Starbucks- Diluk Perera
-
Upload
diluk-perera-mba -
Category
Documents
-
view
165 -
download
1
Transcript of Starbucks- Diluk Perera
STARBUCKS: DELIVERING CUSTOMER SERVICE
DILUK PERERACOHORT: BAY BRIDGE
FACTORS ACCOUNTED FOR EARLY THE EXTRAORDINARY SUCCESS OF STARBUCKS IN THE EARLY 1990S
Experiential Branding strategy- created a
coffee culture and built a loyal customer base
Premium coffee- Worked directly with growers, monitored roasting process and controlled distribution around the world to ensure quality
Service- Provided intimate, uplifting personalized experience every time
A third place atmosphere- Sophisticated, upscale, classy yet inviting environment, encouraged lounging
Other Factors
Employee satisfaction- Satisfaction rate 80%-90% and low turnover rate ensured baristas are motivated to become experts at hard and soft skills to offer warm personalized service to tea fanatics
Unexploited attractive market without strong competition
Wide available distribution strategy and store locations on high visible, high traffic areas
WHAT WAS SO COMPELLING ABOUT THE STARBUCKS VALUE PROPOSITION?
Starbucks experience- Best quality
coffee, intimate service, friendly
baristas and European style classy layout,
that encourage lounging for customers
Target customer expectation- premium
coffee, upscale
third place ambience , live coffee
culture
Target customers- Sophisticate
d, white collar,
educated, affluent coffee lovers,
looking for premium
coffee experience
DEVELOPED HIGHLY DIFFERENTIATED VALUE
PROPOSITION PERFECTLY TO MATCH
THE TARGET CUSTOMER SEGMENT
MUTUALLY REINFORCING CYCLE
HOW DOES THE STARBUCKS OF 2002 DIFFER FROM THE STARBUCKS OF 1992?
Brand is more accessible-Over 5000 stores compared to 140 stores in 1992
Increased product range- Menu complexity has
increased, non coffee products targeting mainstream
customers compared to only targeting coffee fanatics 10
years ago
Non coffee house channels- kiosks, supermarkets,
warehouse clubs, hotels, airplanes
New retail formats- Drive throughs
Difficulty level of Barista job increased- Due to many drink variations
and less time for barista to have a friendly chat
WHAT BRAND IMAGE DID STARBUCKS DEVELOP DURING THIS PERIOD?
Known for specialty /gourmet coffeeHigh quality coffee (not top quality necessarily)Widely available Convenient Clean comfortable storesFeel welcome
Signals of dilution of brand image-Primarily cares about money- increased from 53% to 61%Primarily Cares about building more stores- increased from 48% to 55%More concerned about growth plan than customer satisfaction
WHY HAVE STARBUCKS’ CUSTOMER SATISFACTION SCORES DECLINED?Diluted brand image- consumer
belief Starbucks primarily concerned about money and store availability, rather than
customer satisfaction
Considered less trendy
Perceived difference of image and product differentiation
compared to independent coffee shops was less, hence paying a
premium price for Starbucks was questionable
Baristas unsatisfactory service Speed of service was not
satisfactory level- lack of hard and soft skillsSpeed of service was not satisfactory
Customer Satisfaction
HAS THE COMPANY’S SERVICE DECLINED? NOT NECESSARILY DECLINED
People from these 2 different worlds define great service differently. To make the matter worst same customer would expect rush service from Monday to Friday and would lounge and read newspapers on weekends
Due to the dramatic expansion of customer base, Starbucks now has to serve customers that were not original part of the target market, whose expectations and behaviors are different, hence it impact each other:
Overall customers are pleased with product quality, cleanliness and
atmosphere. However wait time is increasing, this is not necessarily not
due to a service inefficiency.Original target customer gaze at long menu, starts a friendly conversation with barista and requests customized beverage, while new customers complain about service slowing down during rush hour time. On the other hand if baristas rush third place ambience for established customers will be destroyed and baristas will be less friendly and grumpy.
IS IT MEASURING SATISFACTION THE WRONG WAY? IMPERFECT TOOL
• CUSTOMER SNAPCHAT METRICS OF FRIENDLINESS, ORDER FILLED ACCURATELY AND SPEED OF SERVICE IS SELF-CONTRADICTING AND INCONSISTENT
• FRIENDLY THE BARISTA, SLOWER THE SERVICE• BARISTA TAKE TIME TO PREPARE PERFECT HAND CRAFTED BEVERAGE, SLOWER THE SERVICE• LEGENDARY SERVICE ENCOURAGES BARISTAS TO CREATE A MEMORABLE EXPERIENCE FOR THE
CUSTOMERS AND INITIATE CONVERSATIONS, THIS IS INCONSISTENT WITH THE GOAL OF 3 MINUTE SERVICE TARGET.
• NEW INTERNAL MEASUREMENTS SHOULD BE INTRODUCED TO CAPTURE THESE CONFLICTING CUSTOMER EXPECTATIONS
DESCRIBE THE IDEAL STARBUCKS CUSTOMER FROM A PROFITABILITY
STANDPOINT. HOW VALUABLE IS A HIGHLY SATISFIED CUSTOMER
TO STARBUCKS?
Life time revenue
stream of a highly
satisfied customer
worth $ 2970 more
than that of an
unsatisfied customer.
Life Time Value
As per below calculation
revenue stream of
highly satisfied
customer annually is $
200 more than an
unsatisfied customer and
$ 172 more than just a
satisfied customer.
Revenue Annually
Ideal customer would be most
frequent (loyal) customer who
visits Starbucks 8 times a month,
and will spend $4.42 per visit.
These customers account for 62% of all transaction value. Customers
that visit 1-2 times per month
only generate 11% of all
transaction value
Highly Satisfied Customer
Unsatisfied SatisfiedHighly
satisfiedVisits/month 3.9 4.3 7.2
Visits/year 46.8 51.6 86.4$ per
Transaction 3.88 4.06 4.42
Revenue/year 182 210 382
Average Life
(years) 1.1 4.4 8.3Revenue/
Life 200 924 3170
WHAT WOULD IT TAKE TO ENSURE THAT THIS CUSTOMER IS HIGHLY SATISFIED?
• IT IS COMPLEX TO DELIVER CUSTOMER SATISFACTION TO CUSTOMERS WITH DIFFERENT EXPECTATIONS.
• STARBUCKS CUSTOMERS GIVE PRIORITY TO CLEAN STORE, HENCE KEEP THE STORE CLEAN, MAINTAIN HIGH SANITATION LEVEL.
• CONVENIENCE IS THE SECOND PRIORITY. HENCE SPEED UP THE SERVICE. ESTABLISH MORE STORES IN HIGH VISIBILITY TRAFFIC AREAS, INCLUDE DRIVE-THROUGHS, REMODEL SHOP LAYOUTS, INTRODUCE QUICK COFFEE MAKING MACHINES AND PREPAID CARDS TO SPEED UP THE PROCESS AND ELIMINATE ANY BOTTLENECKS.
• NEXT, CUSTOMERS GIVE PRIORITY TO GETTING TREATED AS A VALUABLE CUSTOMER AND FRIENDLY STAFF. BETTER TRAINING OF BARISTAS ON SOFT SKILLS WOULD BE THE SOLUTION.
WHAT’S THE GOAL OF THIS INVESTMENT? SHOULD STARBUCKS MAKE THE $40 MILLION INVESTMENT IN LABOR IN THE STORES?
INVESTMENT PAY OFF BREAK EVEN ANALYSIS:• INVESTMENT PER STORE=$40M / 5000 STORES= $ 8000• DIFFERENCE BETWEEN SATISFIED AND HIGHLY SATISFIED CUSTOMERS= $ 172• TO BREAK EVEN AT EACH STORE= 8000/172= 46 CUSTOMERS• NO. OF VISITORS PER STORE EACH DAY= 570 (EXHIBIT 3)• TO BREAK EVEN DAILY 46 MORE CUSTOMERS OUT OF 570 SHOULD BE CONVERTED FROM SATISFIED TO
HIGHLY SATISFIED.
• RECOMMENDATION: STARBUCKS SHOULD MAKE THIS INVESTMENT AS IT WILL IMPROVE SERVICE SPEED, CONVERTING SATISFIED CUSTOMERS TO HIGHLY SATISFIED CUSTOMERS AND PREVENT TURNING INTO ‘UNSATISFIED’ CUSTOMERS
GOAL: INCREASE SALES BY CONVERTING SATISFIED CUSTOMERS TO HIGHLY SATISFIED LOYAL CUSTOMERS; BY PROVIDING FASTER SERVICE WITHOUT
COMPROMISING VALUE ADDED COFFEE EXPERIENCE TO ESTABLISHED CUSTOMERS.
IS IT POSSIBLE FOR A MEGA-BRAND TO DELIVER CUSTOMER INTIMACY? YES POSSIBLE, BUT DIFFICULT BALANCING ACT
New custome
rs
Established
customers
Defines Starbucks- protect unique value proposition
Require customer intimacy
Less profitable, time consuming
Does not require intimacy
More revenue, low cost- growth vehicle
STARBUCKS WILL HAVE TO MANAGE INTERESTS OF
BOTH SEGMENTS; INCREASE SERVICE EFFICIENCY
WITHOUT NEGLECTING SERVICE QUALITY AND CUSTOMER INTIMACY.