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Analysis of Starbucks Delivering Customer Service

At the current moment, Senior VP of Administration Christine Day is

contemplating howshe will pitch her plan to improve Starbucks customer

satisfaction scores. On paper, thecompanies self imposed snapshot program ofmystery shoppers paints a picture thatthe stores are operating effectively in the

areas they feel drive customer satisfaction.However, recent surveys have

revealed that the companys perception of what drivescustomer satisfaction

varies from the actual expectations of the customer.

According to Starbucks 2010 Annual Report, customer satisfaction scores

continue toincrease, and at several points within the report it is mentioned that

the key drivers for customer satisfaction are superior customer service/speed,

along with partner friendlinessand cleanliness. It is worth noting that the twoformer factors were the top two responsesfor how Starbucks could improve

perceived value, while cleanliness was ranked as themost important attribute for

customer satisfaction. It can be perceived that an additionalfocus has been placed

on these areas since the article was written as CEO HowardSchultz mentioned

them all in his letter to investors.

In order to convince Smith and Schultz of the proposed $40 million plan to

increase eachstores allotted sales, Day must tie customer satisfaction to customer

loyalty, and place anemphasis on how this will translate to an increase in sales. Inthe HBR article Puttingthe Service-Profit Chain to Work, the authors lay

a groundwork for what drivescustomer loyalty and the substantial impact that a

lifelong customer can have on the bottom line. They state that increasing

employee satisfaction yields an increase inemployee retention/productivity,

which improves customer satisfaction, and that

ultimately increase loyalty and profitability. It was mentioned that Starbucks

partnershave highly positive opinion surveys, but that increasingly more difficult

and time-consuming beverages are adding strain to their operations. With the

additional labor dollars, this could make the partners day to day tasks less

stressful and improve their ability to focus on the speed of service, their level of

friendliness and also on thecleanliness of the store. To make the argument

stronger and to put it in financial terms,the $40 million spread over 4500 stores

would equate to $8888 per store per year, or $171 per week. Currently the

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hourly employee labor poor is about $3240 for a storerunning about $15400

per week. This results in a labor cost of 21.04%. In order to keepthe labor % of net

sales at the same level, the store would have to run an additional $812 per

week. With an average ticket hovering around $4, this would mean the

stores wouldneed an additional 203 transactions per week, or about 800 permonth. Exhibit 9 showsthat guests that are extremely satisfied tend to nearly

double their visits from 4.4 to 8.3 per month, so if they were able to eventually

wow 200 current, satisfied customers andmake them extremely satisfied,

yielding them loyal to the company, they would morethan meet their

investment. This calculation doesnt include the almost certain increasein visits

from individuals who are currently unsatisfied, nor does it take into account

theexponentially more important customer life, both of which are worth noting.