Case 15: Massachusetts Audubon Society

1. How is MAS currently positioned against other environmental organizations in

Massachusetts?

National environmental organizations included Friends of the Earth, National Audubon Society,
Sierra Club, The Nature Conservancy, and Wilderness Society had chapters or offices in
Massachusetts. The Appalachian Mountain Club was regional, with chapters throughout the
Northeast U.S. By contrast, Mass Audubon, Trustees of Reservations and MASSPIRG confined
their activities to Massachusetts. Although organizations sometimes worked in coalitions to
advocate specific political agenda, they also competed for funding and, to some extent, for
members. On occasion, some of them had even competed for the same piece of environmentally
sensitive property. The Nature Conversancy protected 17,000 acres in the state, Mass Audubon held
29,000 acres, and The Trustees of Reservations had more than 45,000 acres. Many other nonprofit
organizations operated individual sanctuaries and nature centers or preserved land from
development through land trusts.

2. What is the new member worth to MAS?

MAS’s phrase is “Protecting the Nature of Massachusetts.” They wanted their education program is
aligned with mission and themes. They were trying to find the best way to leverage their unique
strengths-their sanctuary system, scientific expertise, advocacy capability, and their staff so that
Mass Audubon could be a catalyst for conversation. Thus, the new memberships mean that they are
able to get the message across. They have this paradigm from “caring to knowledge to action.”
When people act, that’s the impact.
Case 16: TLContact: CarePages Service (A)
1. Evaluate the evolution of TLC and identify the key decisions that kept it afloat and
underpinned its subsequent success.

Time Line of Case (Key decisions identified with boldface)

February 25, 1998 Eric and Sharon (Day) Langshur’s son Matthew born in Hartford, CT with
heart defect
March 2 Matthew has first operation at U. of Michigan Medical Center
Early March Mark Day (Sharon’s brother) creates simple web site at Stanford
1998–99 Matthew has two more surgeries; more than 200 people visit the website and
return many times
Late 1999 Langshur quit jobs in Chicago to start company to commercialize the
concept, quickly and easily raise $3 million in “angel” financing; Eric is
CEO, Sharon is director of medical services
January 2000 Mark Day joins team as Chief Technology Officer, decides to build website
in-house; team is expanded to include other staff
August 2000 TLC website is launched and continuous improvements made thereafter
Summer 2000 Additional financing obtained; TLC revises business model to B2B, targets
marketing/PR hospital staff, adopts missionary sales approach
Early 2001 Contracts signed with three prestigious hospitals: U. of Michigan Medical
System, NY Presbyterian, Children’s Memorial Chicago
Fall 2001 TLC is running out of cash—dot.com crash environment means no longer
possible to raise money for seed-stage Internet company without cash flow
2002 Competitor, BabyPressConference shuts down; TLC reaches agreement with
CHCA—buying consortium for 38 children’s hospitals; direct-to-hospice co-
marketing initiative launched with National Hospice and Palliative Care
Organization; paid pilot program launched with Tenet Corp., operator of 116
acute-care hospitals; Spanish language option developed through collaboration
with Mexican hospital
June 2002 Mark leaves TLC to enroll in Wharton MBA program
Fall 2002 New feature, online survey capability added to Boston Children’s Hospital
site—useful feedback about value of service to users; pilot donation
programs at two hospitals suggest TLC service increases willingness of users
to donate money to sponsoring hospital—could make service self financing
Late 2002 Lead time on new sales has dropped from nine months to three months
Q1 2003 Revenues accelerating rapidly, more customers sign up, existing customers
renew, increased CarePage utilization/hospital; TLC now serves 40 hospitals
in United States and Canada, mostly academic medical centers (acute care,
state-of-art medicine, very prestigious); additional hospital prospects in
 pipeline but no nursing home or hospice customers; TLC responds to SARS
crisis in Toronto, where several hospitals have been quarantined, by offering
24-hour implementation of CarePage service at a special price
Q2 2003 Eric Langshur plans agenda for board meeting

Genesis of the Concept

The TLC concept originated as a brother’s response to a devastating medical problem affecting his
sister’s new baby. The challenge: To employ evolving website technology (1998) to keep everyone
up to date on the baby’s progress and thus save the parents from having to repeat the same information
over and over again by telephone to concerned relatives and friends. The original simple website
(which would have cost only a few hundred dollars if Mark had paid someone else to build it)
included:
 Bulletins on baby Matthew’s progress
 Background medical information
 Bulletin board for family and friends to post messages
Key results:
 News of the site spread by word of mouth
 Individuals who had never used the Internet before were motivated to find a way to access the
site
 200 people in total used the site—that’s a lot of friends and family!
 People revisited the site on a regular basis to get updates
 Site remained up for two years (Matthew had three rounds of surgery)
 Parents were spared massive amounts of time responding to phone calls with same
information

Success of this concept led to decision to commercialize it. Note that each of TLC’s competitors was
started by individuals who had created family websites for similar purposes (pp. 624–625).

Evolution of Business Model

TLC was launched in an “intoxicating environment” with what proved to be unrealistic expectations
of rapid growth. The business model and selling procedures all had to be modified (pp. 619–20):

 Business Model 1.0: B2C, target prospective parents, families of hospital patients and charge
them a fee per page. But too expensive, too difficult to reach these individuals.
  Business Model 2.0: B2B, target hospitals (who would then offer service to patients—perhaps
at a fee); sell to physicians. Problem, doctors don’t have time to listen or budget to buy; are
busy with patient care.

 Business Model 2.1: Target PR and marketing groups within hospitals—have budget, more
likely to see advantages for hospitals in terms of increased patient satisfaction. Problem, don’t
want to charge patients for a service designed to increase their satisfaction (e.g., TV).

 Business Model 2.2: Get hospital to pay and offer service free to patients. Problem, hospital
administrators couldn’t see appeal to patients or advantages to hospital—required missionary
sales approach which had to target multiple individuals holding a variety of other jobs within
a broader decision-making unit.(e.g., finance, nursing, IT)

Missionary Sales Approach

TLC had expected service to sell itself (better mousetrap fallacy). Now had to switch to missionary
sales approach, emphasizing:

 Advantages to hospital include more satisfied patients, fewer demands on hospital staff as
family and friends turn to website rather than phoning hospital for information

 Findings of national survey of patient satisfaction which showed that:

- 27 percent reported lack of emotional support

- 28 percent cited inadequate information and education
- 23 percent complained of insufficient involvement of family and friends
- patients receiving inadequate emotional support were up to ten times more likely to say
they would not return to/recommend that hospital

Investment in Systems Design

TLC decided to build the website themselves rather than subcontract which would:

 Retain intellectual capital

 Make it easier to undertake future updates and expansion

 Mark Day’s experience with original site gave him clear idea of how it should be built,
including need for flexibility
TLC was willing to invest heavily to get its own systems up and running fast. Worked hard to ensure
system and software were:-

 Usable (user friendly)

 Functional (does what it’s supposed to do)

 Scalable (can be expanded and built upon without failing)

Chose to employ open source-operating system because source code was freely available.

Regularly updated, revised, fixed problems, enhanced functionality, added new features, including
email notification to members of updated news.

Customized pages for hospitals so that they were branded with hospital logo and accessible through
hospital website, even though loaded on TLC’s own servers.

Included software logic to fix common mistakes that users might make. Note people accessing
medical bulletins of loved ones are likely to be nervous and often infrequent users of keyboards and
websites, so more prone to make mistakes—will appreciate user-friendly, “forgiving” website. This
type of innovation is expensive.

Marketing Strategy

 Offer hospitals stand-alone service positioned as e-business patient satisfaction solution

 Rely on viral marketing among families and friends to promote TLC through word-of-mouth
referrals and thus avoid need for mass media marketing

 Outsource direct sales to a national distribution partner that has relationships with hospitals
and health care facilities

 Licensing TLC software to trusted third party vendors and consultants who could bundle TLC
services as a feature to enhance their own offerings, in return for a royalty

 Seize opportunity presented by SARS crisis that quarantines several Toronto hospitals to offer
special rate Care Page service with only 24-hour notice
2. How does TLC create value for (a) patients, and (b) hospitals?

Value for Patients (and their families)—See feedback in Exhibit 2

 Emotional support—keep in touch during illness and recovery

 Save time, reduce stress for family—avoid need to repeat same information many times

 Ensure accuracy of information about patient

 Get new info out quickly to everybody

 Offer potential to link to expert information about the patient’s medical condition

 Facilitate support networks, build bonds with family, friends, and community

 Uplifting for family, patients to read all the messages—may even speed recovery

 Generate spiritual support through prayers

 Include pictures

Value for Hospitals (Note Case Exhibit 3, especially)

 Competitive advantage:

- Increased patient satisfaction is a competitive advantage

- Former patients more willing to return
- Positive word of mouth by both patients and “members” generates referrals

 Productivity tool—saves staff time and effort of responding to requests for info on patients

 Motivational tool—TLC offers potential for patients and CarePages members to nominate
outstanding hospital staff; knowledge that hospital is well regarded may increase retention
and motivation, facilitate recruitment

 Image booster for hospital—May be able to get local PR when TLC service first installed;
CarePage members are impressed (see responses to question 4 of visitor survey, Case Exhibit
3, p. 623)
  Educational tool—potential for hospital to send messages to CarePage members on
permission basis—note responses to Exhibit 3, q. 2, p. 624

 Donation booster—satisfied “members” (visitors to CarePage) more willing to make

donations (see p. 622 and Exhibit 3, responses to question 4, p. 623).

3. Review the four topics on Eric Langshur’s rough draft of the agenda for the board
meeting. As a board member, what position would you take on each topic, and why?

Future Growth

a) How fast?

The rationale for growing fast is to penetrate the market as deeply as possible before current or
new competitors can do so. The risk facing any small business with limited capitalization is that
expenditures will rise faster than income and it will become insolvent.

b) What directions?

TLC has to decide whether to emphasize CarePages versus HTN or to try to run both in harness
simultaneously. It also has to decide whether to stick with the current offerings or to actively
pursue a strategy of product enhancements, even an expansion of the product line. Finally, it has
to decide how much emphasis to devote to Canada, Mexico, and (potentially) other Spanish-
speaking countries relative to the United States.

c) Key targets as selling priorities?

Bigger hospitals have more beds and therefore more patients. Acute care hospitals have sicker
patients who will be in hospital and recuperation longer and whose friends and families will be
more worried about them. Hospitals with substantial obstetrical beds will have larger numbers of
babies being born.

d) Opportunities for new value-added services?

CarePages already are available in Spanish and will soon be available for sale to U.S. hospitals
for an extra fee. Maybe TLC should also consider French? But this represents a much smaller
market (Canada’s population is 33 million, about the same as California’s, and only 20–25 percent
are French speaking). This option would have only limited appeal in the United States where the
 primary French speaking immigrants are Haitian, many of whom prefer to speak and write
Creole—effectively a different language. Under development are:

 Refined procedures for surveying members (visitors) after they have completed a certain
number of visits (useful for feedback, fundraising)

 Nurses Hall of Fame (helps hospitals with hiring—presumably by highlighting that this is a
good place to work—and retention [pride?])

 Message inbox allowing hospitals to deliver targeted messages to members (would require
permission from members but, if given, could help with fundraising and word-of-mouth
promotions; TLC would need to specify content parameters

 Send-a-Prayer—functional link to faith-based organization (would certainly appeal to some

members—note religious content in four of ten feedback messages in the Appendix; question:
Should TLC control list of “appropriate” faith-based organizations? Could be tricky.)

e) Launch stripped down TLC at much lower price?

 Might help TLC gain entry to cash-strapped hospitals, nursing homes, hospices

 Issues:

- Would there be any significant savings for TLC in stripping out certain features?
(Probably minimal because main costs of features are in development.)

- Risk: buy market share by deep discounting that can’t easily be reversed in future years

- Product will be less appealing—fewer functions for members and sponsors

- Existing customers might wonder why they are paying so much more and use this fact as
a bargaining chip at renewal time

- May lower barriers to competition, bring TLC down to TheStatus and CaringBridge
levels. Note failure of VisitingOurs, provider of “a rather basic service”

- Eric believes “added value items are what persuade hospitals to buy” (p. 622, col. 2)

Competition
a) VisitingOurs folds. Good riddance to another competitor, which joins Baby Press Conference on
the trash heap! Is there anything to be learned about this latest failure?

 A rather basic service (less demand for the basics?)

 Outsourced web technology (probably less innovation, less learning from experience, risk of
poorer quality, owners divorced from interface with customers).

b) Comparison chart of TLC vs. TheStatus and CaringBridge (Case Exhibit 4).

TheStatus (TS) is run as sideline of Web design company in Alaska. How seriously will prospective
hospital customer take them? How effective can their sales effort be? CaringBridge (CB) runs by
nonprofit. May have lower prices but how much can they afford to invest in upgrades and innovation?

TLC offers:

 Highest levels of customer service. TS is close but lacks Spanish language, CB is weak.

 The most feature rich service for health-care facilities—the only one with welcome message,
active survey, and donation systems, Spanish language, and unit specification. TS is next best.
CB is very weak.

 Branding. TS is the only one with the entire website co-branded (but is this what hospitals
want?). TLC is the only one to offer customized colors and graphics (more bells and whistles).

 TLC offers the most features for patients. Unique advantages include email notification (when
a new bulletin is posted for a patient, all registered members are told there’s an update), sorting
and paging. TS is second, CB a distant third.

 Message board. Only TLC offers opportunity for patient (or family member) to respond to
messages.

Future threats?

CB looks very weak and will probably be the next to go. Perhaps its owners might sell the system to
someone with deep pockets who would be willing to invest in it. TS would be a better buy for such a
party in terms of offering more features. (Note no one wanted to buy BabyPressConference when it
went under.) The potential market is huge, however, TLC has only a tiny share, and the investment
required would be very modest for a major player in the health care market. Instead of selling the
service to hospitals, a large health products firm could offer its own service free, either self-branded
or co-branded with the hospital (“sponsored by ABC pharmaceuticals”) and develop the membership
list, with permission, as an advertising channel.

Would competition hurt us?

Probably not. It would be easier for a competitor to target current non-users than fight to take one of
TLC’s existing customers away at renewal time. In a mature market, new sales can only be gained by
drawing share from other competitors. In a market with huge latent potential, stimulating primary
demand is the issue (note from p. 6 that there are 6,000 acute care hospitals in the United States,
17,000 nursing homes, and over 3,000 hospices) Competitive activity will generate more awareness
and could help to establish the legitimacy of this type of service. (Note FedEx created the overnight
package delivery business, but subsequent competition from UPS, DHL, Airborne, TNT, and the
postal services helped expand the market rapidly and all parties grew sales as a result). The main risk
would come from a competitor who provided a similar service at a much lower cost, forcing TLC to
drop its prices.

Can we competition proof TLC?

Can’t prevent entry of deep-pocketed new competitor from entering, although it would take time to
develop necessary software, systems and infrastructure (could outsource, of course). Could probably
work around patent protection. Eric thinks TLC’s best defenses are:

 Strategic partnerships
 Continued growth (a long way to go!)
 Product enhancements
 Maintenance of exceptional customer satisfaction levels
 (Could also add high ethical reputation)

Possible Financial Partnership

A large supplier of medical equipment and services is interested in taking a minority financial stake
in TLC.
Finance for accelerated growth?
This is obvious motivation and would allow TLC to sharply increase its selling effort.
Market leverage?

 A powerful financial partner might be able to open doors to prospective new customers
  Add to TLC’s credibility—no risk of them disappearing in a year or two like
BabyPressConference and VisitingOurs
 Perhaps opportunity for bundling of sales efforts (medical supplies plus TLC products)

Pros and cons?

YES

 Increase selling and preempt competition

 Invest in new product development and enhancement
 Finance HTN programming development
 Help with R&D on new technologies

NO

 Some loss of control, even with minority shareholder who may want full control later
 Potential for disputes—what happens if partnership breaks up?
 Will there be pressure to abandon TLC’s very ethical positions on “permission” marketing,
“moral contract” with patients and families

Now or later?

 What’s the rush? Sales are accelerating and TLC is about to become profitable. No new
competition on horizon to stimulate drive for preemption of market.
 May be able to finance growth out of income.
 If waits to sell a stake later, may get more money for a smaller share of equity.
 If TLC feels it really could use more funds to advance market penetration of CarePages, how
about selling HTN?
Case 17: The Accellion Service Guarantee
1. What is the marketing impact of a well-designed service guarantee?
Service Guarantee
A service guarantee is a marketing tool service used by the firms to
– Reduce consumer risk perceptions, signal quality, differentiate a service offering
– Find opportunities to rectify a situation
– Set standards to cater to the expectations of consumers from the service provided
Details of Service Guarantee
– Performance Guarantee
– Availability Guarantee
– Customer Service Guarantee
– Security and Privacy Policy 7

Marketing Impact
 2. Evaluate the design of Accellion’s guarantee shown in Exhibit 1. How effective will it be in
communicating service excellence to potential and current customers? Would you
recommend any changes to its design or implementation?

Design of Accellion’s guarantee

How effective will it be in communicating service excellence to potential and current customers

Recommendation:
Design Recommendations:
– Increase policy transparency by generating regular reports
– Should be careful while using words
– Add disclaimers wherever needed
– Should make use of competitive advantage Implementation
Recommendations:
– Employee more staff & ensure efficiency from the employees
– Regular training of employees to keep them up-to-date and motivated
– Continuous improvements by keeping track of customer expectations through surveys and
feedbacks.

3. Will the guarantee be successful in creating a culture for service excellence within

Accellion? What else may be needed for achieving such a culture?

4. Do you think customers might take advantage of this guarantee and “stage” service failures
to invoke the guarantee? If yes, how could Accellion minimize potential cheating on its
guarantee?
Case 18: Starbucks: Delivering Customer Service
1. What factors accounted for the extraordinary success of Starbucks in the early 1990s?
What was so compelling about the Starbucks value proposition?
The extraordinary success of Starbucks in the early 1990s can be attributed to Schultz who
conceptualized a value proposition differentiated by means of high levels of service & quality
elements offered to a target audience. This converted the experience of drinking coffee into social
experience, a concept new to US but which soon caught up. This led to Starbucks being able to build
a brand for itself and differentiate itself from other coffee chains selling coffee at half the prices. This
was achieved through following ways:
Product Strategy
 Quality of the Coffee: Starbucks offered highest quality coffee sourced from Asia- Pacific, Africa,
Central and South America. It directly controlled the supply chain by working with coffee growers.
It controlled the offering quality by owning stores and not giving franchisees.
 Product Innovation: Starbucks tried to introduce something new for its customers and spent a lot of
time in R&D. One such product innovation was Frappuccino beverages in 1995. It was so well
conceived that it boosted the sales during non-peak hours and became one of the company’s most
successful innovations.
Service Strategy
 Service: The service was focused on establishing good relationship with customers and improving
their experience. The employees or Partners were trained on how to connect with customers by
smiling, having eye contact and remembering their names and orders. Starbucks had “Just Say Yes”
policy which empowered employees to provide best service to the customers beyond company
rules. Starbucks’ goal was to serve a customer within 3 minutes.
 Partner Satisfaction: Howard believed that satisfaction of the partner leads to customer satisfaction.
The company provided many incentives to their partners including health insurance and stock
options to even entry level partners. The company also believed in promoting its existing employees
rather than hiring new ones, which clearly explains its low employee turnover (just 70% in
comparison to 300%).
Place Strategy
 Store Ambience: People generally had only two places where they spent maximum time- work and
home. But, Howard believed that they needed another place where they could sit, relax and network
with others around. Hence, Starbucks provided ambience that would make them to stay. It had
seating areas that would encourage lounging and layouts were designed such as to provide an
inviting environment for the people.
 Distribution Channels: Almost all the Starbucks stores were located in high visibility and traffic
areas achieved by early expansion by means of taking the company public, through this one can
achieve low rental cost etc. It sold coffee through other channels as well known as “Specialty
Operations” and had international licensed stores, warehouse clubs, grocery stores, mail order and
online sales. It also had a joint venture with Pepsi to distribute Frappuccino beverages and it
partnered with Dreyer’s Grand Ice Cream to distribute premium ice creams.
The value proposition of Starbucks is compelling because they give utmost priority to customers and
to the service provided to them. They offered the customer, the highest quality coffee. Also, the value
proposition is not only about the coffee but also the “experience” around its consumption.

2. Why has Starbucks’ customer satisfaction scores declined?

Starbucks’ differentiated value proposition designed for its target market revolved around: service,
ambience and product quality. Though latter two were consistent, service was showing signs of strains
in terms of customer perceptions, as brought out by declining customer satisfaction scores. Overall
rating of Starbucks was especially low among the new customers. However, Starbucks’ self-
assessment scores were showing a positive upward trend.
 Changing customer demographics & expectations: The new customers were younger, from a
lesser income bracket, had different perceptions about the brand. This difference in brand
perception & service expectations i.e. fast service versus customization and lounging is
another reason for low satisfaction scores. While case mentions that most of the service
delivery design and metrics were still keeping in mind the established customers.
 Service decline & measurement gap: The case mentions customer satisfaction gap could
possibly be an outcome of service gap. A large number of customers (34%) believed service
was an area Starbucks could improve upon. Friendlier and faster service was a higher rated
attribute by customers than personal treatment which was an essential part of Starbucks
measurement system. The amount of customization in drinks made serving customers within
time difficult for the baristas.
 Brand Identity and Image: In spite of attempts to differentiate Starbucks from other specialty
coffeehouses, there was little differentiation in the minds of consumers. Because of their
limited presence, the specialty coffeehouses were able to deliver differentiated service to a
niche crowd, which was difficult for Starbucks to achieve considering its ubiquity. Starbucks,
which positioned itself as the ‘third place’, was now being perceived as a place for coffee on
run. Starbucks came to be seen not as a coffee chain with a difference, but as corporate which
‘cared primarily about making money’.
 Losing sight of core proposition: The recent focus of the company had been product centric
as well as to expand rapidly versus the customer centric approach adopted earlier. In their
drive to build brand and introduce new products, they lost sight of changing consumer needs.
The tenuous connection between customer satisfaction and growth seems to have been
disrupted by focusing too much on brand building.

3. Describe the ideal Starbucks customer from a profitability standpoint. What would it take to
ensure that this customer is highly satisfied?
A large portion of Starbucks’ sales came from the loyal customers. 21% of the customers contributed
to around 62% of all the transactions i.e. an average of 19 transactions per customer. In addition the
case gives the customer life time value per customer as shown in exhibit 1 from which it is amply
clear that a highly satisfied customer is a source of a higher revenue. A new customer accounts for
about 15 coffee cups/ week while an established customer accounts for 19 coffee cups/ week. As per
the case, from a cost standpoint labour was Starbucks’ largest expense. Store operating expenses
accounted for about 41% of the total store revenue.
The case mentions 2 important facts about the store costs.
1. The heaviest users i.e. the established customers demanded customization, increasing the
labour content and slowing down service. They also lounged more.
2. Drive through accounted for 50% of sales in stores having the facility.
These facts point out to the fact that the new customers, who are also loyal, would have similar
revenues but significantly lower labour content in the coffee, making them more profitable customers.
However, overall satisfaction of new customers was significantly less that of the established
customers owing to different service expectations. To ensure satisfaction of the new customers
Starbucks must have faster and attentive service, appropriate prices. This can be achieved by using
more labour saving and product standardizing techniques like the verismo machines, Frappuccino
like products top boost off peak sales, increased ergonomic optimization, if necessary more labour.

4. Should Starbucks make the $40 million investment in labour in the stores?
Starbucks considers customer service as a vital element of in store experience. Starbucks has a service
index called the ‘Customer Snapshot’ comprising ‘basic’ and ‘legendary’ service. Speed of service
forms one of the criteria of the basic service and Starbucks has improved on the parameter. However,
despite that customers want a higher speed of service this shows gap in between the company’s targets
and customer expectations. In order to plug these expectations Christine Day, Sr. VP administration
has proposed a $ 40 million per annum additional expenditure on increased labour hours. Company’s
management, however, wants that the $40 million investment should also translate to business
growth.
With the current average hourly rate of $9 and average labour hours of 360 per week, the average
weekly labour cost comes to $3240. Also with average ticket size of $3.85 and average daily customer
count of 570, the average weekly revenue comes to $15361.50. Thus the weekly profit figure becomes
$12121. Break even with the investment of $40 million can be through –
1. Increasing the customer count.
2. Increasing loyalty thereby increasing the average ticket size and life time value
As shown in the Exhibit 3, we can achieve the break even by either increasing the average daily
customer count to 577 or by increasing the average ticket size to $3.9. Increase in ticket size requires
a migration of 84 customers from unsatisfied to satisfied category and migration of 74 customers
from satisfied to highly satisfied category in each of the store to breakeven an expenditure of
$40million. These numbers represent around 6% of the total customers in the respective categories
and appear feasible. Therefore Starbucks can go with the proposal without straining the earning per
share. Additionally, increase in the investment on the in store labour would have the following
benefits-
1. Customer Satisfaction- Starbucks is dealing with 2 customer segments i.e. the existing customers
who value customization and personal attention and new customers demanding faster service.
Existing customer segment puts pressure on the service of the Starbucks store, yet are loyal
customers of Starbucks to whom Starbucks owes its brand identity. Hence Starbucks will be able
to serve this segments’ needs adequately with increased labour. For the new customer segment
speed of service is an important service parameter. Hence increased labour would also enhance
satisfaction and loyalty of this segment translating to a higher revenue.
2. Customer Retention- The penalty in terms of customer life time value of a customer going from
a highly satisfied state to satisfied is $2248. This is a huge downside and additional labour can be
used to retain the highly satisfied customers in the same state.
3. Partner Satisfaction- Investment of $40 million will also enable Starbucks to achieve a higher
partner satisfaction since the workload would get distributed. This will also enable Starbucks to
introduce new beverages at regular interval, another key proposition of Starbucks.