatisfied customer respectively

Based on the above analysis

ESTABLISHED

Want peaceful ambience

Want friendly employees

Want customized beverage

NEW CUSTOMERS

Create a rushed environment

Made the employees grumpy

Put pressure on baristas

83 % of the customers ranked a clean store

being highly important in creating

customer satisfaction.

Customers want friendly and attentive staff Fast and effective service

Same reflected by mystery shoppers

Declined Brand image

Starbucks

Dunkin Donuts

Looking forward

SB lacked a strategic marketing group

New acquisitions due to new customer base

Establish customers less profitable but help in retain a good brand image

Eliminating bottle necks in the stores

Installation of automated machines

Facility remodeling

Product innovation

SVC prepaid cards

Store clustering

Employing more labour

Should SB made the $40m investment in labour??

Investment is needed not only to convert satisfied customers to highly satisfied but is also needed to retain

the present satisfied customers

Conclusion

Thank you