Name: Navin Tiwari

PRN: 16021141065

Submitted to: Dr. Tanmoy De

CASE STUDY ANALYSIS

Starbucks Delivering Customer Service

Services Marketing | August 24, 2017

Introduction:-

Starbucks is an overwhelming brand name in North America as the provider of gourmet

coffee beans, coffee-based drinks, and non-caffeinated beverages. It is additionally

turning into an outstanding brand in numerous nations around the world. Starbucks'

value proposition is to create an "experience" around the consumption of coffee that its

consumers could weave into the fabric of their everyday lives. The organization

presently serves more than 20 million consumers in more than 5000 company-oriented

and licensed stores all throughout the world. Another fascinating truth is that Starbucks

has made this level of progress without much advertising. Recent research has

demonstrated that Starbucks is not meeting its customers' expectations in terms of

customer satisfaction.

The story of Starbucks success is simply extraordinary. Indeed, the vision that Howard

Schultz had for the small coffee shop back in 1982 has become a cultural phenomenon.

In fact, according to Schultz, The idea was to create a chain of coffeehouses that would

become Americas third place. At the time, most Americans had two places in their

lives-home and work. But I believed that people needed another place, a place where

they could go to relax and enjoy others, or just be by themselves. I envisioned a place

that would be separate from home or work, a place that would mean different things to

different people. (Page no. 2). Clearly, Schultzs long-term vision has become a reality.

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Success Value Proportion:-

Starbucks wanted to become the leading brand for coffee all around the world. The

quality of their products has been recognized and shared through word of mouth. The

company almost never spent money on their advertisements. The factors that made

them successful was they sold their coffee to more individuals. Then they made their

company public and this made the lifestyle of ordinary citizens have a third place.

There are three factors of the Starbucks value proposition. The first is the coffee and

the special offerings provided for its customers. The high quality product was sourced

from Africa, Central America, and the Asian-Pacific areas. This is important because it

proves that the service is superiority other than other competitors. The second value

proposition is the service. The statistics prove that the average customer spends 18

days per month at Starbucks. They know exactly what to expect and will want the

drinks just the way they love it. And the third is the atmosphere. Starbucks wanted to

create a place for customers to relax and for people to come together.

Leveraging the Brand:-

Multiple Channels of Distribution:-

While Starbucks has resisted offering its coffee in grocery stores, it has found a variety

of other distribution channels for its products. Besides its stand-alone stores, Starbucks

has set up cafes and retail centers, office buildings, supermarkets, university campuses

and shopping centers.

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Brand Extensions:-

PepsiCo Inc. brought a bottled version of Starbucks Frappuccino (a cold, sweetened

coffee drink) to store shelves in 1995.

Service Innovation:-

Starbucks stored-value card (SVC) had been launched in November 2001. This

prepaid, swipeable smart card referred as the most significant product introduced

since Frappuccino. The companys latest service innovation was its T-Mobile Hotspot

wireless internet service; it offered high-speed access to the internet starting at $49.99 a

month.

Declined customer satisfaction:-

The company was more concerned with quick expansion with less attention to

customers demands. This made it lose track of customer satisfaction, and additionally

conveying the solid client closeness that it had confidence in. Despite Starbucks

overwhelming presence and convenience, there was very little image or product

differentiation between Starbucks and the smaller coffee chains in the minds of the

specially coffeehouse customers. However, there was a significant differentiation

between Starbucks and the independent specialty coffeehouses. The brand image of

Starbucks also had some rough edges. More customers were beginning to agree with

the fact the Starbucks cared primarily about making money and building more stores.

Also, despite the high customer snapshot scores customer satisfaction scores were

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 declining. It was believed that there was a service gap between Starbucks scores on

key attributes and customer satisfaction. In polls by customers improvements to

service, particularly speed of service, was most mentioned for improvement.

$40 Mn Dilemma:-

The goal of this potential investment is to increase customer satisfaction by increasing

speed of the service while attempting to generate more profit. Starbucks found

customers would leave the store if they had to wait for the coffee, and if they can cut

service time then more customers would be served. They should invest $40 mn that will

increase the customer satisfaction and lead to an increase in sales of $20000 per week.

Exhibit 9

Highly
Unsatisfied Satisfied satisfied
Customer Customer customer
No. of Starbucks Visits/month 3.9 4.3 7.2
Average ticket size $3.88 $4.06 $4.42
Average customer Life(years) 1.1 4.4 8.3
Customer life time value $199.74 $921.78 $3,169.7
incremental benefit from
unsatisfied to satisfied $722.04
incremental benefit from satisfied
to Highly satisfied $2,247.89
Investment per year $40,00,000
Break even 5539.859288 1779.4465

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This analysis clearly shows that $40,000,000 breakeven points from unsatisfied to

satisfied and satisfied to highly satisfied customers. The main purpose of the 40 Million

is to satisfy the customers. If through this investment unsatisfied customers will satisfy

than breakeven point is 55399, this shows that 55399 unsatisfied customers must be

satisfied to break even the investment if the customer will not satisfied than all the

investment is in vain. On the other hand side 17794 customers must be satisfied so that

investment will be breakeven.

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