Faria Mehboob / 19L-1634/ B Section

Starbucks: Delivering Customer Service

Case Summary
The case depicts a business dilemma faced by Starbuck's to take measures in order to improve
their current area of weakness, customer satisfaction. Starbucks started off with the efforts
made by Gerald Baldwin, Gordon Bowker and Ziev Sieglin Seattle’s Pike Place in 1971. In 1982
with Schultz addition, it was thought to create starbucks as a 'third place' for people, home and
work being the first and second. Starbucks was created with the purpose of creating not just a
brand but an experience and a place to relax meaning different things to different people.
Starbucks embodied its mantra of 'Live Coffee' through three components of experiential
branding strategy, the uniqueness of coffee itself, the element of customer intimacy generated
and the atmospheric appeal. Starbucks made its way to the top by tapping into high traffic areas,
introducing products other than whole bean coffee.. Another distribution channel adopted was
through non-company operated retail channels that brought 15% of net revenues by making sales
to hotels, airlines, restaurants, domestic retail stores, and specialty revenue generation from sales
International licensed stores, grocery stores and warehouse clubs. The company employed
60,000 partners worldwide and about 50,000 in North America. Hourly-wage employees are
called baristas. They believe that partner satisfaction leads to customer satisfaction. Everyone
had to train (for soft and hard skills) and succeed as baristas before being allowed to work in
corporate headquarters. Two tools for measuring service performance were Customer Snapshot,
a mystery shopper program, and Legendary Service which is based on secret shopper
observations. Two main areas were focused to drive company's growth, retail expansion was
done into different states with the objective of opening stores in new markets while
geographically clustering stores in existing markets. Coffee and non coffee based line
Frappuccino beverages and bottled version of beverages captured a large market.

Despite taking measures to stay successful in the market, Starbucks was falling short on
customer satisfaction based on the market research results.
Issues faced by Starbucks

• Inability to make use of data from market research to make timely decisions.
• the information on Starbucks stored value card was not utilized to its full potential.
• Starbucks came to realize that they hold very little differentiation when compared to
smaller coffee chains.
• Customer base was frequently evolving.
• Customization of drinks lead to a number of drink combinations which slowed down
service in general.
• Geographically clustering their outlets sometimes lead to Cannibalization.

Questions Arising from the Case

• In what ways can Starbucks maintain their quality, speed of service, options of
customized drinks and customer satisfaction at the same time?
• Should Starbucks believe what its customers are telling them about what constitutes
‘excellent’ customer service?
• Will excellent customer service create impact on its sales and profitability if they deliver
it?
• In what other ways can Starbucks use market research and data on the store value cards to
create customer relationships?
• In what ways can excellent service of 3 minute benchmark become consistent?
• How can Starbucks create ways to be differentiated from competitors?
 My response

Dilemma of the case is basically to arrive at the decision whether to make additional 40 million
annually in 4500 stores, which is believed to add the equivalent of 20 hours of labor a week. By
making such investment Starbucks can speed up its service to another efficient level, but it would
be more efficient to use the money on programmed machine that require less man handled steps.
The wide combinations existing due to customizable options have already challenged Starbucks
delivery of pretested quality drinks, having automated machines can help achieve consistency
and satisfy customer every time.
Starbucks should use the information stored on the store value cards to extract demographics and
physiographic elements of consumers so that offers can be made accordingly. By using the
information the customers in the lower income bracket customers, Starbucks can offer affordable
non-customizable or standard coffee so that low income customers can still the Starbucks
experience and simultaneously less steps will be taken to prepare the coffee, leaving time for
baristas to develop a conversation with customers and providing the benchmark service in 3
minutes. Starbucks should focus on turning its satisfies customers to highly satisfied ones since
according to facts, a highly satisfied customer will visit 67.44% more than satisfied one.
Moreover by using data on store value cards, Starbucks can give out promotions as 19%
customer feel that having promotions will make them feel valued customers. Moreover
Starbucks should work on the differentiation perception of customers who feel that Starbucks
offers little differentiation when compared to other brands. A rough image of being all about
money making and expansion should also be worked on to have satisfied customers. Lastly,
Starbucks should also create more effective training programs for baristas so that they stay
beyond 90 day period of training, and develop customer recognition effectively. Starbucks
partners also had highly positive opinion surveys, but that increasingly more customizable and
time consuming beverages added strain to their operations. With the additional labor dollars, this
could make the partners’ everyday tasks less stressful and improve their ability to focus on the
speed of service, their level of friendliness and also on the cleanliness of the store. Investing in
baristas and partners can resolve the dilemma since it is said that satisfaction of partner leads to
customer satisfaction.