Udit Agrawal (Mat. No.

351272)

Marketing Management Session 1 (Starbucks: Delivering Customer Satisfaction)

1. What factors accounted for the extraordinary success of Starbucks in the early 1990s? What
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was so compelling about the Starbucks value proposition?

First, Starbucks offered highest quality coffee and controlled most of supply chain to sustain
it. Second, it worked on Customer Intimacy to create an uplifting experience with small
gestures like making eye contact, remembering name and preferences along with service time
of 3 min. Third, it worked hard on creating an ambience which make their targeted affluent,
white collar customers to ritualistically linger and accept it as Third Place. Starbucks also
have advantage of being first mover in the industry and strategically located its stores high

traffic, high visibility areas and customized menus based on demographics.

There are certain compelling ideas behind Starbucks ideology like, it sited customer and
service as most prominent features with Just Say Yes policy and Customer Intimacy as
mentioned before. It emphasized heavily on soft skills of partners along with hard skills and
imprinted in its DNA, partner satisfaction leads to customer satisfaction. Also, it associated
intangible benefits with coffee drinking and created an inviting environment to have coffee.

2. Why have Starbucks customer satisfaction scores declined? Has the companys service
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declined, or is it simply measuring satisfaction the wrong way?

One of the major reasons for customer satisfaction scores decline can be attributed to
compounded job complexity with multitude of customized drinks which resulted in less time
for Customer Intimacy. It is also substantiated by the fact that 34% (Exhibit 11) customer
thinks service needs improvement. Whereas, another important factor has been customer
demographics change (Exhibit 8) which has resulted in 31% (Exhibit 11) customer thinks
better prices or incentive offers are required as new customers are from lower age and
income groups. The demographics change has also affected the perception of Starbucks as it
is seen as more Coffee on the run option compared to social, diverse, trendy independent

coffee shops which is completely opposite of Starbucks initial philosophy.

Companys services have definitely decreased compared to last decade but they also have
shortcomings in the measurement criterions as Customer Snapshot doesnt reflect the
sustainable process and the rough edges marketing research team discovered are not directly
relevant to quality of product and service.