Analysis of Starbucks Delivering Customer Service

At the current moment, Senior VP of Administration Christine Day is contemplating how she will pitch her plan to improve Starbucks customer satisfaction scores. On paper, the companies self imposed snap shot program of mystery shoppers paints a picture that the stores are operating effectively in the areas they feel drive customer satisfaction. However, recent surveys have revealed that the companys perception of what drives customer satisfaction varies from the actual expectations of the customer. According to Starbucks 2010 Annual Report, customer satisfaction scores continue to increase, 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 friendliness and cleanliness. It is worth noting that the two former factors were the top two responses for how Starbucks could improve perceived value, while cleanliness was ranked as the most important attribute for customer satisfaction. It can be perceived that an additional focus has been placed on these areas since the article was written as CEO Howard Schultz mentioned them all in his letter to investors. In order to convince Smith and Schultz of the proposed $40 million plan to increase each stores allotted sales, Day must tie customer satisfaction to customer loyalty, and place an emphasis on how this will translate to an increase in sales. In the HBR article Putting the Service-Profit Chain to Work, the authors lay a groundwork for what drives customer loyalty and the substantial impact that a lifelong customer can have on the bottom line. They state that increasing employee satisfaction yields an increase in employee retention/productivity, which improves customer satisfaction, and that

ultimately increase loyalty and profitability. It was mentioned that Starbucks partners have highly positive opinion surveys, but that increasingly more difficult and timeconsuming 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 the cleanliness 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 hourly employee labor poor is about $3240 for a store running about $15400 per week. This results in a labor cost of 21.04%. In order to keep the 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 would need an additional 203 transactions per week, or about 800 per month. Exhibit 9 shows that 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 and make them extremely satisfied, yielding them loyal to the company, they would more than meet their investment. This calculation doesnt include the almost certain increase in visits from individuals who are currently unsatisfied, nor does it take into account the exponentially more important customer life, both of which are worth noting.