DETERMINANTS OF CUSTOMER LOYALTY IN THE SPECIALTY COFFEE INDUSTRY: THE DIFFERENCES BETWEEN CUSTOMER LOYALTY TO AN

INDEPENDENT COFFEE SHOP AND STARBUCKS

A THESIS

Presented to

The Faculty of the Department of Economics and Business

The Colorado College

In Partial Fulfillment of the Requirements for the Degree

Bachelor of Arts

By

Natalie Abel

May 2009

DETERMINANTS OF CUSTOMER LOYALTY IN THE SPECIALTY COFFEE INDUSTRY: THE DIFFERENCES BETWEEN CUSTOMER LOYALTY TO AN

INDEPENDENT COFFEE SHOP AND STARBUCKS

Natalie Abel

May 2009

Economics

Abstract

Customer loyalty is widely studied in both the goods and service industries; however, there has been very little customer loyalty research on an industry that combines goods and services. Studying the specialty coffee industry tills this gap. This study investigates the determinants of customer loyalty to an independent conee shop and to Starbucks. I surveyed sixteen colTee shop patrons, eight from an independent Colorado Springs coffee shop called Pikes Perk and eight from the Starbucks located across the street. The study did not turn up much loyalty behavior at either coffee shop, however it did indicate several important factors in a customers decision of where to buy their coffee such as, convenience, ambiance, and the need to support an independent coffee shop.

KEYWORDS: (Specialty Coffee Industry, Customer Loyalty)

ON MY HONOR, I HAVE NEITHER GIVEN NOR RECEIVED UNAUTHORIZED AID ON THIS THESIS

Signatnre

TABLE OF CONTENTS

ABSTRACT ACKNOWLEDGEMENTS

INTRODUCTION

III

IV

2 LITERATURE REVIEW 8 Customer Loyalty................................................................................................ 8 Brand Loyalty................................................. ................................................... 11 Consumer Values... ...... .................................................... ......... .......................... 16 Branding and Corporate Success .......................................... ... ... ... ..................... 18 Rise of the Specialty Cortee Industry................................................................. 19 Starbucks' Success.............................................................................................. 21

3 THEORETICAL FRAMEWORK AND RESEARCH PROPOSITIONS 24 Classifying Coffee Drinkers...................................................... ........ 24 Consumer Loyalty Behavior, Part I: Coffee Drinker Typology.................... 26 Consumer Loyalty Behavior, Part II: Branded or Independent?......................... 27

Detenninants of Customer Loyalty to and Independent Coffee Shop....... 27 Detenninants of Customer Loyalty to Starbucks .............................. .

4 RESEARCH METHODOLOGY 34 Why Colorado Springs? ............................................. ...................... "................ 35 The Coffee Shops.................. ....................... ......... .... .......... 36 Why Surveys·) ............................................................................................... . 36 Surveying Coffee Drinkers .................. . 37 Methodological Complications in Retrospect. .... 39

5 IS 45

The Importance of Convenience....................................................... 45 The Importance of Ambiance and Atmosphere............... ....................... 47 The Role of Brands............................................ .......................... 47 Loyalty to Independents..................... ....................................... ..... 50 Coffee Drinker Typologies......................................................... ..... 51 Where are the Loyalists?.................................................................................... 52

6 DISCUSSION AND CONCLUSION 55

SOURCES CONSULTED 60

LIST OF FIGURES

3.1 CHART OF COFFEE DRINKER TYPOLOGIES ..................... ............ 33

4.1 COFFEE CONSUMPTION SURVEy............ .................................. 40

ACKNOWLEDGEMENTS

I want to thank everyone who helped me in any way throughout this thesis

process. Thank you to my advisor, Sasha Breger, whose enthusiasm, guidance, and

constant support kept me going throughout this entire thesis process. Thank you to the

entire Economics Department for helping me with anything and everything I needed.

Thank you to my parents and sister for always encouraging me and believing in me.

Thank you to all of my friends, roommates, and teammates for helping me through all of

those long nights and stressful days.

CHAPTER I

INTRODUCTION

The Coffee industry affects over 75% of the adult population in the United States,

with 54% of this population drinking coffee daily and another 25% drink coffee

occasionally. The Specialty Coffee industry's sales are increasing 20% annually and this

new niche now accounts for 8% of the $18 million a year US coffee industry. Starbucks

is by far the largest coffee house chain with 15,000 stores in 42 countries around the

world, yet the independent coffee shops and small coffee chains still control61% of the

market I This is one of the reasons that the specialty coffec industry is so unique and

interesting. Even with all of Starbucks success the market is still dominated by

independent coffee shops and small chains. In most food and beverage industries there

are several large corporations that compete for market sharc, but that is not the case in the

specialty coffee industry. Given Starbucks' success, companies have tried to copy their

strategy. However no company has been as successful thus far. Starbucks made specialty

coffee popular. Before Starbucks, the majority of coffee drinkers drank store bought prc

ground colfee. Starbucks taught Americans what a good cup of coffee was and made it

available lor the masses. There definitely were good small colfee shops with loyal

'Coffee Research Institute. Coffee Consumption Statistics in the United States, 12 A,pril 2006, available from httptllwww.cofleeresearch.org/marketJusa.htm; Internet; accessed 8 December 2008.

2

patrons but it wasn't until Starbucks entered the market that terms like "latte" and

"cappuccino" became everyday vocabulary. They educated the public about the wonders

of specialty eoflee and cotIee shop culture. By creating interest in Specialty coHee,

Starbucks enabled independent coffee shops to be successful. "Many people believe that

Starbucks increases the overall market, attracting new customers to the product who then

patronize the independent provider next door."}

One of the many reasons Starbucks has been so successful at building a global

corporation is that they have been careful about controlling their growth. Initiaily

Starbucks kept their stores in the Pacific Northwest, within a three-hour drive from

Starbueks headquarters and the roasting plant both located in Seattle, W A. In 1988

Starbucks issued a mail-order catalog, which they used to build brand awareness

nationwide.

Building the company slowly also allowed the company's executives to

understand variations in specialty cotTee demand in different regions and cities. This

information about emerging interest in specialty coffee was useful for selecting potential

sites for new cafes around the country. Once the executives decided on a market that they

wanted to enter, the strategy was to secure the best real estate and establish a foothold in

each new city, building a powerful identity there before entering the next market. J

2 Kevin Helliker, Shirley Leung, "Despite the Jitters, Most CotTeehouses Survive Starbucks," Wall Street Journal, 24 Sept. 2002, sec. A, p. I.

, Nancy Kohen, Brand New: How entrepreneurs Earned Consumers' Trus/ From Wedgwood 10 Dell (Boston: Harvard Business School Publishing Corporation, 20(1).

3

In 1992 and 1993 Starbucks developed a three-year geographic expansion strategy

that they called the "hub and spoke,,4 strategy. They selected large cities to serve as a hub

and they sent teams of professionals there to support their goal of opening twenty stores

in the first two years. Once that goal was achieved they would open additional stores in

surrounding smaller spoke cities5 This method of expansion proved to be successful for

Starbucks.

In the early 1990' s the executives began exploring ideas of using other companies

to help them spread brand awareness. One of their first partnerships was ScatHe based

Horizon Airlines, a regional branch of Alaskan Airlines. Horizon began serving

Star bucks coffee on all of their flights, which travel up and down the West Coast.

Starbucks also entered into a partnership with Nordstrom, an upscale department store.

They created a unique blend that was sold only in Nordstrom department stores. During

the same period of exploratory expansion Starbucks signed a contract with Barnes &

Noble to operate cafes in their bookstores. In the first year of their partnership Starbucks

opened seventy-three cafes in Barnes & Noble locations.

While working on increasing expansion Starbucks' CEO Howard Schultz

"recognized that the challenge would be to ensure that the rapid growth did not

undermine quality or dilute the elegance of Starbucks culture and its reputation for

\ Arthur A. Thompson, Jr. and AJ. Strickland, Ill, Sirategic /vianagemcnl. Concepts and Cases, II th cd. (Boston, Massachusetts: Irwin McGraw Hill, 1999).

Arthur A. Thompson . .Jr. and AJ. Strickland, Ill, Srralegic !\4(lnllg(!'m';ni' Concepts lind Cases. 11 ed. (Boston. iv1assachusetts: Irwin McGraw Ilil!. 1999).

4

service.,,6 The Starbucks executives' great strategies for expansion, combined with their

attention to the importance of maintaining their standards of excellent quality and service,

allowed them to grow quickly.

Starbucks has been known for their dedication to taking care of its employees.

This dedication is not just something they added in recent years in order to project an

image of corporate responsibility. Rather. this is deeply embedded in the core values of

the Starbucks Corporation. Since day one CEO Howard Schultz has made taking care of

his employees his first priority. He believes that such practices arc the best way to create

a successful company. This idea of taking care of your employees to make sure they are

happy is not just an idea he came up with one day, it had been a long-time concern of his.

One commentator recently said of Schultz that: "Growing up in Canarsie, he had vowed

that ifhe acquired significant responsibility, he would 'do something that would

guarantee that people would not be left behind. I always wanted to build the kind of

company my father never got a chance to work for.,,7 Schultz grew up in a poor family in

the projects in the Canarsie neighborhood of Brooklyn, NY. His lather worked a blue-

collar job that did not offer him and his family health insurance and benefits. Schultz

remembered how much stress it put on his father and their family. and, because of this, he

endeavored to create a different working environment lor his company.

Drawing on such childhood experiences, Schultz came up with a plan to olfer

health care coverage to all employees who worked twenty hours or more each week.

Unfortunately his board members were not so dedicated to this idea. Indeed, they were

6 David Bollier, Aiming Higher' 25 Srories o(How Companies Prosper Combining Sound Management and Social Vision (New York: AMACOM, 1996), 215. 7 Kohen, 239.

5

skeptical of the idea because of the additional costs it would create. Now more

determined than ever, Schultz continued pursuing it. He thought that otTering health care

coverage to their employees would lower their employee turnover and therefore lowers

their training costs. It wasn't until the board figured out that ofTcring health care coverage

would lower their costs in the long run that they jumped on board. They found that it cost

them $3000 to train a new employee and only $1500 a year for health care, and that the

health care would make for lower employee turnover so they would end up saving money

in the end. Schultz's inklings were correct and he finally got his health care plan

underway. 8

Starbucks does not only offer health care coverage to their employees or

"partners" as they refer to them. The company also developed employee stock options

called "bean stock". Schultz commented on why it was important to go so far as to offer

employees unique stock options: "The two cornerstones of the culture of our company

are to treat people with respect and dignity, and a manifestation of that was, tirst and

foremost, creating an environment where everybody was an owner.,,9 In 1991, each

partner was granted stock options that were worth 12% of their base annual pay. This is

another way that Starbucks secures long-term employment among partners: The longer

employees stay with Starbucks the more options employees are granted and the more

valuable employees become. ·'The average employee participating in a stock program

will, over ten years, amass stock options with a value equal to three times his or her

, This idea of increasing benefits to increase productivity and lower turnover, has been articulated by labor economists in terms of·'efficiency wages".

q BoHier. 217.

salary.,,10 Along with Schultz's ethical reasons for providing such good benefits to his

employees, he also believes that empowering his employee's lead to the high level of

customer service that drives the success at Starbucks.

6

In order to provide incredible customer service the employees not only need to be

happy and feel appreciated, but they also need to be knowledgeable about the Starbucks

products and how to make an excellent cup coffee. Starbucks provides the proper training

to their employees. Every Starbucks barista goes through a twenty-four hour training

program in which they take classes on cotTee history, drink preparation, coffee

knowledge, customer service, retail skills, and a workshop called "brewing the perfect

cup". This training is very thorough, teaching the new baristas everything they would

possibly have to deal with. There are sessions on everything from how to clean the milk

wand on the espresso machine to explaining the Italian drink names to the customers, to

how to sell a very expensive, top of the line home espresso machine. The Starbucks

executives believe that positive customer experiences are one of the most important

aspects of their success. Having knowledgeable employees is crucial for creating positive

customer experiences.

Howard Schultz and the Starbucks Company he has created is truly the realization

of the "American Dream". Schultz went from having no money to creating and sustaining

one of the most impressive and successful companies around. Through his hard work,

innovative ideas, and commitment to his morals he has built a company that other

entrepreneurs would be wise to imitate. For many years, Starbucks has been on Fortune

magazine's list of "most admired companies". Yet, even with all of the wonderful things

10 Ibid .. 218.

7

Starbucks offers and stands for, many consumers still do not want to patronize Starbucks.

In fact, there is an active opposition to Starbucks among many coffee lovers.

With all of Starbucks success and dominance, how is it that independent colfee

shops are not only staying in business but also thriving and multiplying quickly') Such

observations raise important questions about the behaviors and mindsets of coffee

consumers as they navigate various coffee retail establishments. Specifically, customer

loyalty exists in many sectors of the economy but does it exist in the coffee industry?

How can customer loyalty be measured? What are the factors thai determine customer

loyalty? In this thesis, I will examine how Starbucks, relative to a small coffee shop,

gains customer loyalty and what affect a corporate brand has on customer loyalty.

Further, I will also explore whether or not customers are loyal to a particular coffee shop

and, if so, what informs a customer's decision to pick a specific coffee shop to get their

coffee from everyday, The study will be conducted in Colorado Springs, CO. I will

survey customers from a local coffee shop called Pikes Perk located on Tejon Street and

a Starbucks that is located across the street.

In the next chapter, Chapter 2, I will discuss literature from other research that has

been done in the areas of customer loyalty, brand loyalty, and coffee specific studies. In

Chapler 3, I will explain the theoretical framework I have laid out and my expected

findings. In Chapter 4, I will explain how I went about my research and collected my

data. In Chapter 5, I will discuss what I actually found and how it docs or does not relate

to my expectations. Finally, in Chapter 6, I will discuss the implications of my study and

avcnues for further rcsearch.

CHAPTER II

LITERATURE REVIEW

Looking at the components of customer loyalty in many sectors of the economy,

mainly services and brand-name goods, will help managers and businesses gain and

retain loyal customers. The literature on customer loyalty gives insight into what

customer loyalty is to the consumer and to the producer, how customer loyalty can help a

business, and how it can effectively be measured.

Customer Loyalty

Several studies have been done that look at components of consumer loyalty in

the service industry. A 2008 study by Bodet attempted to test the relationship between

consumer satisfaction and loyalty. The study found the mediating role played by overall

satisfaction, which they defined as the customers satisfaction that included all their past

experiences from the commencement of their membership to their most recent experience

with it, in the relationship between transaction-specilic satisfaction, defined as the

customers satisfaction with the last experience they had with the organization, and

attitudinal loyalty , defined as the customers feelings towards the organization. The

implications of this study are that managers should focus on overall satisfaction when

8

9

there are numerous interactions in service, such as with services that have memberships,

while also trying to avoid unusual and extraordinary transaction-spccitic dissatisfactions, I

There are several other studies that look at satisfaction in services provided and

how it affects loyalty, Examining the role that personalization plays in service

encounters, Mittal and Lassar found that positive personalization can positively influence

customers' purchasing decisions. The authors define "personalization as the social

content of interaction between service employees and their customcrs,,2 Positive

personalization is when a service provider assists customers with enthusiasm and sends

out personal warmth in service encounters. A study by Gupta, McLaughlin, and Gomez

quanti tied the connection between intent to return and actual traffic counts in the

restaurant business. They found that the factors that had the greatest int1uences on

whether a customer will return were delicious food, an appropriate cost, a cheerful

greeting, and attentive service.' These last two items mentioned are often instances of

personalization.

The last two articles that relate to the service industry take a different approach

from looking at personal interaction and customer satisfaction. The first article, by

Ganesh, Arnold, and Reynolds, defines a firm's customer base as having three distinct

groups. They are: customers who have switched from other service providers, including

Guillaume Bodel. "Customer satistaction and loyalty in service: Two concepts four constructs, several relationships," Journal of Retailing and Consumer Services, 15 (2008): 156-62.

2 Banwari Mittal, Walli-ied Lassar, "The Role of Personalization in Service Encounters," Journal of Retailing, 72 (] 996): 95-109.

5 Sachin Gupta, Edward McLaughlin, Miguel Gomez, "Guest Satisfaction and Restaurant Pcrt~)rmance," Cornell Hotel & Restaurant Administration Quarterly, 48 (2007): 284-98.

10

both "satisfied switchers" (customers who were satisfied with their old service provider

but switched anyway) and "dissatisfied switchers" (customers who switched to a new

service provider because they were not satisfied with their old one); and "stayers"

(customers who did not switch). The authors found that dissatisfied switchers are the

most satisfied customers and are most likely to engage in active loyalty behaviors.

Stayers who exhibit higher satisfaction than satisfied switchers but lower satisfaction than

the dissatisfied switchers are more likely to exhibit passive loyalty behaviors. Satisfied

svvitchers are the least satisfied customers and fall between the other two groups in terms

of both active and passive loyalty behaviors.4 The second article looks at the affect of

corporate image and branding on customer satisfaction and loyalty. Andreassen and

Lindestad found that for complex and infrequently purchased services, corporate image

rather than customer satisfaction is the main predictor of customer loyalty. 5This article

leads to thinking about whether corporate image plays an important role in determining

consumer loyalty to other products like food and! or beverages.

Krishnamurthi looked at the relationship between consumer brand preference or

loyalty and price elasticity in purchasing behavior. He looked at the price elasticity for

loyal versus non-loyal customers. The study found that choice decision elasticities,

meaning the effect price has on choosing a particular brand, are higher lor non-Ioyals

4 Jaishankar Ganesh, Mark J. Arnold, Kristy E. Reynolds, "Understanding the Customer Base of Service Providers: An Examination of the DitIercnce between Switchcrs and Stayers." Journal of Marketing, 64 (2000): 65-87.

Tor Wallin Andreassen, Bodil Lindestad, "Customer loyalty and complex services: The impact of corporate image on quality, customer satisfaction and loyalty for customers

varying degrees expertise," International Journal of Service Industry tvlanagemcnt. 9 (1998):

II

than for loyals, and the direction is reversed in the quantity decision, meaning the effect

price has on the quantity purchased with loyals being more elastic than non-loyals. 6 I

would hypothesize that, if this study were done in the sp,-'Cialty coffee industry, there

would be similar findings. If a person has strong loyalty to Starbucks, they will not

choose to purchase cotree from another cafe if the Starbucks' price is increased, but it is

likely they may decide to limit the number of cups they purchase each day.

Brand Loyalty

The next set of articles mostly focuses on brand loyalty to goods in the food and

beverage market. In the first study, Day attempts to enhance traditional brand loyalty

measurements (that usc the proportion of total product purchases devoted to the brand

most otten purchased) by also looking at the customer attitude towards the brand. True

brand loyal buyers not only purchase that brand time atter time, but they arc also

committed to the value and price appeal ofthe brand by being confident that they have

judged the brand correctly. The improvements that Day made to the brand loyalty

measures significantly improved the explanation of individual variability in brand

loyalty?

Jacoby and Kyner look at the difference between brand loyalty and repeat

purchasing behavior. They define brand loyalty by a set of six necessary and collectively

sufficient conditions. "'Brand Loyalty is (l) the biased (nonrandom), (2) behavioral

6 Lakshman Krishnamurthi, "An Empirical analysis of the relationship between brand loyalty and consumer price elasticity." Marketing Science, 10 (1991): 172-83.

, George S. Day. "'A Two-Dimensional Concept of Brand Loyalty .. ' Journal of Advertising Research. 9 (1969): 29-35.

12

response (purchase), (3) expressed over time, (4) by some decision making unit, (5) with

respect to one or more alternative hrands out of a set of such brands, and (6) is a function

of psychological (decision-making, evaluative) processes,"s They go on to talk about how

verbal reports ofloyalty, meaning statements of preference or intention to buy, are

insufficient for defining brand loyalty. The verbal report of loyalty has to be combined

with loyal purchasing behaviors to be considered brand loyalty. This article is important

to my research because it provides a comprehensive definition of brand loyalty for me to

work with.

Tucker looks further into Brand Loyalty by looking at how it is developed. Tucker

says, "brand loyalty is conceived to be simply biased choice behavior with respect to

branded merchandise.,,9 Tucker makes an interesting point that he attributes to

Psychological theory, "one may learn to like what he chooses as readily as he may learn

to choose what hc likes."lo Tucker's Ending that will most likely relate to my research is

that: "some consumers will become brand loyal even when there is no discriminable

difference between brands other than the brand itself." II Even though the products in this

study were exactly the same other than their name, some of the customers still became

loyal to one brand. This would be interesting to look at in the specialty coffee industry, if

8 Jacob Jacoby. David R Kyner. "Brand Loyally vs. Repeal Purchasing Behavior." Journal of Marketing Research, 10 (] ): 1-9.

9 W.T. Tucker, "The Development of Brand Loyalty_" Journal of Marketing Research, 1 (J 964): 32.

j{j Ibid ..

:: Ibid .. 35.

13

two cotTee shops served the exact same cup of coffee I believe that people would become

loyal to one or the other because of connections they make with the brand,

Fournier went a little deeper to look at factors that lead to the stability and

durability of consumer brand relationships over time, She found that there are six factors

that lead to keeping a quality brand relationship: love and passion, self~connection,

interdependence, commitment, intimacy, and brand partner quality, She says "Brand

relationship quality evolves through meaningful brand and consumer actions, as per the

reciprocity principle on which all relationships are grounded,,,12 The idea of the

reciprocity principle is that if you treat the brand well by being loyal, the brand, in return,

will treat you well by being faithful to its customers, This idea is easily related to the

specialty coffee industry in that customers become loyal to their coffee shop of choice

because the customers think that the coffee shop will treat them well by being there when

they need their coffee most and making the coffee to their personal standards,

One method that marketing experts have used to specify loyalty is by segmenting

the market for a certain good, Segmenting the market is a process where marketing

experts split the market for a good in to several different segments based on cost and the

perceived quality of the good, They then place different types of consumers into the

segment of goods they would most likely purchase, It is a tool that can be very helpful for

companies to aim the advertising of their product towards a certain consumer group, The

procedure that Bucklin, Gupta, and Han used presents a segmentation picture that is

specific to a single brand at a time rather than for the category as a whole, Their model

captures response as a function of both intrinsic preference and the household's

'2 Susan Fournier, "Consumers and Their Brands: Developing Relationship Theory in Consumer Research," Journal of Consumer Research, 24 (1998): 365,

14

sensitivity to particular marketing activity like price, promotion, or advertising. The

model assumes that market response follows an S- shaped curve, a household's reaction

to a price change on a strongly preferred brand would be smaller, which would place it on

the steeper middle part of the curve and the response to the price change on a moderate! y

preferred brand would be greater, which would place it on the flatter top portion of the

curve. The nonlinear response shows brand-specific price sensitivity for an individual

household. Using the information gained from their model they were able to create brand

specific market segmentation by grouping households with similar responses. The results

of this study are for all brands in the category, which allows managers to obtain a brand's

eye view of both their product and their competition as well. This study should allow

managers to assess the opportunities for targeting towards different customer groups. 13

This study is especially applicable to my research because the product they used was

ground coffee and it could be helpful in looking at consumer reactions to marketing

activity in the specialty coffee industry.

Starr and Rubinson conducted another study using the market segmentation

method. They found that brands with higher repeat rates must have a greater percentage

of share coming from consumers who are loyal to those brands, and that a brand with a

higher repeat rate must have a lower price elasticity of demand. They also found that

brands that are more substitutable, as measured by higher switching in relation to share

were shown to have greater cross-price demand elasticity than less substitutable brands. 14

13 Randolph E. Bucklin, "A Brand's Eye View of Response Segmentation in Consumer Brand Choice Behavior," Journal of Marketing Research. 32 (1995): 66-74.

14Martin K. Starr. Joel R. Rubinson. "A loyalty group Segmentation model for brand purchasing simulation," Journal of Marketing Research. 15 \ 1978): 378-83.

15

Muniz and Hamer used a unique method to study oppositional brand loyalty

behavior in a social environment. They used Usenet newsgroups which function much

like electronic bulletin boards to track what people say about their brand of choice and

competing brands. They found that oppositional brand loyalty, meaning being loyal to a

brand through a strong dislike for a competing brand, is shown in two related ways. In the

first way, consumers would define their product category preferences not only by what

they did consume, but also by what they did not consume. In the second way, consumers

would state their opposition to the competing brand and initiate playful rivalries with

users of the competing brand. In many instances the first way would lead to the second.

This study demonstrates that some consumers derive a part of the meaning of the brand

and their identity from their opposition to competing brands. IS This article deals with

people's preference between Coke and Pepsi. Many people love Coke by hating Pepsi.

Thompson and Arsel discuss the idea of Oppositional Brand Loyalty in the coffee

industry. They come up with two types of oppositional brand loyalists who are loyal to

independent coHee shops due to their dislike for Starbucks. In the tirst one which they

call "Cafe Flaneurs", they see Starbucks not as the evil enemy destroying who is

destroying local competition but as a boring and uncultured corporate setting. They arc

not finnly opposed to going to Starbucks and sometimes do go to Starbucks because of

convenience reasons.

The second type is called "Oppositionallocalisls" who see their anti-Starbucks

stancc as a "sociopolitical gospel and regard their support of local conee shops as a

15 Lawrence O. Hamer, Albert M. Muniz. Versus Them: Oppositional Brand Loyalty and the Cola Wars." Advances in Consumer Research, 28 (2001): 355-60.

16

consequential rebuke of corporate power.,,16 They take a much more political stance and

think that the only reason one would have to go to a Starbucks when you are say traveling

is because Starbucks has driven out all of the local competition. This research directly

relates to my study and creates two great definitions of oppositional brand loyalist for me

to work with.

Consumer Values

Collins, Steg, and Koning look at how much a consumers buying behavior can be

explained by a consumers values and beliefs about the importance of a company's

Sustainable Corporate Performance (SCP). They use the stakeholder theory to explain

that a consumer can affect the companies welling being. Freeman defines stakeholder as:

"any group who can affect or is affected by the achievement of the firm's objectives.,,17

Since customers are a key factor in the survival of a corporation, they are important

stakeholders, and it is necessary for the corporations to listen to what is important to their

customers. Next. the authors differentiate between values and beliefs. Schwartz says that

values are "desirable goals, varying in importance that serve as guiding principles in

people's lives,,18 Values are usually fairly stable across time. Beliefs are more specific

than values: they are more easily changed when there is new and contradictory

:6 Craig J. Thompson, Zeyncp luse!. "The Starbucks Brandscapc and Consumers' (Anti corporate) Experiences of Glocalization," Journal of Consumer Research, 31 (2004): 639.

17 Christy M. Collins, Linda Steg, Martine A. S. Koning. "Customers' Values, Beliefs on Sustainable Corporate Performance, and Buying Behavior," Psychology and Marketing, 24 (20(J7) 556. 18 Ibid .. 558.

17

infonnation because of "fads and fashions in political and social thinking or the influence

ora new social circle.,,19 Looking at the ditIerence between values and beliefs, it is

important for corporations to be able to distinguish between people's beliefs that are

deeply rooted in their values and will not change based on popular culture and beliefs that

come from the current trends in social responsibility and are quickly changed.

Understanding the difference between the two allows the corporation to be able to focus

on which beliefs are most important and rigid. It is the rigid beliefs the corporation has to

focus on because those are the ones that alIect a consumers buying behavior over the

long term. They found that a customer's beliefs about the importance of environmental

SCP was shown in their buying behavior, but that their socially responsible buying was

not related to their beliefs about the importance of social SCPo Although the article is

mostly focused on the specific beliefs that affect a consumers buying behavior, the ideas

about the difference between and the importance of values and beliefs will be the most

useful for my study.

Carrigan and Buckely's study is designed to gain an understanding of consumers'

perceptions of family owned businesses. The respondents in the study mostly view family

businesses as small, cozy and comfortable; as well as strong loyalty and very community

oriented. There were several strengths that were determined to be important to the

consumers: Being able to directly access someone who makes decisions and will take

responsibility for any problems the customers have is important. Mutual trust that exists

between the family businesses and their customers creates a special bond that keeps the

customers going back. The respondents noted that they had higher expectations of the

Iv Ibid., 559.

18

products and services that come from family firms, and they were also willing to pay

more to get a better quality experience. Many of the respondents felt strongly that family

businesses are the glue that holds their communities together, and that it is consumers'

social responsibility to purchase their goods from the family businesses, so that they are

able to stay in business. Overall the study indicates that family businesses play an

important role in a consumers purchasing behavior. They respondents perceived the

family businesses as a unique entity that they want to help keep around20 The findings of

the article will be helpful tor explaining why consumers feel strongly about purchasing

their coffee from independent collee shops that have many of the same qualities of a

family business.

Branding and Corporate Success

Haig begins his book "Brand Royalty" by saying, "Branding is the most important

aspect of business .... Brand success equals business success.,,21 Drawing a connection

between brand and religious preferences. he gives eight characteristics of religion (Faith,

Omnipresence, Gurus, Goodness, Purity, Places of worship, Icons, and Miracles) and

gives examples of how specific brands fit into each category. This is vcry applicable to

my study of the specialty coffec industry. I think people's daily coffee routine can be

somewhat similar to a religious ritual and I would like to look further into this and

explore how it relates customer! brand loyalty. Haig goes on to describe the 100 brands

20 Marylyn Carrigan, Joan Buckley, "What's so special about family business'!' /\n exploratory study of UK and Irish consumer experiences of family businesses," International Journal of Consumer Studies. (2008): 656,666.

2: Matt Haig, Brand Royalty (Sterling. Virginia: Kogan Page Limited. 2(04),1.

19

that he thinks have most successfully branded their company. Haig says Starbucks'

secrets of success are: Emotion, Replication, and Community. The idea of Emotion

comes from Starbucks' emphasis on building emotional ties with their customers, and

getting emotions involved leads to a higher likelihood that they will be become loyal.

Replication helps the customers know what to expect at every Starbucks store, and it also

gives customers a sense of familiarity and allows them to feci comfortable in any

Starbucks store. Starbucks executives say that they are selling the community identity of

being a Starbucks customer almost as much as the cup of coffee itself. This idea of

community within a large corporation is huge in a customer's perception of the

company22 He makes a good point that there isn't one formula for successful branding,

since the purpose of branding is to distinguish a company from its con1petitors, meaning

that branding needs to be unique.

Rise of the Specialty Coffee Industry

The specialty coffee industry is the focus of my thesis and looking at its

background is important in order to make conclusions about its current state. Roseberry's

article provides great insight into the rise of the specialty coffee industry. In the mid

1800's in the United States Coffee was an elite expensive beverage that was produced

with a primary emphasis on quality. It wasn't until the early 1900's that coffee became a

commodity: inexpensive beverage drunk by working class families and in the factories.

Therefore the rise of the importance of quality in coffee that started gaining interest in the

1980's was rcally just the industry going back to the way it had been over a ceutury

20

before. The difference is that this time the coffee producers and distributors took coffee

to a whole new level. The fad began with the small regional roasters not the giants that

dominated the market. One of the most important new tactics they used was targeting

specific consumer groups. They broke down the consumers in the market and identified

those who they wanted to pull into the market based on their consumption style and

economic status. They began to figurc out how to aim to please all of their consumer

tastes instead of just creating one fairly homogenous good.23 This article gives useful

background information on how and why the current specialty coHee industry came to

be. The article also begins the discussion of tactics the coffee companies used to become

successful in the up and coming industry.

Ponte's article gives a lot of the same background information about the rise of

the specialty coffee industry as Roseberry does. He goes on to give Starbucks a lot of

credit for their breakthrough in creating a cafe atmosphere where it is more about the

experience than the cofiee itself. It was a place that people could hang out that wasn't

either home or work, Howard Schultz calls this the "third place". At the end of his

discussion he brings up two interesting points that I have not come across before in my

research. The first is that, by becoming a large corporation that produces a homogenized

consumption experience that is consistent but not necessarily great. Starbucks has almost

become the opposite of how specialty conee houses see themselves. As coflee chains

continue to consolidate, quality may be less of a focus. This is a great point and I think it

is very valid and common: companies start out idealistic, and, as they turn into huge

23 William Roseherry, Rise and the ",,,'!mfY Class in the Cnitcd States." American Anthropologist. 98 (1996):

21

corporations, they lose sight of their initial goals. His second interesting point is that the

excitement about this new coffee consumption experience may be more about the latte

(milk) than the coffee itself24

Fast forward fifteen years from 1987, when Starbucks opened their first store to

2002 when the companies who copied Starbucks cafe model are now blaming them for

moving into town and killing the local competition. This is a common concern and

outlook that many people, both owners of Independent coffee shops and their customers,

have when they hear Starbucks is coming. However, it has become common for

independent coffee shops to actually show increased growth in revenue after Starbucks

moves into town. This is because Starbucks creates greater awareness about specialty

cotTec and draws in new customers, once these new customers understand what specialty

colIee is all about often buy their coffee from the independent coffee shop next door.

This is also because often the panic of Starbucks coming to lown makes the independent

owners improve their shops. 25

Starbucks' Success

In order to properly study the specialty coffee industry it is necessary to do some

in depth research on the industry's most successful company, Starbucks. Kohen's book

investigates how entrepreneurs motivated consumers to buy their product, which they had

little to no experience with. One of her chapters is on Howard Schultz and Starbucks. She

24 Stellmo Ponte, "The 'Latte' Revolution') Regulation, Markets. and Consumption in the Global Coffee Chain," World Development. 30 (2002): 1110-1112.

25 Kevin Helliker, Shirley Leung, "Despite the Jitters, Most CofTeehouses Survive Starbucks." \\/all Street Journal, 24 Sept. 2002, sec. A, p. 1, p.l1.

22

examines Howard Schultz's life and how his background afTects decisions he made

throughout the creation of Starbucks. She carefully examines the important decisions

Starbucks made to become the hugely successful company it is today. Schultz wanted to

re-create the ambiance of an Italian coffee bar. He thought that people would rcally enjoy

a peaceful place to socialize or have alone time over a good cup of coffee. They were

careful about their expansion, making sure they didn't expand too quickly and carefully

choosing the locations of every store. They sent out a mail order catalog where people in

cities that did not have a Starbucks could order their coffee beans. This allowed them to

spread awareness of their product while simultaneously seeing which cities had the most

interest in Star bucks. They used this as a tool to decide where to open up new stores.

Schultz's team decided early on that exceptional customer service was vital to their

success, and, because of this. they put a huge emphasis on motivating the employees by

putting them through intensive training, providing a happy working environment and

taking care of their needs. Because of Schultz' s background coming from poor family

where his father worked a blue-collar job for little pay and no health insurance or benefits

he wanted a different environment for Starbucks. He proposed providing health care

coverage to all employees who worked twenty hours or more a week. This was

completely unheard of for a large corporation. The board finally approved it when they

decided it made economic sense. they figured that it cost them $3000 to train a new

employee and only $1500 a year for heallh care, the health care would make for lower

employee turnover so they would end up saving money in the end. They knew that

everything they did affected the Starbucks brand so they had to make decisions that

would project the brand the they wanted it to be seen, Even tbough Starbucks is a

23

coffee retailer they knew that what Starbucks was actually providing was a consistent and

satisfying coffee experience. 26 Starbucks is a good example of a company that has

succeeded in gaining peoples trust and loyalty because of their product, comforting

environment. and the exceptional treatment of their employees.

There has not been much research done on customer! brand loyalty in industries

where service and product are combined. Studying the coffee industry would fill this gap

and provide some insightful infonnation. I think that. in the last decade the importance of

great customer service has significantly increased. People now judge restaurants and

cafes just as much on customer service as they do on the food or drinks themselves.

Because of this, it is becoming increasingly more important for companies to understand

and implement exceptional customer service while serving a high quality product.

Customers build strong emotional connections to products when exceptional employees

serve them.

There are many different ways of studying customer! brand loyalties, but one

thing that is constant, no matter how it is measured or studied, is that customer! brand

loyalty plays a key role in the success of a company. Studies in this field will continue to

give businesses insight into how build up their loyal customer base and strengthen their

brand.

Nancv Kohen. ' floH' entrenreneuf'.\' Earned CfJnSUmers! Trust From .,' , ,.

Wedgw()od to Dell (Boston: Harvard Business School Publishing Corporation, 200 i). 203-256.

CHAPTER III

THEORETICAL FRAMEWORK AND RESEARCH PROPOSITIONS

In this chapter I will explain the factors that may reasonably lead to customer

loyalty in the specialty coffee industry. I will first distinguish between the different types

of colTee drinkers and then explain whether the different types of coffee drinkers account

for the hypothesized relationship between types of coffee drinkers and different

dimensions of customer loyalty. In the second part of this chapter, I will explain

predictions for why coffee drinkers become loyal to a specific coffee shop. I will first

describe the reason customers are loyal to Starbucks, and then the reasons they are loyal

to Independent coffee shops.

Classifying Coffee Drinkers

The two main axes along which I classify types of coffee drinkers are: I. how

often the person drinks coffee; and, 2. whether they drink coffee for the taste or the efTect

(i.e. the well-established stimulating effects of caffeine). The five categories I developed

are: 1. Avid Coffee Drinker; 2. Classic Coffee Drinker; 3. ColTee Connoisseur; 4.

Appreciates ColTee: and, 5. Sporadic Coffee Drinker. Below, I discuss and explain this

typology in greater detail. At the end of this chapter I also include a diagram (Figure 3.1)

of these different types ofcof1ee drinkers.

24

An Avid Coffee Drinker is a person who drinks coffee everyday and is most

likely addicted to its calfeine content. Therefore this type of cotfee drinker needs it for

the effect. Avid Coffee Drinkers also have a specific taste for they way they like their

colfee prepared.

25

The second type of coffee drinker is a Classic Coffee Drinker. The Classic Coffee

Drinker drinks coffee often and does so mostly for the caffeine effect. The Classic Coffee

Drinker does not care much about the beverage tastes. Rather, convenience is his or her

mam concern.

The third type of coffee drinker is a ColTee Connoisseur. The Coffee Connoisseur

can taste the difference between different types of beans and drinks coffee not for the

effect but for the flavor. This type of drinker truly loves the taste of coffee. This type of

coffee drinker often grinds their own beans at home and will go out of their way to have a

great cup of coffee.

The fourth type is someone who Appreciates Coffee. The Coffee Appreciator

does not drink cotTee everyday but can taste the difference between a good cup of coffee

and a bad cup of coffee. When they do drink coffee they would prefer to have a good cup

and enjoy the taste but it is not necessarily a requirement in their coffee drinking choice.

They last category of coffee drinker is a Sporadic Coffee Drinker. The Sporadic

Coffee Drinker is a person who drinks coffee only when helshe needs the calfeine effect

and does not care much about the taste. College students would ollen fall into this

category. They do not consider the taste in their decision to buy the coffee and just drink

the conce quickly in order to stay awake.

26

Consumer Loyalty Behaviors, Part I: Coffee Drinker Typology

I have developed several hypotheses regarding the relationships between these

types of colIee drinkers and the consumer loyalty behavior that each type may

respectively exhibit in their eofIee consuming behaviors. In particular, depending on their

respective locations in the co flee drinker typology, consumers mayor may not exhibit

loyalty to a coffee shop. Below, I detail and explain each of these hypotheses.

First, I predict that the people who drink coffee for the taste, such as an Avid

Co flee Drinkers, Coffee Connoisseurs, and Coffee Appreciators, are more likely to

become loyal to a coffee shop. Coffee drinkers who are concerned with the taste will find

a coffee shop that makes coffee the way they like it and go back day after day to get their

favorite cup of coffee. They arc more likely to go out of their way to purchase their

coffee from their favorite coffee shop. They will also have a lower price elasticity.

My second hypothesis predicts that people who buy coffee for the effect and do

not care about the taste, such as Classic Coffee Drinkers and Sporadic Coffee Drinkers,

will most likely purchase their coffee from the most convenient coffee shop. It is possible

that they may appear to be loyal to one coffee shop because it is the most convenient so

they go back day after day; however, repeat purchasing behavior does not necessarily

signify customer loyalty. If a new coffee shop opened up that were more convenient and!

or sold coffee for a lower price they would buy from the new coHee shop. This example

demonstrates one of the greatest difliculties in examining customer loyalty; the difference

between repeat purchasing behavior and customer loyalty.

27

Consumer Loyalty Behaviors, Part II: Branded or Independent?

The second model I created looks at the factors that lead to a loyal customer

picking a specific coffee shop. I will look at the different possible rationales for

consumers exhibiting loyalty to Starbucks versus an Independent coffee shop. In

particular, I discuss loyalty towards a particular type of coffee shop with reference to the

quality of the cofree served, the concept of "oppositional brand loyalty", "familiness", the

store's ambiance, the affect ora rewards card, feel the corporate feel being a positive for

Starbucks.

Determinants of Customer Loyalty to an Independent Coffee Shop

There arc several reasons why a coffee drinker would decide to buy his/her coffee

from an independent coffee shop, The most basic reason, which is my third hypothesis, is

that they believe the coffee shop makes a beller cup of coffee than Starbucks does. This is

all about personal taste.

The second reason relates back to the idea of "oppositional brand loyalty". The

consumer is supporting their local coffee shop because they believe there is something

wrong with the Starbucks Corporation. Thompson and Arsel came up with two different

groups ofpeoplc who have incorporated an anti-Starbueks position into their everyday

lives (Reference Chapter 2). The first group does not see Starbucks as the evil empire

trying to take over the world, but simply believes that it is a boring and uncultured coffee

shop for the corporate world. The second group takes a much stronger anti-Starbucks

attitude and secs their Slance against Starbucks as more of a jab against the corporale

world as a whole. They think that Starbucks exemplifies all that is wrong with society.

28

They view their support of local coffee shops as much more of a political action to stop

corporate greed. My fourth hypothesis is that these two groups strike an interest in an

independent coffee shop because of their dislike for Starbucks. My fifth hypothesis is the

opposite of this idea, which is that people choose an independent coffee shop because

they want to support their community by buying from their local coffee shop. This leads

into my next idea: familiness.

Familiness is an idea that is discussed in Carrigan and Buckley'S article exploring

the advantages of family owned businesses (Reference Chapter 2). Although independent

coffee shops don't necessarily fit the definition of a family owned business, they have

several of the same qualities. Independent coffee shops are often placed in a

neighborhood setting that has a strong community. It is not just who owns the business

but also who works at the business. My sixth hypothesis is, many people like to support

entrepreneurs in their community, but are also lured in by knowing the employees. Local

companies often employ people from the community, which makes the consumers

experience more personalized. Knowing the person who prepares your co nee makes it

more special. When a coffee shop owner knows their customers personally they not only

have their shops name to protect, they have their own name to protect as well. Having

that kind of responsibility makes their standards higher. My seventh hypothesis is,

customers are more trusting of businesses when they have a personal connection to them.

tend (0 have higher expectations of service but are also willing 10 pay a higher price

lor the higher quality.

29

My eighth hypothesis is, a cotIee drinker might be loyal to an independent coffee

shop is because they like the particular ambiance of that shop. This could include their

food options, the available sitting room, the decor, and the clientele.

Determinants of Customer Loyalty to Starbucks

On the other end of the spectrum there is Starbucks. It is one of those corporations

that people love to hate. However, they have been hugely successfully at drawing in a

large group of loyal customers. My ninth hypothesis is, that the number one reason they

have been successful is by creating and sustaining such a strong brand. The Starbucks

logo has become one of the most widely recognized in the United States. The Starbucks

brand has come to be known for their quality and reliability. My tenth hypothesis is, I

think people become more loyal to the Starbucks brand than a specific Starbucks coffee

shop.

People are creatures of routine. Many people take comfort in the familiarity of

Starbucks coffee shops. All Starbucks coffee shops have similar layouts and interior

decorations. The familiarity makes the Starbucks coflee shops almost like a safe haven

from the busy world outside. Once a loyal Starbucks customer steps into the coffee shop,

no matter where they are in the United States or around the world, they feel at home. My

eleventh hypothesis is that there are two factors that help Starbucks give their customers

that familiarity: reliability and convenience.

IVly twelfth hypothesis is that the Starbucks brand has become so strong because

of how reliable they are. A Starbucks customer can go to their local Starbucks morning

after morning or any Star bucks around the country and world. order their favorite drink

30

no matter how complicated it is, and get the same drink. Going back to the idea that

people are creatures of routine: people find a drink they like and want to order it every

time they go to that coffee shop. Starbucks is also has an efficient process of getting a

customers order from the cashier to the barista, into the cup and into the customers hand

in a short amount of time. Starbucks delivers this reliability to their customers, which

keeps them coming back day after day.

In most urban areas you can find a Starbucks very easily, and in large downto'A'l1

areas it is common for there to be a Starbucks on every block or every other block. My

thirteenth hypothesis is. that convenience is enticing for coffee drinkers because they can

tind their favorite drink in almost every city in the United States. Not only can they find it

in every city in the United States but also they can easily find it in any city. There are

sixteen Starbucks locations in Colorado Springs and 406 in the state of Colorado.

My fourteenth hypothesis is that Starbucks' high standards for Customer Service

have enabled their reliability. Every Starbucks barista goes through an intense and

thorough twenty-four hour training program. Not only does Starbucks put a lot of effort

into training their employees, they are dedicated to treating their employees well, which

leads to happy and agreeable employees. The Starbucks Corporation give their employees

the tools they need to provide great customer service. They are knowledgeable about

colTee. skilled at making it. and are taken care of by the company. Those are just the

factors that make the baristas want to uphold Starbucks' high standards of customer

service. The customers do not see the reasons behind the good customer service; they just

see the friendly and skilled baristas who welcome customers with a big smile. In many

cases baristas learn to memorize custon1ers drink order~L When a customer goes to the

same Starbucks everyday, it makes them happy to be remembered by the baristas, It is

another way that Starbucks makes their customers feel at home in their coffee shops.

31

Another possible reason for customer loyalty is the Starbucks Gift Card and

Rewards program. My fifteenth hypothesis is that a Starbucks gift card would necessarily

turn a person into a loyal customer. I think they will demonstrate repeat purchasing

behaviors because people are not going to pass up a few free cups of colTee. It does not

however guarantee that the customers will continue to purchase their cotTee at Starbucks

once they have used up their gift cards. However, Starbucks has recently come out with a

new Starbucks rewards card, which gives customers free perks when they pay with their

Slarbueks gift card. The free perks include customization options, like soy milk and

flavored syrup, on the house; free brewed coffee refills; and a free tall drink with the

purchase of anyone pound bag of whole bean coffee. My sixteenth hypothesis is that the

Starbucks Rewards programs is more likely to lead to customer loyalty because it gives

customers a greater incentive to going back to Starbucks, with the hopes that increased

exposure to Starbucks will build an emotional connection between the customer and

Starbucks.

My seventeenth hypothesis is that many Starbucks customers are loyal to

Starbucks because of their sophisticated image. The coffee shops look upscale while still

being comfortable and casual. Star bucks is an appropriate place for a casual business

meeting and customers fee! comfortable walking into the stores wearing business clothes.

For many people Starbucks is a status symbol: they are proud to be seen in Starbucks or

walking around downtown with a Starbucks cup in their hand,

It may seem like I am being biased towards Starbucks in my discussion of why a

person would be loyal to an Independent coHee shop or Starbucks However, it is actually

a matter of data availability. It is easy to generalize about reason customers would be

loyal to Starbucks because it is a large corporation composed of homogeneous coffee

shops. Because of the dominant nature of the Starbucks Corporation and all of its media

attention, there has been tons of literature (both good and bad) written about every aspect

of the company. Other than my two main arguments about loyalty to independents (i.e.

loving an independent because of a dislike for Starbucks and wanting to support

independent businesses) it is hard to generalize about why a customer would be loyal to

an independent coffee shop because there are so many of them and they are all dilferent

from each other. In addition there is very little academic literature written about the

success of independent coffee shops. Instead of focusing on the good aspects of

independent coffee shops, the majority of the literature promoting independent coffee

shops focuses on the bad aspects of Starbucks. Because it is difficult to make

generalizations about independent coffee shops and the lack of information written about

the reasons for their success, it is difficult to draw an equal number of hypotheses about

reasons for customer loyalty to Starbucks and Independent coffee shops without

excluding important information about Starbucks.

The two models I have proposed exist simultaneously and are not mutually

exclusive. They work together to define customer loyalty in the specialty conee industry

and differentiate between loyalty to an Independent coffee shop and loyalty to Starbucks.

Avid CoHee Drinker

FIGURE 3.1

CHART OF COFFEE DRINKER TYPOLOGIES

Drinks Conee Every Day

Classic {'".n,",,,

Drinker

Caffeine El1eel

Less Likely to Become Loyal to a

Specific conee Shop

Sporadic C. :offee 1 Drinker

Drinks Co flee Occasionally

Coffee Appreciator

Taste

More Likely to Become Loyal to a

Specific Coffee Shop

Coffee Connoisseur

w w

CHAPTER IV

RESEARCH METHODOLOGY

One of the many things that intrigued me most about looking at customer loyalty

in the specialty coffee industry is that there has been very little academic research done

on the determinants of consumer loyalty in industries that rely on both their product and

their level of customer service for success. In a more popular vein, the United States is

becoming increasingly caffeine dependent in order to make our culture's fast-paced.

always-on-the-go, lifestyle possible. Because of this, the coffee industry, especially the

specialty coffee industry, is nourishing. For both of these reasons, I wanted to look

deeper into customer decisions about where to purchase a cup of coHee. For many people

a bad cup of coffee in the morning ruins the day. By choosing to get their coffee from a

particular cotlee shop they are putting a lot of trust in that establishment. Below, I

explain and discuss my research methodology in detail. I first discuss why I chose

Colorado Springs, and then move on to the specific coffee shops. This is followed by

why I chose to survey research, I will then discuss the four categories of question that

make up the survey, next I reflect ofthc methodological complications! faced, and

finally I include the survey itself (Figure 4.1).

34

35

Why Colorado Springs?

1be most obvious reason for choosing Colorado Springs as the site of my research

is for convenience. The coffee shops were easily accessible, and I was able to spend a

good amount of time in each coffee shop studying the clientele, the atmosphere, and

tasting the coffee. Although my decision to use Colorado Springs for my study was

greatly inl1uenced by convenience factors, using Colorado Springs made a lot of sense for

other reasons as well.

I originally considered studying coffee shops in Seattle, W A because it is the

veritable Mecca for coffee drinkers. There is almost double the number of colfee shops

per capita in Seattle than the next closest city. However, I did not choose Seattle because

it is an outlier due to the rather fanatical engagement of Seattle's population with its

coffee and would not even come close to being representative of coffee consumption

behaviors in the rest of the country. Colorado Springs however does not have the same

obsession with coffee that Seattle does, and it is similar to other quickly growing Western

cities, with a similar popUlation, average age, and average annual income. While this is a

small study that only focuses on Colorado Springs, my results may nonetheless shed light

upon consumer loyalty trends in other. similar cities in the American West. Because of its

similarity to other cities it makes the results more generalize able than if I had picked

Seattle. A recent Washington post article noted the similarities in demographics among

several westerns cities.

36

The Coffee Shops

The coftee shops I chose to include in my study are Pikes Perk and Starbucks.

The reason I picked these two coffee shops is that I did is first because they are located

across the street from each other on the main commercial street in downtown Colorado

Springs. Picking stores across the street from each other makes comparison more simple

because it is just as easy for a customer to go to Pikes Perk as it is to go to the Starbucks

across the street. Pikes Perk has a unique environment with a lot of room for customers to

sit and enjoy their cofiCe, while reading the newspaper, doing some work, or just

relaxing. The proximity of these two coffee shops is a periect example of Star bucks'

marketing strategy of placing their colTee shops as close as they can to a competing

com~e shop.

Why Surveys?

I chose to do a small n qualitative study. I thought this would be the best

way to study customer loyalty behaviors among coffee shop patrons. I used a

nonprobability convenience sample. According to Henry, when a researcher uses the

method of convenience sampling they "select cases based on their availability for the

study" I This was the case in my study; J only chose customers who happened to visit the

particular coffee shop I was at during the time I was there. All of the customers who

visited that coffee shop before or after I was there were not even considered in my

selection process. I also only chose customers who sat at the coffee shop for more than

I Gary T. Henry. Practical Sampling (Newbury Park: Sage Publications, 1990), 18.

37

just a few minutes, so this leaves out the entire group of grab and go customers who

visited the conee shop while I was there. It is unfortunate that I was not able to survey

these grab and go customers because I think they would have made for some interesting

results. So much of the coffee industry is about providing speedy service so that

customers can run in and grab their coHee to get a quick caffeine tix and get right back to

where they need to be.

lt is hard to etlectively quantify customers' tee lings towards a brand or reasons

for picking a particular brand over another. Because of this, any kind of statistical or

quantitative research methods would not tum up the same valuable results as qualitative

research. Customer loyalty lends itself to a morc personal research style. Using a

qualitative survey method for studying customer loyalty allows me understand

customers' attitudes towards specific aspects of the coffee shop. Being able to ask the

survey-takers to explain their answers instead of a simple yes or no enables me to get a

richer understanding of their coffee drinking habits and reason for going to that coffee

shop. It would be difficult to do a study based on interviews instead of surveys because I

have no way of knowing belore I interview someone if they are a first time coftee drinker

or a loyal customer. Administering surveys instead allows me to reach more people so

that I get a wider variety of responses.

Surveying Coffee Drinkers

I created an extensive survey that has four categories of question: demographic

and background questions, questions that help me identify the type of coffee drinker at

hand. probing questions about loyalty behaviors and added Starbucks-spccilic questions

for the people being snrveyed at Starbucks and Pikes Perk-specifIc questions for people

being surveyed at Pikes Perk. 1 discuss each of these types of questions below in turn.

38

The demographic questions (questions 1-10) are the least important for the

information I am trying to get out of this study. but I wanted to include them so I knew a

little bit about each survey-taker. Background information may also come into play in the

event that there turns out to be some interesting trends between the demographics and

their conce drinking habits or their loyalty behaviors.

The second set of questions (questions 11-34), the "kind of colTee drinker"

questions are aimed at allowing me to place survey-takers into one of the tlve groups of

coffee drinkers I created: Avid coffee drinker, classic cot Tee drinker, coffce connoisseur,

coffee appreciator, and sporadic coffce drinker (please see chapter 3 for more detailed

descriptions of this typology). This is a very important part of my study. Please recall

from chapter 3 that I hypothesized that the customers who drink coffee more for taste arc

more likely to be loyal to a specitlc coffee shop than customers who drink conce more

for the cafTeine enecl.

This brings me to my third set of questions (questions 35-46), which were created

in hopes of distinguishing customer loyalty behaviors. They are also meant to determine

what aspects of a conee shop are the most important to a customer.

The fourth set of questions (questions 47-56), are specific questions about the

cotTee shop that they are surveyed at (i.e. the Starbucks customers surveyed are asked

questions about Starbucks and the Pikes Perk customers surveyed are asked questions

about Pikes Perk). It is nccessary to ask these coffec shop specific questions in order to

be able ask questions that do not apply to both conee shops. In particular. I ask questions

that help determine if a Pikes Perk customer show and signs of having "oppositional

brand loyalty" (as discussed in chapter 3).

Methodological Complications in Retrospect

I faced several difficulties doing a survey-based study. The first problem I came

across was that a smaller number of customers that I would have liked agreed to fill out

the survey. This is probably because it was long and some people did not want to spend

time doing it. I should have expected this because people onen go to coffee houses to

relax and have a moment to themselves and are not interested in dissecting their coffee

drinking habits and preferences.

39

The second main problem was that many of the people who did fill out a survey

were unclear in their answers. Either they contradicted themselves throughout the survey,

did not answer the question I was asking, or left key questions blank. There are several

reasons that probably led to these frustrating answers, including that I was not was not

clear enough in the questions I was asking. As I have learned here, it is onen difficult to

communicate one's intentions in writing. Another reason is that it is hard for customers to

give definite answers or even approximations about their colfee habits is that many

consumers vary their coffee routine. The last reason is that people are not oficn askcd to

examine their habits and loyalty behaviors. We usually go along our daily lives without

spending much time analyzing the things they do, so when we arc asked to step back and

look at our patterns and reasons for liking or disliking certain things it is hard for us to

ans\ver.

40

One of the disadvantages of survey research is that when you get these unclear

and frustrating answers you do not get the opportunity to clarify them and understand

what the customer was trying to say. You also do not get the chance ask follow up

questions to dig deeper into consumer behaviors. One way of somewhat diminishing

these problems would be to conduct follow up interviews with customers who gave

confusing answers or with customers who seem to have behaviors in which deeper

understanding by the researcher might lead to richer and more insightful results. Another

addition that may have helped me get the results I was hoping for is to define terms like

"loyalty" on the survey so that the customer and I were on the same page about what I

was looking for.

FIGURE 4.1

COFFEE CONSUMPTION SURVEY

I. Which age range do you fit into?

15-25 26-35 36-45 46-55 56-65 66-75 Over 75

2. Gender: Male Female

3. Martial Status: Single In a relationship Married

4. Children: YES NO

5. Where did you grow up'? (Specific City or Town and State)

6. Do you consider Colorado Springs your home? YES NO If not. what do you consider home?

7. When you were growing up did your family tend to shop most frequemly al (circle

the choice that best applies)?

Locally o\\lled establishments equal measure

National chains

8. Do you work in a corporate environment? YES NO

Both in relatively

9. In choosing to support a particular business, is it important to you that the business practices good environmental stewardship, ethical trading, and/or other • sustainability' practices?

10. Did your parents drink colfee when you were growing up? If so, what kind of coffee?

II. How long have you been a coHee drinker? (Approximate number of years)

12. On average, how many days a week do you drink cof1ee?

! 3. How many cups of coffee do you drink per day?

14. When you think of coffee what is the first coffee company that comes to mind?

15. Do you purchase coffee at a retail establishment to make at home? YES NO

16. If Yes, Where do you usually buy it and what kind do you buy?

17. How many days a week do you drink coffee at home?

18. Do you ever buy store bought, pre-ground coffee brands like Folgers or Maxwell House?

19. Do you like this kind of coffee"

20. Do you ever drink instant colfee?

21. Do you like instant colfec')

22. Do you ever grind your own beans"

23. Do you tind yourself seeking out the finest tasting bcans') Explain.

41

24. When do you drink coffee? (ex. Morning only, Morning and afternoon, all day)

25. How often do you purchase coffee from a coffee shop?

26. What is your typical coffee drink order?

27. Do you order the same drink every time you go to a eolIee shop'! YES NO

28. If not, does it vary based on the time of day?

29. Describe your typical daily coffee routine including: number of cups and where you get each cup (home, coffee shop, work, etc).

30. When you go to a coffee shop how much time do you usually spend hanging out and drinking your coffee?

31. What is your main reason for drinking coffee?

32. Is the kind of cotIee you drink at any given time dictated primarily by the quality of the coHee or its convenience?

33. Do you ever find yourself discussing coffee with other people? If so, what about conee do you discuss?

34. Is this your favorite place to buy conee?

35. Is this the only place you buy coffee') YES NO

36. If not, where else to do you often buy coffee?

37. How often do you buy conee here?

38. How long have you been coming here to get coffee (years, months, weeks)')

39. What keeps you coming back here? List as many reasons as you like.

40. If this isn't your favorite coHee shop what brings you here today')

42

41. Rank your reasons for coming to this coffee shop (From 1- 4. where I represents the most important factor in your decision):

Quality_ Service Atmosphere_ Location_

42. Describe what is most important to you about your top two reasons:

43. Is there a reason not listed above that is more important? YES NO

44. If yes. what is it and why is it important to you?

45. Do you personally know any of the employees at this coffee shop?

46. How does the picture below make you feeJ'i

Starbucks Ouly Questions

47. Are you a Starbucks rewards member"

48. What is your favorite aspect of Starbucks'i

43

49, Do you consider yourselfloyal to Starbucks? YES NO If yes, what has made you loyal to Starbucks?

50. Is your choice to go to Starbucks about more thau just the Coffee')

51. Please describe a positive interaction you have had with a Starbucks employee.

Pikes Perk Only Questions

52. Do you ever go to Starbucks?

53. Would you ever go to Starbucks?

54. What is your favorite aspect about Pikes Perk?

55. Do you consider yourselfloyal to Pikes Perk? YES NO If yes, what has made you loyal to Pikes Perk?

56. Does your decision to get your coffee from Pikes Perk have auything to do with a conscious decision to support an independent coffee shop" Explain.

44

CHAPTER V

RESULTS

The surveys were administered during the last two weeks of March 2009. There

wcre sixteen survey-takers total, eight were surveyed at Pikes Perk and eight were

surveyed at Starbucks. In this chapter I will discuss the importance of convenience, the

importance of ambiance and atmosphere, the role that brands play, instances of loyalty to

independents, coffee drinker typologies, and I will finish by discussing why it is likely

that I did not find much loyalty behavior.

The Importance of Convenience

Throughout the whole study the strongest trend was the importance of

convenience in a customers decision of where to buy coffee. One interesting aspect of

this finding is that all of these customers were sitting down for a while not just running

out the door with their com~e. So it says that that even if they are going to spend an

extended period of time at the colIce shop they still do not want to have to spend a lot of

time or e[fixt getting there. Time is precious to people and hassle is something they do

not want to deal with if at all avoidable.

Although convenience was important to customers at both Starbucks and Pikes

Perk. all but one of the Starbucks customers who mentioned convenience being important

45

46

in their decision of where to get their coffee also said that convenience is one of their

favorite aspects of Starbucks. However none of the Pikes Perk customers, who mentioned

convenience being important in their decision, listed convenience as being one of their

favorite aspects of Pikes Perk. Instead three of them listed atmosphere and two-listed

location. It is hard to determine what they meant by location, if it was that they liked that

it was downtown in the midst of all the commotion or if they were getting at the idea that

it is located near to where they live or work and therefore its convenience. Even if the

second case is correct, there is likely a reason why they used the word "location" instead

of "convenience". It is likely that the Starbucks customers who listed convenience as one

of their favorite aspects were more thinking about Starbucks stores as a whole instead of

just that particular store.

The importance of convenience is something I was expecting to find in the

Starbucks customers. However it was not something I was expecting to find as much in

Pikes Perk customers. I thought Pikes Perk customers would list quality over

convenience in question #32: "Is the kind of coffee you drink at any given time dictated

primarily by the quality of the coffee or its convenience?" Being convenient and

accessible is something that the Starbucks Corporation relies on for success. They place

several stores on a street because they know that if Starbucks stores are that much more

accessible to coffee drinkers than a competing store a block down it is likely that

Starbuck, will get their business.

47

The Importance of Ambiance and Atmosphere

Another common trend I found was how much people appreciate the atmosphere

at both coffee shops, especially the availability of room to do work. The Pikes Perk

customers made it clear how much they enjoy utilizing the abundance of area to sit and

do work. A few of them mentioned how they often spend several hours sitting at Pikes

Perk getting work done. One of them mentioned the importance of the free wireless

Internet, which Starbucks does not offer, in her decision to spend time doing work at

Pikes Perk.

The Role of Brands

As I stated earlier, the number one reason I think that Starbucks has been

successful is that it has created and sustained a strong brand. While my study did not find

many links between the brand and loyalty behaviors it does help them get business. There

were no customers who said that the brand name is important to them, which is not

surprising: Even if it is part of their decision to pick Starbucks, they are not likely to

admit it. Even though no one mentioned the Starbucks brand as being important, I did

find a few things that lead me to believe the brand name does help Starbucks gct business

even if it is an unconscious thought on the customers part.

First, the majority ofthe customers I surveyed at both com~e shops said Starbucks

is the first coffee company that comes to mind when they think about coffec. Four out of

eight customers surveyed at Starbueks said that Starbucks was the first coffee company

that comes to mind. Six out of the eight customers surveyed at Pikes Perk said Starbucks

48

was the first coffee company that came to mind, one of whom claimed to be a loyal Pikes

Perk customer. Seven of the eight Pikes Perks customers surveyed said that they would

and sometimes do go to Starbucks. The one person surveyed who said they do not and

never would go to Starbucks is a Pikes Perk employee, who has a stronger preference for

Pikes Perk than most other customers likely do. So, although these customers were not at

Starbucks and in some cases prefer not to go to Starbucks, they have at some point and

will in the future go to Starbucks to get coffee. This shows that Starbucks' methods of

getting their name out there and building an image of quality and reliability does help

them get business even if it is not just from loyal customers.

There were two Starbucks customers who presented interesting cases that are

worth exalnining in greater detaiL The first was a male who said it was his first time in

that particular Starbucks store. His reason for being there on that particular day was

"killing time between meetings" and he lists convenience as one of his favorite aspects of

Starbucks. However, when asked the question "how does the picture below make you

feel?" he responded, "put offreally. I'm not really a fan of Starbucks". This struck me as

very interesting because he had the option of going across the street to Pikes Perk to get

his caffeine fix and kill time, yet he chose to go to Starbucks, whose logo makes him feel

"put off" and which he actively dislikes.

This particular survey-taker listed atmosphere as his top rcason for going to

Starbucks and that he does not like the coffee there. He said the most important part of

the atmosphere was the chair he was sitting in and the music. Since this was his nrst time

in that particular Starbucks and knew he disliked Starbucks coffee, his reason for going to

Starbucks over Pikes Perk is likely that he knew what his experience was going to be

49

like. Since Starbucks always has big comfy chairs and nice soothing music, it is likely

that his reason tor picking Starbucks was that he could count on Starbucks to provide him

with these amenities. This is a good example of how the sameness and familiarity of all

Starbucks stores is effective at drawing in customers.

The second is another case of a customer who was at that Starbucks for

convenience reasons, but this case interested me for a different reason. This customer

explained his loyalty to another independent coffee shop in Colorado Springs called

"Raven's Nest Coffee". This case caught my eye because it shows that although that

customer is loyal to one independent coffee shop, when he is not able to go to Raven's

Next Coffee he chooses to go to Starbucks, the corporate chain, instead of another

independent coffee shop just a stones throwaway. This case is a good example of how

not all customers who are loyal to one independent coffee shop will pick another

independent coffee shop over Starbucks. This is a case of a coffee drinker being loyal to

an independent coffee shop because he likes the particular environment and coftee at that

coffee shop instead of picking the coffee shop because of his dislike for a large

corporation.

The one Starbucks customer surveyed who identified herself as being loyal to

Starbucks also said she is a Starbucks rewards member. The Starbucks rewards program

is a new program Starbueks is otrering their customer in the hopes that it will increase

their customer lovahv. however this customer said she has been ooino there to oct conee .. ~" b b b

for fifteen years so it is highly unlikely that her loyalty to Starbucks was brought on by

her becoming a Starbucks rewards member. It seems to be quite the opposite actually: her

loyalty behavior towards Starbucks is most likely the reason she joined the rewards

program,

Loyalty to Independents

Of the customers surveyed at Pikes Perk there were two customers who claimed

to be loyal to Pikes Perk who displayed very different outlooks why they are loyal to

Pikes Perk, They both seemed to be loyal for reasons I was expecting to find at

independent coffee shops,

50

The first fits into one of the two groups of "oppositional brand loyalty" that

Thompson and Arsel came up with, "Oppositional brand loyalty" is the idea that a

customer becomes loyal to one company due to their dislike or hatred for another. They

said that this group of people takes a very strong anti-Starbucks stance; and that they see

their anti-Starbucks stance as more of a jab against the corporate world as a whole, They

think that Starbucks exemplifies all that is wTong with society and view their support of

local coffee shops as much more of a political action to stop corporate greed,

The customer that fits into this group also happens to work at Pikes Perk, which

of course makes him biased towards Pikes Perk, but some of his answers seem to stem

from more of a hatred of Starbucks than just believing that Pikes Perk is the best coffee

shop, He goes right out and makes a stand against corporations when he answers the

question: "Does your decision to get your coffee from Pikes Perk have anything to do

with a conscious decision to support an independent coffee shop" Explain," By saying,

"Yes, Die Corporate Pigs", Ifhis support were just about believing in Pikes Perk he

would not have stated his opinion in such an aggressive manner. Adding to his stab

51

against corporations, when asked how the picture of the Starbucks logo made him feel he

said, "Upset Very upset", Just seeing the Starbucks logo invokes a strong negative

feeling in him,

On the other end of the spectrum, another customer also showed loyalty behaviors

but her loyalty seemed to come from a love for her local stores rather than a hatred of

corporations, She admitted that she would and sometimes docs go to Starbucks when she

is traveling. When asked the question "Does your decision to get your cofjee from Pikes

Perk have anything to do with a conscious decision to support an independent coffee

shop?" she responded, "Yes- local businesses are what keeps our city going!" This shows

that her loyalty to Pikes Perk comes from her belief that supporting local businesses is

important

Coffee Drinker Typologies

I found it difficult to place the surveyed customers into the five different

categories of coffee drinkers because of a lack of important infonnation. The lack of

information comes from a number of things; at times, I asked the wrong questions; the

customers did not all fully complete the surveys or answer the questions that I asked; and

also the customers did not appear to be completely honest Needing something because

your body is chemically addicted to it is not something people are very likely to openly

admit.

I found that it is hard to tell the difference between an avid coffee drinker and a

collee connoisseur because a customers main rcason for drinking coffee may be for the

taste, bUL because they like it so much and therefore drink it otten. they may actually

52

need it for the effect It is also difficult because a customer may say that they drink

Folgers, which I would think of as not very good com~c and therefore say that they do not

care much about the taste of their com~e. However, it is possible that they have tried all

difTerent kinds of coffee and think that Folgers is the best In this situation, given my

limited information, I would categorize them as a person who "Drinks Coffee" when in

fact they are actually a "Coffee Connoisseur" with differing tastes. This is the trickiest

thing about categorizing colTee drinkers; much of the distinction rests upon personal

tastes.

Where are the Loyalists?

Although my study was aimed at finding out how different aspects of Starbucks

and Pikes Perk make customers loyal to one or the other, I did not find many truly loyal

customers. I was not very surprised by this for a few reasons. The number one reason is

that loyalty is extremely hard to measure. As I discussed in my literature review there are

many different scholarly opinions about the best way to measure loyalty. I also do not

think it is very common for people to be extremely loyal to any good, service, or

combination, especially in an industry that offers so many quality options in relatively

close proximity. I think, as I did find, that people are likely to have preferences to one

company over another but they are not willing to go out of their way to go to a specific

coffee shop every time they want a cup of coffee.

In my study all of the customers surveyed at Pikes Perk had made a conscious

choice to go to Pikes Perk on that particular day. There were a wide variety of reasons for

choosing to go there, whether it was because they are loyal to Pikes Perk and it is the

53

only place they go for coffee or because they had work they needed to get done and they

knew Pikes Perk has plenty of space to work. None of them said they just ended up there

for the sole reason of convenience. Whereas out of the customers surveyed at Starbucks

there were a few people who ended up there because it was convenient.

One possible reason for why the Pikes Perk customers made a more conscious

decision to go there on that day is that it takes more of a conscious decision to end up

there. There is only one Pikes Perk within close vicinity, but there are several Starbucks

near by. 'I'hese days it is hard to go very far in an urban area without passing at least one

Starbucks. As I mentioned before, more than half of the Pikes Perk customers surveyed

said the first cotIce company they think of when they think of coffee is Starbucks, which

means their decision to go to Pikes Perk was not totally instinctive. It is possible that

coffee drinkers who actively believe in the importance of supporting local businesses feel

more of an obligation to go to Pikes Perk. If they do not, then it might go out of business.

This sounds dramatic, but it is true that giving Pikes Perk their business has more of an

affect on the well being of the company than one visit to Starbucks would have on the

Starbucks Corporation.

Starbucks customers take their ability to get their coffee from Starbucks for

granted because there is no fcar that if they do not buy their coffee there it was go away.

In a sense, Pikes Perk customers have to, as a whole, work for their ability to get their

co/Tee trom Pikes Perk by making sure it stays in business.

I may not have found exactly what I was looking for in tenus of differences in

what leads to customer loyalty between Starbueks and Pikes Perk, or much loyalty

behavior at all, but I did find several interesting elements of customer preferences that

would be helpful for future studies in a similar field.

54

CHAPTER VI

DISCUSSION AND CONCLUSION

This study has yielded several interesting findings that contain implications for

marketing directors and coffee shop proprietors. As well as finding some important

implications for people in the specialty coffee industry, this study may also suggest many

ideas for improving studies in the tield of customer loyalty and also other possibilities for

future research.

As I stated in my results convenience won the gold medal for importance in my

study. Although customers have ethical ideals and taste preferenccs, it seemed that

convenience is likely to sway their decision. Convenience is something that Starbucks

has been striving for, and it has worked. Having their stores on every block often makes it

hard for people to not choose Starbucks. Because of this it is even more important for

independent coffee shops to situate themselves in high traffic and easily accessible areas.

One of the more interesting findings suggests that an independent coffee shop looking

either to expand or to open its first sbop might want to take on Starbucks' strategy of

opening up coffee shops as close to a competing collee shop as possible.

This idea is supported by the survey taken by one Pikes Perk customer. Sbe is a

seasoned coffee drinker who said tbat she does like Starhucks. However. when she was

asked the question: "Does your decision to get your coffee from Pikes Perk have anything

55

56

to do with a conscious decision to support an independent coffee shop? Explain." Her

answer was, "Yes,local business is important to me - if there is a Starbucks and another

local coffee shop in the same location - I will choose the local coffee shop. Small

business is vital to a city's economy." Because of this and likely many other people with

the same view, an independent co tree shop would be wise to try this method. Instead of

fearing the large corporation, they should take them on in a head-to-head competition.

As I discussed earlier, the Starbucks brand does help get customers. Although

they are not always a customer's tirst choice, as I found with many of the Pikes Perk

customers, most coffee drinkers have in the past and will in the future go to Starbucks.

Starbucks has done a fantastic job of getting themselves to the forefront of people minds.

While customer loyalty is great for any company to have, it seems that it is likely less

important for Starbucks in the future. Up to this point, the company has done such a good

job of establishing a name (for good quality, atmosphere, and reliability) that when also

combined with their convenience, it seems that Starbucks will always have customers as

long as they maintain their name.

Many of the customers from both coffee shops made a point of how important the

atmosphere and even more so ample sitting room is to their decision of where to buy

coffee. This is important for any coffee shop owner to make note of. There were a few

customers who mentioned that the coffee shops tables to do work at and comfy chairs to

relax in were what brought them to the coffee shop on that particular day. Even though a

customer might not go out of their way to get to a coffee shop just because of their

furniture, it is very important for coHee shops to provide such amenities.

57

Putting these three suggestions together, it is apparent that a coffee shop could not

survive having only one strong quality. A colIee shop needs to have several conditions

for success. Even if a colTee shop serves amazing coffee, if the shop is difficult to tind, it

is going to have a hard time drawing in enough customers to survive. The moral of this

story is that every customer has difterent priorities. While it would be impossible to cater

to ever customers' wants and needs it is important that a colIee shop has several strong

qualities that bring customers in the door.

This thesis brings up several avenues for further research. First, as I stated before

there were several difficulties I came across while conducting my research. Improving on

several of these issues would make for a more successful study. The one thing that I think

a future study in customer loyalty would benetit from most is tinding a way to include the

grab and go customers. They make up a large majority of any coffee shops daily business

and arc quite possibly some orthe more loyal customers. The in coffee shop survey

method made it nearly impossible to include these customers in my study.

A few suggestions for way of trying to include these customers is to either hand

them a survey on their way out the door to ti II out on their own time and return to that

cofIee shop during their next visit. This would be interesting because not only would you

be more likely to get some data from these customers, the fact that they returned the

survey means that they came back to that shop, which right there gives you more

inl()rmation than be!{ne. Another suggestion would be to ask them to wTite down their e-

mail address and send them an online survey so once again they could do it on their own

time and not have to worry about the possibility of loosing the surveyor forgetting to

return

58

Another aspect that would be key in conducting a similar study in the future

would be to include more customers so that you could get a vvider variety of data and also

hopefully be able to draw more meaningful conclusions.

There are several other possible studies relating to the coffee industry that would

be interesting to conduct, the usefulness of which is suggested by my own study. The first

one involves looking at the effect of the increase in popularity of Dunkin' Donuts cotfee

and McDonald's recent addition, McCafe on competing Starbucks coffee shops. These

are two companies who until recently have not been known for great coffee, but they are

both beginning to enter the realm of specialty coffee. The greatest advantages these two

companies have on Starbucks are that they are often more convenient and have much

lower prices. Especially during this current financial crisis, which is causing people to cut

out extra costs, the company who can offer good coffee for the lowest price is likely to

sec a lot of success.

Another study that would be interesting to consider is doing an in-depth market

segmentation including all competing coffee companies in a city. This could be done

using just independent coffee companies to see how they match up to one another or you

could do another comparison of Starbucks and independent coffee shops in close

proximity throughout an entire city. To make the study richer, you could do short case

studies on all of the coHee shops included in the market segmentation as well as trying to

determine the market share of each ofthose companies.

In this study I set out to find the detem1inams of customer loyalty to an

independent coffee shop (Pikes Perk) and to Starbucks. Although I did not tind many

59

loyalty behaviors I found several important dimensions of coffee consumer behavior that

are suggestive both for coffee shop proprietors and future researchers of this topic,

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