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Case study

Starbucks: delivering

By: Abrarul haque

Group - 8

Key Challenges for Starbucks

Invest $40 million to increase labor hours in each store?

What factor accounted for

Extraordinary success?
Great quality products,
Customized coffee, served in clean, convenient placed
stores for everyday coffee
Friendly and fast serving Baristas
Everything in a pleasant atmosphere
Their USP was a place where every American could escape
from home or work, for a coffee drinking ritual; high
quality coffee, according to each customer's taste, served in
a special, intimate ambience

Brand Image & Value proposition

Value proposition
Starbucks value preposition is best captured by: Live Coffee Mantra
It means creating an experience around the consumption of coffee.
Three component of this experiential branding:
1. Coffee itself
2.Customer Intimacy

Brand Image:
Market research team did take notice, several things.
1. Very little image or product differentiation between Starbucks and the
smaller coffee chains.
2. The number of respondents who strongly agreed with the statement
Starbucks cares primarily about making money was up from 53% in 2000
to 61% in 2001, while the number of respondents who strongly agreed with
the statement Starbucks cares primarily about building more stores was up
from 48% to 55

Why customer satisfaction score declined?

Reason for decline:
Focus more on partner satisfaction than on customer
Neglecting the market and customer trend
Increased lead time
Unsatisfactory service of partner as it sets high
slandered by the company
Low speed of service as customized drink slowed
down the process of delivery.
New stores cannibalized existing store sales

Is it simply measuring satisfaction wrong

Starbucks measuring only on how customer view the company not service:
More customer agreed with the fact that Starbucks cared about primarily
making money and building more stores but generally customer are satisfied
with the company.
What has been observed and measured was the compliance of partners' actions
with procedures, cleanliness and speed of service. For example, talking strictly
about the first two key attributes, cleanliness and convenience, they are both
fulfilled Customer snapshot" scores, customer survey and brand image
confirm it. However, these do not represent customer satisfaction, but they
hardly measure the level of few services offered.
Day believes that they "tend to be great at measuring things, at collecting
market data", but obviously they have collected wrong or useless information,
and, to make matters worse, they were "not very disciplined when it comes to
using this data to drive decision making"

How does the Starbucks of 2002

differ from Starbucks of 1992?
In 1992, 50% of the sales of Starbucks came
from whole bean coffee but in 2002, 77% of
sales comes from beverages.
Customer based changed from highly
sophisticated white collar peoples to new
young age , students and professional.
Coffee got more customized.
More products on the menu.

Starbucks has become a corporate, accessible and consistent

place to drink a good coffee on the way to work - it is not an
experience anymore today it appeals to customers with
completely different lifestyles, needs and wants.
It may satisfy this new customer base up to a point, but they
are not the initially targeted sector.
Since nothing has been done to stimulate intellectually the
sector targeted in 1992, they most probably left for
independent coffee shops, whose brands are associated with
"diverse, intellectual, artsy, funky, free-spirited", etc.
Starbucks is now appealing to younger people, looking for a
quick cup of good coffee, spending less time and money in
the shops. Also, we can read in the case that the growth
plans were based primarily on demographic data, not on
psychographic information. Market sectors instead of market
segments have been targeted during expansion.