Starbucks: Delivering Customer Service

Nimrah Zubairy 07031

The extraordinary success of Starbucks in the early 1990s is 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. 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:

• Quality of the Coffee: Starbucks offered highest quality coffee sourced from Asia Pacific, Africa, Central
and South America as It directly controlled the supply chain
• 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: 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' goal was to serve a customer within 3
minutes.
• 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.

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. 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.