STARBUCKS COFFEE- Dorosin Case

SUBMITTED BY:
PURNIMA JINDAL A-03 NIKITA KHANNA A-10 NIKITA KHURANA A-23 NEERAJ NAMAN A-37

Question 1

Was Mr.Dorosin a Voicer at any stage? If yes, narrate the actions of Starbucks management, leading him to become a Terrorist?

VOICER:-

A Voicer is a consumer who believes that complaining is positive for both the consumer as well as the company. A voicer feels that complaining helps the company to improve its services, and they give the company the opportunity to recover from its service failures. If the company responds in a positive manner, the voicers develop a positive attitude for the company. The following instances shows Mr. Dorosin behavior as a voicer:i.

Experienced problems and complained against the faulty Estro Vapore Espresso machine at Barkley, California store. Was given a loaner until replacement.

ii.

iii. Like a loaner so much that he purchased another one for a friend for $189. iv.

Complained about the faulty loaner and not being given a free coffee along with a loaner.

TERRORIST
A terrorist is a consumer who becomes obsessed with what he believes to be the companys inadequate response to their complaint. Such

consumers
They also

publicize

the

service

companys

failures

through

Newspapers ,advertisements and other media. encourage the other unhappy consumers to complain, thereby generating a considerable amount of negative publicity in the media about the company which can further damage the reputation of the company.

The Following instances show Mr. Dorosin as a terrorist:i.

Estro Vapore Espresso purchased by him from California store was a faulty one and he encountered certain problems with it

ii.

The Loaner purchased by him as a wedding gift for his friend was not in a good working conditions and he was also not given half a pound of coffee which is given free of cost with the purchase of a machine

i.

Despite several telephone calls to various people at both the retail store and Starbucks corporate offices, Mr. Dorosin felt that the problem remained unresolved.

ii. The company persuaded Mr.Dorosin to accept a $269 replacement for his $299 machine Starbucks would apply the $30difference to their cost on upgrading the bride's $189 machine for a $269 Model. iii. Mr.Dorosin when told Starbucks that if they wouldn't listen perhaps others would, and that if necessary he was prepared to take out an ad in the Wall Street Journal soliciting other "Starbucked" customers to call in on a toll free line. Starbucks said they were "Sorry he felt that way

Question 2

Critically evaluate the service recovery system of Starbucks. Identify the fail points and suggest remedial measures

Service Recovery

It is an effort an organization expends to win back customers goodwill once it has been lost due to service failure.

Urgent Effort
Urgent effort was made by the store to replace Mr Dorosins faulty Estra Vapore Espresso machine with a loaner, until his machine replacement Agreed to send a machine of a better quality to Dorosins friend. Offered a refund, when Estro 410 was also found defective.

Apology
The store manager apologized and said to come in for the manual, the lb of coffee and a free cup of coffee, when he forgot to give these things. Corporate Customer Service Supervisor, Bill Stein called and apologized Dorosin for his frustration, after knowing the whole incident from district manager.

Compensation
Stein offered Dorosin& his friend both $269 machines as compensation. Reese offered replacement of both machines, steaming pitchers & free coffee.

Fail Points: Dorosin from VOICER TO ACTIVIST

When he found both his machines turned out to be defective When he was not given lb of free coffee, to which he was entitled New machine should have been given with great care, when already one of the machines bought earlier by Dorosin was defective Repeated telling of story to the store manager, then district manager and then customer service supervisor may have irritated Dorosin Store manager failed to give Dorosin a good compensation when the second machine turned out to be defective Bill stein didn't the terms of Dorosin at the first instance when He asked to give the advertisement in Wall Street Journal

Remedial Measures
Doing things right the first time:
Stringent Quality measures should be adopted before the product is delivered to the consumer so that minor problems are resolved at the initial phases itself thereby saving Time, Cost and Reputation of the company

Complaint should be considered as a gift

Successful Complaint Handling Mechanism should be adopted because according to a RECIPROCITY PRINCIPLE, even if I had a problem with your company and if you do something nice for me, I will be more likely to give you more of my business and tell others, what a great company you are

Putting People First:

There should be a group of employees, who should go out of their way to satisfy consumers. Moreover, staff should be empowered to handle complaints and track down the complaint numbers each week without setting a goal to reduce them. More authority should be given to lower level managers to act quickly ,so that this kind of situations could be handled confidently. The employees or staff should be trained to empathize with the customers problem.

Question 3

Study the Product Mix of Starbucks Retail Stores. What proportion of their business is, Hardware and Equipment? How important is it for Starbucks?

PRODUCT MIX
The product mix in each store varied and was dependent on the size of

the store and its location.

Larger stores carry a revolving selection that can include any of the

Company's more than 50 varieties of whole bean coffees and a range of coffee related products, including exclusive, high-quality coffeemaking equipment as well as accessories bearing various Company trademarks, such as coffee mugs, coffee grinders, storage containers, coffee filters, and finely packaged gourmet food products.
The smaller stores and kiosks usually sell a full line of coffee

beverages, a limited selection of whole bean coffees and a few hardware items, mostly logo mugs and small equipment items.

 Starbucks product-mix expanded from 30 varieties of whole bean coffees to eco-

friendly cappuccino, coffee makers, and other Starbuck paraphernalia. Its product offerings have also expanded beyond pastries and coffee to oatmeal, smoothies, and wraps to keep up with the competition and satisfy more customer needs.
The company has also been constantly introducing new products, such as "Instant

via Ready" and "Full Leaf Tazo Tea Lattes" and "Tazo Tea Infusions".
The company also offers Starbucks coffee and cappuccino makers for consumers

who wish to replace their existing home coffee makers.

In recent years, the company began selling special jazz and blues CDs, which in

some cases were special compilations that had been put together for Starbucks to use as store background music.

As per the case:

The companys mix of merchandise as a percentage of retail sales was approximately 55% coffee beverages, 21% whole bean coffees, 14% food items, and 10% coffee-related hardware and equipment.

IMPORTANCE OF PRODUCT MIX

This line of product mix has very keen and really prominent role in bring

about image of their services in all aspects.

A company can use this product mix line in proving their quality of service

and this is front way of appearance which they can prove that they are best in service and quality.
The company can only take this as opportunity to prove their quality.
Customer service was a key ingredient to Starbucks success. One of the

five guiding principles of the company was Develop enthusiastically satisfied customers all of the time.

The larger Starbucks retail stores carried a range of coffee-related products,

including high quality coffee-making equipment. Which they can prove by using these mix strategy.

Question 4
Study the competitive scenario in their Coffee related Products Division.

Apply Porters model of Competitive Advantage and detail a strategy for the Starbucks

COMPETITIVE SCENARIO OF STARBUCKS FOR COFFEE PRODUCTS

The companys coffees and coffee products competed directly against specialty coffees sold at retail through supermarkets, specialty retailers, and a number of specialty coffee stores. The company believes that its customers chose retailers primarily on the basis of quality and convenience, and to a lesser extent, on price.

Coffee and coffee products

Specialty coffee at retailers Nescafe Folgers(P&G) Maxwell House ( Kraft foods)

Specialty coffee Shops Coffee Bean & Tea Leaf Costa Coffee

COMPETITIVE SCENARIO OF STARBUCKS FOR BEVERAGES

The companys coffee beverages competed directly against all restaurant and beverage outlets that served coffee as well as an increasing number of espresso stands, carts, and stores. The specialty coffee segment is a very lucrative segment and the company believes that any company with substantially greater financial, marketing, and operating resources than the company could enter this market at any time and compete directly against Starbucks.
Coffee Beverages

Beverage outlets: Restaurant

Green Mountain Coffee Roasters Dunkin Donuts Costa Coffee

Express stands, Carts and stores

Porters 5 Forces Model

Rivalry among existing competitors: High, within the industry Starbucks operates in with major competitors like Costa, McDonalds, Caribou Coffee, and Dunkin Donuts and thousands of small local coffee shops and cafes.

Bargaining power of Customers: High, because there is no and minimal switching cost for customers, and there is an abundance of offers available for them.

Threat of substitutes: High, substitutes for Starbucks Coffee include tea, juices, soft

drinks, water and energy drinks, whereas pubs and bars can be highlighted as substitute
places for customers to meet someone and spend their times outside of home and work environments.

Porters 5 Forces Model

Bargaining power of suppliers: High, due to the fact that the demand for coffee is high

in global level and coffee beans can be produced only in certain geographical areas.
Moreover, the issues associated with African coffee producers being treated unfairly by multinational companies are being resolved with the efforts of various non-government organizations, and this is contributing to the increasing bargaining power of suppliers.

Threat of new entrants: Low, because the market is highly saturated and substantial amount of financial resources associated with buildings and properties are required in order to enter into the industry.

STARBUCKS: COMPETITIVE ADVANTAGE STRATEGY

Focused Differentiation
Starbucks sustains competitive advantage by constantly looking for new ideas,

new products, as well as new experiences for guests. Example: the company hires designers to come up with artwork for commuter mugs. target customers.

Costly or difficult for multi-segment competitors to meet specialized needs of

Starbucks forte is incorporating differentiated features such as their different

flavored coffees that no other company offers convenience not on the basis of price.

They believe that customer chooses retailers on the basis of quality and
Market trends are constantly being monitored by Starbucks as well. They study

every citys personality and how their products can best fit into the community.

STARBUCKS STRATEGY

Product Line
1. Rapid store expansion strategy Domestic store expansion International store expansion

2. Coffee purchasing strategy

RAPID STORE EXPANSION STRATEGY

Domestic store expansion

clustered in high traffic and visibility area Starbucks everywhere approach

International store expansion

- Created a new subsidiary, Starbucks Coffee International for its international ventures.

Company-owned and company-operated stores or licensing

COFFEE PURCHASING STRATEGY

Relationship building with growers and exporters. Using fixed-price purchase commitment and purchasing coffee

future contracts.
Contributing to the sustainability of coffee growers.
Purchasing and marketing Fair Trade Certified coffee.

Promoting coffee cultivation methods that protected biodiversity

and maintained a healthy environment.

PRODUCT LINE STRATEGY

Wide range of products choices

The introduction of its Crme Frappuccino line of drinks is one example of how Starbucks strives to stay fresh and innovative The rollout of Starbucks Double Shot espresso drinks to answer the energy drink trend. The infusion of Tazo tea drinks into its product line is further evidence of Starbucks' desire to be viewed as different and unique.
High quality coffee making equipment Joint ventures PepsiCo Dreyers Grand Ice Cream Jim Beam Brands Starbucks Cards The Starbucks Card, a sort of "fancy gift certificate," is another one of Starbucks' successful innovations.

Question 5
Were the demands of Dorosin justified at any stage? How can now he be handled to save the company, money and reputation?

No, the demands of Dorosin were not justified at any stage because
In the initial phases itself, he was demanding a top-of-the-line replacement worth $2500 for machines worth $299 and a $189. If these demands would have been accepted, then it may lead to unjust demands from other consumers also. Infact when he got fame and publicity after giving an ad in Wall Street Journal, his demands changed and he started demanding a shelter for runaway juveniles, which was again an unacceptable demand .

Some Steps can be taken to handle Dorosin to save company, money and reputation:
CUSTOMER HELPLINE

24*7 customer helpline should be installed to handle all sorts of complaints of the customers.
IMPROVEMENT CAMPAIGN

Pamphlets, brochures with tag lines such as we dont want to lose you should be served along with every service so as to make customers feel special.
LEGAL ACTION:

The company can sue Dorosin after his persistent efforts to tarnish the companys image.
.