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- 1. Starbucks: Delivering Customer Service
- 2. Starbucks: Delivering Customer Service COMPANY BACKGROUND
- 3. II Giomale acquires Starbucks assets 2000 140 Stores in Northwest and Chicago & Went Public Changes name to Starbucks Corp. New CEO- Orin Smith 2002 1992 1984 Schultz joined Marketing Team 1987 1982 1971 Starbucks location in Seattle Schultz founded II Giomale offering brewed coffee & espresso beverages w/ Starbucks coffee beans Schultz remained -Chairman and Chief Global Strategist Established leading brand N. America CAGR 40% 20 million unique customer Over 5000 stores Opening average 3 stores a day T i m e l i n e - S t a r b u c k s
- 4. Starbucks: Delivering Customer Service VALUE PROPOSITION
- 5. “Live coffees” mantra - to keeping the national coffee culture alive.
- 6. Creating an “experience” around the consumption of coffee
- 7. Value proposition EXPERIENTIAL BRANDING STRATEGY
- 8. Coffee Itself offering the highest-quality coffee in the world, coffee standards by controlling the supply chain as possible and the distribution to retail stores
- 9. Customer Intimacy Senior VP Retail: Jim Alling Says Our Goal is to create an uplifting Customer experience every time you walk through our door
- 10. Atmosphere People come for coffee but the ambience is what make them stay
- 11. Value proposition DISTRIBUTION STRATEGY
- 12. To reach customers where they work, travel, shop, and dine Good Location: Company-operated stores located in high-traffic, high-visibility settings
- 13. Product mixed tended to vary depending on a store’s size and location Non-company-operated retail channels, foodservice accounts, domestic retail store licenses
- 14. Value proposition STARBUCKS PARTNERS
- 15. All Starbucks employees are called Partners
- 16. Generous policy of giving health insurance and stock options High partner satisfaction rate (80% to 90%), well above the industry norm.
- 17. Lowest employee turnover rates in the industry (just 70%, compared with fast-food industry averages as high as 300%) Lower managers turnover rates & encouraged promotion from within its own ranks
- 18. Starbucks: Delivering Customer Service DELIVERING ON SERVICE
- 19. Training: hard and soft skills “Just Say Yes” Policy empowered partners the best service possible
- 20. Delivering on service MEASURING SERVICE PERFORMANCE
- 21. Starbucks: Delivering Customer Service COMPETITION
- 22. Small scale Specialty coffee chains concentrated regionally 1000 of independent specialty coffee shops Donut and bagel chains (Dunkin donuts)
- 23. In the home, specialty coffee was estimated to be a $3.2 billion business, of which Starbucks was estimated to have a 4% share.
- 24. In the food-service channel, specialty coffee was estimated to be a $5 billion business, of which Starbucks was estimated to have a 5% share
- 25. In grocery stores, Starbucks was estimated to have a 7.3% share in the ground-coffee category and a 21.7% share in the whole- beans category.
- 26. It was estimated that over the next several years, the overall retail market would grow less than 1% per annum, but growth in the specialty-coffee category would be strong, with compound annual growth rate (CAGR) of 9% to 10%
- 27. Starbucks’ U.S. business was projected to grow at a CAGR of approximately 20% top-line revenue growth
- 28. 2002 Strategy Objective Most recognized and respected brand in the world Retail Expansion Product Innovation
- 29. Caffeinating the world RETAIL EXPANSION
- 30. Coffee consumption was on the rise in the United States Half of US population drank coffee everyday 1/3 of coffee consumption took place outside home
- 31. 8 states in the US without a 150 of the roughly 300 single company-operated metropolitan statistical areas in Starbucks. the nation
- 32. the company believed it was far from reaching saturation levels in many existing markets For example only one store for every 110,000 people only seven states had more than 100 Starbucks locations
- 33. the company believed it was far from reaching saturation levels in many existing markets For example only one store for every 110,000 people only seven states had more than 100 Starbucks locations
- 34. Retail business was to open stores in new markets Clustering stores Resulted in Cannibalization But Total incremental sales
- 35. United Kingdom, Australia, and Thailand Licenced Store: Asia, Europe, the Middle East, Africa, and Latin America The company’s goal was to ultimately have 15,000 international stores
- 36. Caffeinating the world PRODUCT INNOVATION
- 37. New product launched in every holiday season Product development took 12-18 months Ergonomic flow 1995 Coffee and non-coffee-based line of Frappuccino beverages boosting traffic during nonpeak hours “We’ve learned that no matter how great a drink it is, if our partners aren’t excited about it, it won’t sell,” - Alling.
- 38. Starbucks: Delivering Customer Service SERVICE INNOVATION
- 39. Store Value Card -2001 “The most significant product introduction since Frappuccino August 2002 gift recipients are being introduced to brand for the first time T-Mobile Hotspot wireless Internet service Can use to pay for transactions company-operated store in North America cardholders tended to visit Starbucks twice customer-transaction data
- 40. Starbucks: Delivering Customer Service STARBUCKS MARKET RESEARCH: TROUBLE BREWING?
- 41. 3 separate groups lacked a strategic marketing group had no chief marketing Officer Market research Category group Marketing group market research contradicted fundamentals Were not looking at big picture “Marketing is everywhere at Starbucks—it just doesn’t necessarily show up in a line item called ‘marketing.’
- 42. Caffeinating the world STARBUCKS’ BRAND MEANING
- 43. Qualitative Brand Meaning: Independents vs. Starbucks
- 44. The Top Five Attributes Consumers Associate with the Starbucks Brand Known for specialty/gourmet coffee (54% strongly agree) Widely available (43% strongly agree) Corporate (42% strongly agree) Trendy (41% strongly agree) Always feel welcome at Starbucks (39% strongly agree)
- 45. Caffeinating the world CHANGING CUSTOMER
- 46. Evolving customer base Newer customers tended to be younger, less well-educated, and in a lower income bracket than Starbucks’ more established customers.
- 47. Caffeinating the world CUSTOMER BEHAVIOR
- 48. No difference between rural and urban Customer Visit Frequency
- 49. Caffeinating the world MEASURING AND DRIVING CUSTOMER SATISFACTION
- 50. Starbucks was not meeting expectations in terms of customer satisfaction
- 51. 83% of Starbucks’ customers rate a clean store as being highly important (90+ on a 100-point scale) in creating customer satisfaction. Service gap between Starbucks scores on key attributes and customer expectations
- 52. Caffeinating the world REDISCOVERING THE STARBUCKS CUSTOMER
- 53. Relaxing the Labour-hour
- 54. Starbucks: Delivering Customer Service QUESTIONS
- 55. Questions 1 FACTORS ACCOUNTED FOR THE EXTRA-ORDINARY SUCCESS OF STARBUCKS IN THE EARLY 1990’S?
- 56. “Buying coffee as a drink, The experience of enjoying coffee” Changed the coffee drinking experience in the U.S Starbucks wanted to create a chain of coffeehouses that would become America’s ‘Third place’ Starbucks was a place where people can enjoy their social interactions, relax, or just spent some time by themselves. Courtesy: Ramya, Vighnesh, Venketraman, Sharath (Amrita School of Business, Coimbatore)
- 57. First Mover Advantage The concept was new There was no competition Courtesy: Ramya, Vighnesh, Venketraman, Sharath (Amrita School of Business, Coimbatore)
- 58. Customer Service Customer Intimacy’ : “Our goal is to create an uplifting experience every time you walk through the door.” ‘Speed of Service : They served the customer within 3 minutes ‘Just Say Yes Policy’ : Provide the best service possible, even it required going beyond company rules If a customer spills and asks for a re drink, they did provide Courtesy: Ramya, Vighnesh, Venketraman, Sharath (Amrita School of Business, Coimbatore)
- 59. Ambience Starbucks had seating areas to encourage lounging It had universal appeal Courtesy: Ramya, Vighnesh, Venketraman, Sharath (Amrita School of Business, Coimbatore)
- 60. Partner Satisfaction = Customer Satisfaction Generous benefits even to most entry level partners Partners were among the highest paid hourly workers Lowest turnover in the industry Courtesy: Ramya, Vighnesh, Venketraman, Sharath (Amrita School of Business, Coimbatore)
- 61. Coffee Quality Starbucks offered highest quality coffee in the world, sourced from Africa, Central & South America etc Courtesy: Ramya, Vighnesh, Venketraman, Sharath (Amrita School of Business, Coimbatore) It controlled its supply chain to ensure coffee standards
- 62. Target Audience Targeted primarily towards the affluent, well ‐ educated, white ‐ collar people (Age group: 25 – 44) Courtesy: Ramya, Vighnesh, Venketraman, Sharath (Amrita School of Business, Coimbatore)
- 63. Questions 2 WHAT WAS SO COMPELLING ABOUT THE STARBUCKS VALUE PROPOSITION
- 64. It places the customer and the service delivered to the customer above everything else. It moved away from the tangible benefits that the coffee offers, such as taste to intangible benefits of experiencing a Starbucks coffee Courtesy: Ramya, Vighnesh, Venketraman, Sharath (Amrita School of Business, Coimbatore)
- 65. The Brand Image Starbucks was known for being widely available Their specialty coffee, and being trendy. Customers also though that the stores were clean and were satisfied with the Starbucks product. Courtesy: Ramya, Vighnesh, Venketraman, Sharath (Amrita School of Business, Coimbatore)
- 66. Questions 3 WHY HAS STARBUCKS’ CUSTOMER SATISFACTION SCORES DECLINED? OR IS IT MEASURING IT IN A WRONG WAY
- 67. Despite the overwhelming presence and convenience, the scores declined There was very little image or product differentiation between Starbucks and the smaller coffee chains The brand image of Starbucks also had some rough edges Courtesy: Ramya, Vighnesh, Venketraman, Sharath (Amrita School of Business, Coimbatore)
- 68. Market research data shows that customer satisfaction has declined The satisfaction level of customers varies with the type of customer. The demographics of its customers are changing Expectations could have increased It set the standards very high for its customers With the expansion and product innovation, it was not able to meet the standards Customized drinks might have had harmful effect Increasing lead time Courtesy: Ramya, Vighnesh, Venketraman, Sharath (Amrita School of Business, Coimbatore)
- 69. Starbucks is measuring much on how people view the company More customers were beginning to agree with the fact the Starbucks cared primarily about making money and building more stores. Generally customers are satisfied with the coffee. Courtesy: Ramya, Vighnesh, Venketraman, Sharath (Amrita School of Business, Coimbatore)
- 70. Questions 4 HOW HAS STARBUCKS CHANGED SINCE EARLY DAYS?
- 71. Retail Expansion The store had expanded rapidly, from 140 stores in 1992 to 4500 stores in 2002 Courtesy: Ramya, Vighnesh, Venketraman, Sharath (Amrita School of Business, Coimbatore)
- 72. Product Concentration In 1992, about half of the company’s sales came from sales of whole ‐ bean coffees whereas in 2002 about 77% of the sales came from beverages. Product Innovation Strategy The company had added new products in menu and also sold equipment and accessories Courtesy: Ramya, Vighnesh, Venketraman, Sharath (Amrita School of Business, Coimbatore)
- 73. Customer base “Customers going to the Starbucks” “Starbucks going to the customers” There was a change in the demographic profile of the customer base Affluent, upper class professionals Young and low income group Courtesy: Ramya, Vighnesh, Venketraman, Sharath (Amrita School of Business, Coimbatore)
- 74. Brand Image The Starbucks image to the public started changing 1992 : ‘Third Place’: Get the best coffee and relax 2002: A convenient place to hangout and the coffee was just good Courtesy: Ramya, Vighnesh, Venketraman, Sharath (Amrita School of Business, Coimbatore)
- 75. Questions 5 DESCRIBE THE IDEAL STARBUCKS CUSTOMER FROM A PROFITABILITY STANDPOINT.
- 76. The ideal customer from a profitability standpoint is The loyal customer who visits the store 18 times a month Service time in all stores not exceed 3 mins Improve customer throughput Reach as close to $20000 level in terms of weekly sales Courtesy: Ramya, Vighnesh, Venketraman, Sharath (Amrita School of Business, Coimbatore)
- 77. Questions 6 WHAT WOULD IT TAKE TO ENSURE THAT THIS CUSTOMER IS HIGHLY SATISFIED? HOW VALUABLE IS A HIGHLY SATISFIED CUSTOMER TO STARBUCKS?
- 78. Cater to their needs and match/exceed their expectations. Ensure service is as fast as customer wants it to be Add lounging areas and more comfortable chairs and tables so that customers feel relaxed when using hotspot also Customer satisfaction -> loyalty-> increase in average ticket size-> higher profits Courtesy: Ramya, Vighnesh, Venketraman, Sharath (Amrita School of Business, Coimbatore)
- 79. Questions 7 SHOULD STARBUCKS MAKE THE $40 MILLION INVESTMENT IN LABOUR IN THE STORES?
- 80. Yes!! Allocate the money based on size of store, number of customers, location and need for additional labour instead of apportioning the $40 million equally to all the stores Apart from making the investment, Starbucks need to look more into their customer base and improve on their brand image and value proposition Courtesy: Ramya, Vighnesh, Venketraman, Sharath (Amrita School of Business, Coimbatore)
- 81. Starbucks: Delivering Customer Service THANK YOU
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STARBUCKS Delivering Customer Service
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Stratergic Management Case study on Starbucks Ppt
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Starbucks Delivering Customer Service Presented By: Dona Saji Introduction Company started in 1971 in Seattle, Wash
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Starbucks Delivering Customer Service Presented By: Dona Saji Introduction Company started in 1971 in Seattle, Washington Products sold include: - beverages - pastries - whole coffee beans - coffee-related retail items Starbucks is the largest coffeehouse company in the world, with 20,891 stores in 62 countries, including 13,279 in the United States. HISTORY 1971- Gerald Baldwin, Gordon Bowker and Zeiv Seigl opened a small coffee shop in Seattle. 1989- Howard Schultz joined Starbucks. Idea of creating chain of coffeehouses Concept of “third place” 1992- 140 stores across US. 1992 – Decision to make the company public. 2002 – Starbucks established as dominant speciality-coffee brand. INDUSTRY Specialty Eatery Industry – Fits within the largest segment of disposable income spending -- food and beverages – Steady growth in this segment in the 1990’s. – Increase in number of new companies – As demand for convenience has made eating out a normal routine, the demand for specialty food services has increased in recent years Channels of Distribution Speciality Operations – 15 % of revenue Sales of ground coffees to hotels , airlines etc – 27% of revenue Domestic retail store – 18 % Internationally licensed stores ,grocery stores etc – 55% of revenue. Starbucks Partners Starbucks employees are referred to as “Partners”. Hourly-waged employees were called “Baristas”. Starbucks had lowest turnover rate. Ensured employee satisfaction. 1. What factors accounted for Strabucks’s success in the early 1990’s and what was so compelling about its value proposition? What brand image did Starbucks develop during this period ? The success of Starbucks in the early 1990’s can be attributed to various elements: Howard Schultz’s vision of customer centric company. Idea of making Starbucks, America’s “third place”. Enforced high coffee standards. Customer satisfaction. Friendly environment for customers. Product Variety. Target audience :Affluent , well-educated white people. Value Proposition Starbucks stressed on “Experiential Branding Strategy” 3 components attached to this strategy. 1. Coffee Experience revolving consumption of coffee. Offered highest quality coffee in the world. Controlled much of the supply chain. Worked directly with growers. 2. Service Emphasized on customer intimacy. Provide uplifting experience. Customizing drink. 3.Atmosphere Inviting environment. Unique and welcoming ambience. Brand Image in 1990’s Highly standardised coffee. Clean ambience. Convenient coffee bar, as it was spread across various locations. Starbucks’s joint ventures. (eg: Coca Cola)Increased brand awareness and recognition. Innovations and services also paved way to build a strong brand image. 2.Why have Starbucks’s customer satisfaction scores declined ? Has the company’s service declined or is it simply measuring satisfaction the wrong way ? Reasons for decline in customer satisfaction : Growing customer base. Customers felt that Starbucks was more interested in making money and expanding. Unsatisfied customers – new customers. New customers have higher expectations . Competitors imitating the services of Starbucks. Retail expansion and product innovation had harmful effects on quality,service and atmosphere Larger target audience Change in image of the brand.(premium to everyday coffee) Concentrated on increasing the number of retail stores. Lack of customer intimacy. Poor service, as sales increased. Increasing competition. Tension between product quality and customer focus. Has the company’s service declined or is it simply measuring satisfaction the wrong way ? Overall company service has not declined. Overall, customers are satisfied with cleanliness, quality of coffee etc. Issue- Increase in waiting time. Shift in focus of Starbucks from being customer oriented to store expansion. Decline in customer service 3. How has Starbucks changed since its early days ? Increase in the number of stores, throughout the US and internationally. Establishment of small coffee stores. Additional products – Food items and new beverages. Focused on product innovation. Shift in customer base of Starbucks. Introduced machines to enhance service. 4. Describe the ideal Starbucks customer from a profitability standpoint. What would it take to ensure that this customer is highly satisfied ? How valuable to Starbucks is a highly satisfied customer ? A loyal customer = profitable investment. A loyal customer visits Starbucks almost 18 times a month. These customers account for 62% of Starbucks’s transactions. Customers visiting 1 or 2 times-generate 11% of Starbucks’s transactions. Every customer is invaluable to Starbucks. An ideal customer is a highly satisfied customer. Customer satisfaction perception Selection of merchandice New, innovative beverages Selection of whole beans Selection of noncoffee beverages highest-quality pastry, dessert highest quality tea involved in the community Best ice-blended drinks Place to relax, meet friends Knowldgedgebale staff Pleasant Atmosphere / ambience Best espresso drinks Freshest coffee Appropriate price Fast service Highest - quality coffee Coffee -taste / flavour Friendly staff Treated as a valuable customers Convenient Clean Store 5 13 16 17 17 20 30 34 37 39 50 60 60 65 65 67 72 73 75 77 83 Steps to ensure high satisfaction of the customers : Starbucks should be able to increase the number of visits of the current customers. Satisfaction level of customers is increased. Emphasize on the partners usage of proper soft skills , when interacting with customers. Stores are kept neat always. Bring service time down Starbucks should ensure that: Satisfaction level of customers is increased. Emphasize on the partners usage of proper soft skills , when interacting with customers. Stores are kept neat always. Bring service time down How valuable is the customers Without the 21% of customers, averaging eighteen visits a month, Starbuck’s would loose 62% of all its transactions highly satisfied customers have an average ticket price of $4.42 Opposite to this the non satisfied customers is only $4.06 5. Should Starbucks make the $40 million investment in labor in the stores ? What is the goal of this investment ? Is it possible for a mega-brand to deliver customer intimacy ? Proceed in investing $40 million. Invest to increase serviced efficiency. This prevents customer retention. Introduce set ups and equipments to enhance efficiency . Use secondary market research to identify and alter product differentiation in comparison to smaller chains. Continue product and service innovation. Invest in increasing labor. It is possible to deliver customer – intimacy. Starbucks was already known for its customer intimacy policy. Currently they need to revive it. Eg : SCV (Starbucks store-value card) Service innovation : T-Mobile HotSpot wireless internet service. THANK YOU!!!
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Starbucks Delivering Customer Service Harvard Case Solution & Analysis
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Starbucks Delivering Customer Service Case Study Solution
Recommendation:.
On the basis of the alternatives evaluation, it was found that the price change was not an option to be chosenas it was required by the organization to keep its strategy of pricing intact. Proceeding with the plan of Day about the addition of labor force, however, is cost beneficial and feasible but not the best option to be chosen.
The plan to increase the service speed and its efficiency through all its stores. Although, it was ranked at seven during the analysis of cost benefit but bringing improvement in the service speed, Starbucks has the capability to grow its revenues $143 M in 2002 to $231 M in 2005. On the other hand, the cost of implementation plan of addition of labor is about $40 M.
Therefore, it to recommend that Starbucks should focus on speeding the services and launch of a training program carrying out friendly behavior of employees and an offer of free coffee to their customers after a certain limit.
Implementation:
In the implementation of each recommendation, Starbucks needed to follow it in a step-wise manner. At first, improvement in the service speed to no more than three minutes through increase in the hours of labors is considered as a better option. As the efficiency of Starbucks services had not been best and close by three minutes through bringing improvement in the equipment and processes. This strategy is first to be implemented in pilot mode.In order to test this strategy, Starbucks must choose few localities with the need of implementation of accurate and controlled tools for measurement of improvement in the service speed. It is important to monitor the levels of consumer satisfaction to evaluate the improvements in return. Once, the organization gets confident in achieving desired outcomes, then the organization surely roll it out in all its stores operating in different regions of the world.
Second recommendation of bringing improvement in the friendly nature of employees and their attention at work. As it can be achieved with no experience of added cost, but this can be a great challenge to the organization.This practice requires infusion with the culture of Starbucks and its core values to give a sustainable impact and be successful. As Starbucks is well-established and recognized organization with a quite large workforce, it needs to bring change in the training plan management for its workforce to provide them with training of soft skills. Furthermore, this needs to be an initiative at the time of recruitment process and the training of employees. Changing the perception of consumers towards the staff of Starbucks is to be for the higher satisfaction of customers.
In order to achieve both the goals and overcome the issues, recreation of Starbucks image on communicating about its consumer values.
Expected results:
However, the analysis was highly diligent and the planning was quite better. There is a possibility that implementation of these alternatives might not result in positive outcome. The reason behind this is based on the pilot program implementation. It will provide with the breathing space in the events when the results will not be according to expectation.
Exhibit – SWOT Analysis
exhibit – alternatives.
Exhibit –Porter’s Five Forces:
Exhibit –Customer satisfaction gap
- About 13.87 percent customers are unsatisfied whereas 73 percent customers reported the importance of Friendly staff.
- The profitability that customers predicted is the product of 19 percent x 73 percent = 13.87 percent.
Exhibit – Cost Benefit Analysis:
According to the information from the case, about 42 percent customers of Starbucks visit two times in a month, 37 percent 3 to 7 times in a month, and 21 percent no less than 8 times a month generating revenue of about 11 percent, 27 percent and 62 percent respectively.
Considering these revenue percentages and data of Exhibit 4, the projected revenue for the year 2002 and 2005 are:
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Starbucks: Delivering Customer Service Case Discussion: March 4
Issue. Recent Market Research shows a decline in Customer Satisfaction at Starbucks. To stay on plan with their aggressive growth strategy, should $40 million be invested in the 4,500 stores focusing on improving the speed of customer service?Will this improvement lead to increased satisfacti
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