Delivering Customer Service

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due to: Excellent Supply chain management Control over Retail operations . service or customer intimacy with an “experience”.Introducing Starbucks •Brainchild of Howard Schultz (1980) •Chain of coffeehouses with a product differentiation of specialty “live coffee”.000 stores around the globe. •By 2002. there were over 5. •The company spent minimal dollars on advertising to promote a brand concept. •Known for High Quality. and an atmosphere of a “third place” to add to their work and home alternatives. •The original stores targeted the affluent.

Background Strategic Alliances for specialty products. Strategy of opening new stores at a rapid pace. Special focus on Baristas (employees). Many products required numerous steps to complete the order. often cannibalizing itself. Introduced a prepaid card. System to track customer satisfaction. No Centralized Marketing Program. There was lack of differentiation and also change of customers. Installed automated espresso machines in some stores. Concern had been expressed that Starbucks had lost the connection . Threat of Indirect competition and New Entrants. New innovation was based upon partner acceptance.

Mission Live Coffee The Starbucks Value Proposition To create an “experience” around the consumption of coffee. sense of community. and the need for people to come together To create an uplifting experience in “Customer intimacy” . an experience that people would weave into their lives To create an “ambience” based on human spirit.

Advantage Starbucks 11th consecutive year of consistent sales of 5% or greater. Company spent close to nothing to achieve this goal. Good strategic alliances with Pepsi-Cola and Kraft foods to distribute some of their products. Lowest employee turnover rates in the industry (just 70% as compared to 300% the average of the fast food industry) Implemented good policies to insure competitive advantage “Just say Yes” policy Measuring service performance Expect business projections to rise and be steady and consistent . Sales climbed at an annual compound growth rate of 40% and net earnings to 50% since Starbucks went public.

This is in contrast to the way Starbucks management viewed the company. quick. should $40 million be invested in the 4.500 stores focusing on improving the speed of customer service? Will this improvement lead to increased satisfaction that will translate in to an increase in sales and profitability? Does this investment align with the growth strategy of retail expansion and product innovation? Recent indications were that customer satisfaction was declining due to the time required to be served and employee attitude • • • • . but Starbucks was seen more as a convenient.Issues • • Differences between customer and management perception. and consistently good coffee provider. Customers did perceive many independent coffee houses as a “third place”. Recent Market Research shows a decline in Customer Satisfaction at Starbucks. To stay on plan with their aggressive growth strategy.

Is that going to add customer loyalty? Starbucks wanted more handcrafted time consuming choices for consumers. specialty coffee was estimated to be 3. Starbucks had no operations in 6 states. do the customers see them this way or as a specialty coffee commodity store? • • • Rise of coffee consumption in the US with the largest growth being that of specialty coffee. Specialty Coffee Market Traditional Market . In the home segment.2 billion. Starbucks only had 4% of this market. Is that going to add to customer loyalty? Starbucks sees themselves as selling innovative products. and was operating in only 150 of 300 metro areas.Questions and Opportunity • • • Starbucks wanted to serve the customer within 3 minute time window.

Market Research Findings Recent Findings of people’s experiences: Starbucks cares primarily about making money Starbucks cares about building more stores • Up from 54% to 61% • Up from 48% to 55% Top 5 Attributes of Starbucks: Known for specialty/gourmet coffee (54% strongly agree) Widely available (43% strongly agree) Corporate (42% strongly agree) Trendy (41.5% strongly agree) Always feel welcome at Starbucks (39% strongly agree) .

2. . 3. Investment of $40 million annually to increase speed of service. 6.Options 1. Service Innovation. Product innovation. Alter the product mix . Process of Measuring Service performance. 4. 5. Retail Expansion.

•Well Defined and Attractive Target Market. Starbucks’ value proposition is a compelling one because: •Customer and the service delivered to the customer are placed above everything else. . but the experience. •Product Quality. Starbucks moves away from the tangible benefits that the coffee offers and focuses on the quality of its coffee and the intangible benefits of the experience of drinking Starbucks coffee. •With its value proposition.Starbucks Success was due to: •Store Atmosphere. •Service Quality. •Partner Satisfaction. •Starbucks became a coffee shop that does not sell coffee.

the established customers have a positive opinion.  Change in demographic profile of customers.  Change in Starbucks Brand Image.Starbucks 1992 vs. .The breakdown of customers by number of visits per month. this does not necessarily mean that the service has declined. Service Decline or Wrong Measurement??? Even though the evidence shows that customers are not as satisfied as before. Starbucks 2002  Retail Expansion Strategy over the 10 years. The Customer Snapshot mystery shopper program is a subjective measure to record results. The less Satisfied Customers are the new customers.How customers would respond to certain criteria right after their Starbucks experience. The measurement should focus on: . . .  Increase in complexity of the product mix and service.When Starbucks evolved as a business it set the standards very high for its customers through its value proposition.The addition of new items on the menus and the rapid retail store expansion had an adverse effect on the other two important aspects of the value Proposition. Reasons are: . .

Who would bring in a revenue of $ 1000 -$ 8000 over the lifetime.g. Store cleanliness. Starbucks needs to get the basics right: Ensure Satisfaction levels are high.The ideal Starbucks customer is one… Who visits the store on an average of 18 times per month due to correlation between satisfaction levels and number of visits. Deliver on all aspects of its value proposition. Focus on Key attributes. . Developing Soft Skills of Partners. Promote its stored‐value card (SCV) more. e.

Customer Lifetime Value .

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