Analysis of Starbucks Delivering Customer Service

 At the current moment, Senior VP of Administration Christine Day is contemplating how she

will pitch her plan to improve Starbucks’ customer satisfaction scores. On paper, the companies

self imposed “snap shot” program of mystery shoppers paints a picture that the stores are

operating effectively in the areas they feel drive customer satisfaction. However, recent surveys

have revealed that the company’s perception of what drives customer satisfaction varies from the

actual expectations of the customer.

 According to Starbucks’ 2010 Annual Report, customer satisfaction scores continue to increase,

and at several points within the report it is mentioned that the key drivers for customer

satisfaction are superior customer service/speed, along with partner friendliness and cleanliness.

It is worth noting that the two former factors were the top two responses for how Starbucks could

improve perceived value, while cleanliness was ranked as the most important attribute for

customer satisfaction. It can be perceived that an additional focus has been placed on these areas

since the article was written as CEO Howard Schultz mentioned them all in his letter to

investors.

 In order to convince Smith and Schultz of the proposed $40 million plan to increase each stores

allotted sales, Day must tie customer satisfaction to customer loyalty, and place an emphasis on

how this will translate to an increase in sales. In the HBR article “Putting the Service-Profit

Chain to Work,” the authors lay a groundwork for what drives customer loyalty and the

substantial impact that a lifelong customer can have on the bottom line. They state that

increasing employee satisfaction yields an increase in employee retention/productivity, which

improves customer satisfaction, and that ultimately increase loyalty and profitability. It was
mentioned that Starbucks partners have highly positive opinion surveys, but that increasingly

more difficult and time-consuming beverages are adding strain to their operations. With the

additional labor dollars, this could make the partners’ day to day 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. To make the argument stronger and to put it in financial terms, the $40 million

spread over 4500 stores would equate to $8888 per store per year, or $171 per week. Currently

the hourly employee labor poor is about $3240 for a store running about $15400 per week. This

results in a labor cost of 21.04%. In order to keep the labor % of net sales at the same level, the

store would have to run an additional $812 per week. With an average ticket hovering around

$4, this would mean the stores would need an additional 203 transactions per week, or about 800

per month. Exhibit 9 shows that guests that are extremely satisfied tend to nearly double their

visits from 4.4 to 8.3 per month, so if they were able to eventually “wow” 200 current, satisfied

customers and make them extremely satisfied, yielding them loyal to the company, they would

more than meet their investment. This calculation doesn’t include the almost certain increase in

visits from individuals who are currently unsatisfied, nor does it take into account the

exponentially more important customer life, both of which are worth noting.