Case Study Starbucks: Delivering Customer Service

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 satisfaction that will translate in to an increase in sales and profitability? Does this investment align with the growth strategy of retail expansion and product innovation?

Starbucks: Mission Statement live coffee The Starbucks Value Proposition To create an experience around the consumption of coffee, an experience that people would weave into their lives To create an uplifting experience in Customer intimacy To create an ambience based on human spirit, sense of community, and the need for people to come together

Starbucks is suddenly in a position of: Consistent sales. But Low customer satisfaction Low speed of service

Customized drinks Slows down the service process Strain on workers

Hand crafted Drinks Involve Time Slows down the service process

Competition A variety of regionally concentrated small scale Specialty coffee, bagel and donut chains

Recent market research Findings of peoples experiences: Starbucks cares primarily about making money Up from 54% to 61%

Starbucks cares about building more stores Up from 48% to 55%

Top 5 Attributes of Starbucks: 1. Known for specialty/gourmet coffee (54% strongly agree) 2. Widely available (43% strongly agree) 3. Corporate (42% strongly agree) 4. Trendy (41.5% strongly agree) Always feel welcome at Starbucks (39% strongly agree Starbucks Options Investment of $40 million annually to increase speed of service (impact = customer satisfaction, translates to sales) Alter the product mix Determine change depending on store size and location Process of Measuring Service performance Categories: Service, Cleanliness, Product Quality, Speed of Service Retail Expansion New stores in new markets Geographically cluster stores in existing markets Product innovation

Priority of Mgmt given that the prices were stable in recent years Service Innovation Starbucks store Value Card Effort to identify and demonstrate in very concrete terms on how to determine

Starbucks Forte
11th consecutive year of consistent sales of 5% or greater Company spent close to nothing to achieve this goal Sales climbed at an annual compound growth rate of 40% and net earnings to 50% since Starbucks went public Good strategic alliances with Pepsi-Cola and Kraft foods to distribute some of their products Lowest employee turnover rates in the industry (just 70% as compared to 300% the average of the fast food industry) Implemented good policies to insure competitive advantage Just say Yes policy Measuring service performance Expect business projections to rise and be steady and consistent

Plan of Action
Plan based Starbucks strengths relative to the presented issues Proceed with investing the $40 million annually in the 4,500 stores to increase service efficiency (impacting customer satisfaction. Goal ~ customer retention in the competitive coffee house market) While the investment enables additional labor hours, research efforts to increase efficiency through set-up and equipment (e.g. automated espresso machine, specialized work stations)

Use secondary market research data to identify, analyze, and alter product differentiation strategies, with respect to smaller chains and Starbucks obliquities Alter the product mix depending on the store size and location of the outlet (demographics) Sample to find out what customers mainly look for Sample data results would narrow the customization and train baristas with those special concoctions

Plan based Starbucks strengths relative to the presented issues 5. Marketing Research showing that existing markets are far from saturation Analyze this particular area with specific concrete terms targeting a particular objective 6. Continue with Product and Service innovation, proactively conduct an environmental scan to launch new products 7. Validate Market Research metrics and methods of sampling, data analysis Service Performance categories Does the data translate in to measurable metrics that can impact sales and profitability?