18L-3082

Muneeb Suhail

Section: B

Summary
The success story of Starbucks began when Schultz got his chance and took over the company. Right
after taking command, Schultz immediately starting opening new stores. The stores were selling whole
beans and premium priced coffee beverages and were mainly targeting white collar patrons and well
educated people aging 25 to 44. Howard Schultz was inspired by a company who wanted to make its
customers the apex of its success. He wanted to change the coffee drinking experience in the U.S and
envisioned it as to be the third place for Americans. In order to achieve this, Schultz wanted to create
superior customer value by keeping the customers as the focus in its value proposition. He successfully
created benefits for its human resources which compelled them to create superior value and hence
change the overall coffee drinking experience.

The brand strategy of Starbucks was not about the coffee itself, but the experience that coffee gives to
its consumer. Starbucks wanted to keep the national coffee culture alive and it wanted to give an
experience which the people would entwine into their daily life. Few of the success factors of Starbucks
are listed below:

1- Ambiance: Schultz vision was to make Starbucks a “Third Place” for the Americans, where
they can sit and relax. Schultz said that at times an average American had only two places,
home and the office they work in, so he believed that people were in need of a third place
where they socialize and or even be by themselves. He envisioned a place that would play a
role in separating home from their work and a place which would have multiple meanings
for every different person that would walk in. To achieve this he wanted to recreate the
Italian Coffee culture he saw in Italy, Milan. In spirit Schultz wanted Starbucks to change the
idea of buying coffee from the coffeehouse as a drink to the experience and joy that is
brought by drinking coffee.
2- Quality: Another reason for Starbucks to be successful was that it had a strategy of
operating company controlled retail stores. It allowed them to control the quality of the
coffee and other products that were being sold at the stores. Product mixes tended to vary
depending on the store size and the location. At the same time Starbucks was also striving
to control the supply chain as much as possible by sourcing the highest quality of coffee in
the world from Africa, Central and South America and the Asia Pacific regions. These two
strategies allowed Starbucks to control their quality and create and enhance customer
value.
3- Employee Satisfaction: At Starbucks all employees were known as “Partners”. The company
had an extensive employee base of about 60,000 partners in total and most of them were
working on an hourly wage. Schultz made it clear from the first day that In order to achieve
customer satisfaction, partner satisfaction was necessary. The company had a lavish policy
of giving health insurances and stock options to their partners. As a result of this the
company had a consistent partner satisfaction rate of 80-90%. The company had a norm of
encouraging promotions from within its own ranks due to which 70% of the managers
working company were ex baristas. Even though this doesn’t prove the fact that it would
lead to higher customer satisfaction but since the company cares about its partners so much
that it would mean they convert this hourly wage position into a permanent position due to
which they would be more experienced and by only knowing the name of a customer that
walks in the store means that the customer would develop a sense of belonging to the store
and would definitely return.
4- Service Deliverance: Whenever a partner was hired in anyone of the Starbucks store, they
had to undergo two types of training. The first type of training was more focused on how to
handle the cash register and how to mix drinks since the majority of the beverages were
handcrafted which further ensured superior quality, this type of training was focused on
partners “hard skills”. The second type of training has had the goal of teaching the partners
on how to communicate and create a connection between them and the customers. They
were taught to wholeheartedly welcome the customer to the store, establish eye contact
with them and smile, remember the names and the orders of regular customers. Partners
were also encouraged to indulge in conversations with the customers which required an
answer more than a simple yes or a no. Another strategy to ensure quality service was the
“Just Say Yes” strategy. It meant that if a customer spills a drink and asks for a refill, he will
get the refill. These type of things again created an atmosphere of belonging for the
customer which made them feel special and hence increased satisfaction.
Recommendations:
I believe that making the $40 million investment is justified since the factors surrounding the valued
customer perception are the biggest group of factors requires improvements. The company does a
number of things to improve customer satisfaction, such as:

1- Offer promotions and launch incentive programs that can attract new customers and increasing
the customer base and even satisfy the existing customers.
2- Starbucks should consider developing a marketing department since historically it lacks one and
hadn’t spent a single penny on the advertisement. Since the landscape is changing and the
competition is getting tough, Starbucks needs to develop strategies which help it to stand out
from the rest. Moreover the marketing department will be able to look into and can provide a
better analysis of what are the customer needs which help Starbucks in understanding the
customers even better.
3- Starbucks shouldn’t waste the investment on new beverages since most of the customers are
not looking for new drinks and rather they are looking for superior and speedy customer service.
4- Partners should be trained for more friendly behavior with the customers and speedy services
which allow them, the customers, to build close belonging with the company.