STARBUCKS: DELIVERING CUSTOMER SERVICES

PRESENTED BY :

Mahesh

pandey Iipm new delhi

INTRODUCTION

Founder and chairman of Starbucks- Howard Schultz. In North America late 2002,Christine Day, Starbucks senior vice president said that “WE HAVE ALWAYS TAKEN GREAT PRIDE IN OUR RETAIL SERVICE”. But according to the data ,we are not meeting our customer expectations in terms of satisfaction. Now they plan to invest additional $40 million annually which would add 20 hours of labour a week each store. WHETHER THE COMPANY SHOULD MOVE FORWARD WITH THE PLAN???? THEN WHAT WILL BE THE IMPACT ON SALES AND PROFITABILITY????

TEAM STRUCTURE

Howard Schultz- Chairman, President and Chief Executive Officer of Starbucks Corporation.
Martin Coles- Chief Operating Officer. Pete Bocian- Chief Financial Officer and Chief Administrative Officer. Paula Boggs- Executive Vice President, Law and Corporate Affairs.

3

STARBUCKS BACKGROUND

In 1971, three coffee fanatics- Gerald Baldwin, Gorden Bowker and Ziev Siegl-opened a small coffee shop in Seattle’s Pike Place market.

Specialised in selling whole arabica beans to a niche market of coffee purists.
In 1982, Schultz join the Starbucks marketing team, the idea was to create a chain of coffeehouses that would become America’s “THIRD PLACE”. Place that would separate from home or work and mean different things to different people. Few year later, Schultz took over Starbucks and in same year he decided to take the company public raising $25 million in the process. After this, growth rate climbed from 40% to 50% and number of stores140 to 5000 stores around the globe.

STARBUCKS’ FINANCIALS, FY1998 TO FY 2002

FY 1998
In millions ($) 1076.8 25.8 1,102.6 206.1

FY 2002
In millions ($) 2583.8 209.1 2792.9 496.0

REVENUE
Co-Owned North American Co-Owned Int’l (UK, Thailand, Australia) Total Company-Operated Retail Specialty Operations

Net Revenues Cost of Goods Sold Gross Profit Joint-Venture Income Expenses: Store Operating Expense Other Operating Expense Depreciation & Amortization Expense General & Amortization Expense Operating Expenses Operating Profit Net Income % Change in monthly comparable store sales

1,308.7 578.5 730.2 1.0 418.5 44.5 72.5 77.6 613.1 109.2 68.4

3288.9 1350.0 1938.9 35.8 1,121.1 127.2 205.6 202.1 1,656.0 310.0 215.1

STARBUCKS INVESTOPEDIA

Why should consumers go for STARBUCKS
EXPERIENTIAL BRANDING STRATEGY COMPONENTS
COFFEE SERVICE ATMOSPHERE

STARBUCKS BRANDING STRATEGY LIVE COFFEE EXPERIENCE

CHANNELS OF DISTRIBUTION PHILOSOPHY: 1.Want to reach customers where they work, travel, shop and dine. 2.To establish relationships with third parties that share our values and commitment to Quality. STARBUCKS PARTNERS: 1.All Starbuck’s employees were called “PARTNERS”. 2.Howard belief that PARTNERS SATISFACTION = CUSTOMER SATISFACTION 3.Lowest employee turnover in the industry i.e.70% as compared to as high as 300%.

90% 80% 70% 60% 50% 40% 30% 20% 10% 0%
clean store treated as a valuable taste fast service freshest coffee place to relax highest quality tea

UNIQUE SELLING PROPOSITION

Column 1

SERVICE PERFORMANCE MEASURE
COMPANY’S MOST PROMINENT TOOL WAS A MYSTERY SHOPPER PROGRAM.

“CUSTOMER SNAPSHOT”. During 2002,it had increased across all the stores.
94 93.5 93 92.5 92 91.5 91 90.5 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr 5th Qtr SERVICE

92 91.5 91 90.5 90 89.5 89 88.5 1st Qtr
3.35 3.3 3.25 3.2 3.15 3.1 3.05 3 2.95 2.9 1st Qtr

CLEANLINESS

2nd Qtr

3rd Qtr

4th Qtr

5th Qtr

92 91.5 91 90.5 90 89.5 89 1s t Qtr PRODUCT QUALITY

AVERAGE WAIT TIME(IN MINUTES SECONDS

2nd Qtr

3rd Qtr

4th Qtr

5th Qtr

2nd Qtr

3rd Qtr 4th Qtr 5th Qtr

SWOT ANALYSIS

STRENGTH AND OPPORTUNITIES
Partners had to undergo two types of training:1.Hard skills-Learning how to use the cash register and mix drinks.For ex- Making an expresso beverage required seven specific steps. 2.Soft skills-Teach partners to connect with customers .For ex-establish eye contact,to smile and to try to remember their names and orders. Starbuck’s “JUST SAY YES” policy empowered partners to provide the best service possible.

Speciality Coffee Traditional Coffee

Speciality Coffee Traditional Coffee

Speciality COFFEE Traditional Coffee

Starbucks share of specialty coffee market 38%

Starbucks share of specialty coffee market 42%

Starbucks share of specialty coffee market 50%

THREATS AND WEAKNESS
ALMOST HALF OF STARBUCKS’ CUSTOMER CUSTOMIZED THEIR DRINKS: 1) Created a tension between product quality and customer focus. 2) Slow down the service for everyone else. 3) Making a customized drink would require now 10 different steps. So more baristas required. 4) Problem was to hire more baristas is that labour is the largest expense item in North America. 5) According to survey Starbuck’s cares only about making money and building more stores i.e. 53% to 61% and 48% to 55%. 6) No differentiation between between Starbuck’s and smaller coffee chains.

OVERCOMINGS
1) 2) 3) 4) 5) Focussed on incresing barista efficiency. Removing all non-value-added tasks. Simplifying the beverage production process. Tinkering with the facility design to eliminate bottlenecks. Company recently begun installing automated expresso machines.

COMPETITORS
1)
  

Minneapolis-based Caribou Coffee:Operated more than 200 stores in nine states. Differentiated itself on store environment. Its strategy was to stimulate the look and feel of an Alaskan lodge, with knotty pine cabinetry, fireplaces and soft seating.

2)
   

California-based Peet’s Coffee & Tea
Operated about 70 stores in 5 states. More than 60% of Peet’s revenues came from sale of whole beans. Its strategy was to build super premium brand by offering the freshest coffee in market. It delivered on promise by “Roasting To order” making sure that all its coffee shipped within 24 hours of roasting.

3)

Dunkin Donuts
Operated 3700 stores in 38 States had begun offering flavoured coffee and noncoffee alternatives.

4)
  

Independent Speciality Coffee Shops
Offered wide range of food and beverages. Offered satellite televisions or internet-connected computers. Delivering highly personalized service.

GROWTH PLANS
Starbucks already owned close to 1/3rd of America coffee bars and growth plans were based on following considerations given below:
 

RETAIL EXPANSION
Coffee consumption was on the rise in the US about half population now drank coffee everyday. There were still 8 states in US without a single company-operated starbucks. The company believe it was far from reaching saturation levels in many existing markets.

2)
  

PRODUCT EXPANSION
New product was launched on regular basis and should introduce atleast one new hot beverage every holiday season. The new product development process (R&D) team tinkered with product formulations: a) Whether a product made fit into the “ergonomic flow” of operation. b) Speed with which the beverage could be handcrafted. Company successfully introduce coffee and non coffee based line of Frappuccino beverages.

3)
  

SERVICE INNOVATION

Starbucks’ Stored-value card (SVP) had been launched in November 2001. This prepaid swipeable smart card increased $160 million sales. T-mobile hot spot wireless internet service, introduced in August 2002.

MARKET RESEARCH
 

Marketing Research Group Category Group Marketing Group

70% 60% 50% 40% 30% 20% 10% 0% % of total starbucks customer base

CUSTOMER VISIT FREQUENCY

% of all Starbuck's Transactions

customer visit 8+ times in a month customer visit 3-7 times/month customer visit 1-2 times/month

CONCLUSION
In the end we would like to conclude that Starbuck’s should invest $40 MILLION because according to the study and market research we have seen that

customer base and satisfaction has reduced. Also
they have problem in planning and strategy of service providing. So

$40 million should be invested in all the Starbucks’ store i.e. 17009. so that they
can work on improving delivering services and add on more baristas.

THANK YOU

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