Name : Deepak Bora

SAP ID : 80303180028

Starbucks: Delivering Customer Service

How does Starbucks deliver its value proposition in these changing

times?
The extraordinary success of Starbucks can be attributed to 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. 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 is 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

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 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.

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