CASE SYNOPSIS• Starbucks, the dominant specialty-coffee brand in

North America, must respond to recent market research indicating that the company is not meeting customer expectation in terms of service.

• To increase customer satisfaction, the company is debating a plan that would increase the amount of labor in its stores and theoretically increase speed-of-service.

• However, the impact of the plan which would cost almost $40million annually on the company’s bottom line is unclear.

THE 7 P’SPRODUCT • Focuses on product innovation• Customization• Deals in four types of products• Coffee beverages, food items, whole bean coffees, equipment and accessories

PRICING• Value based pricing• Premium price & premium product• Starbuck experience• Purchase of fair trade certified coffee• Purchase of highest grade Arabica coffee

PROMOTION • Organizing Grand events• Artworks on mugs and T-shirt• Local ambassadors for promotion

PEOPLE• Employees were referred to as “partners”• Lowest employee turnover• Best place to work• Generous policy of giving health insurance

PLACE• Started stores in retail sectors, office buildings and

university campuses• Ensured at least one store in high traffic areas• 900 licensed stores• Goals to have 15000 international stores

PHYSICAL EVIDENCE• Large setup of stores all over the world• Well skilled & well trained employees• Ambience is created on universal appeal• More than 5000 stores around the globe PROCESS• Baristas had to undergo rigorous training• Starts from welcoming the customer to taking their

feedback• Simplify the beverage process to increase efficiency

SERVICE ENCOUNTER● Time during which customer interact directly with

a service.

● High Contact Service – customer visits service

facility and remains throughout process.

● Soft Skill Training

● “Just Say Yes”

SCOPE TO IMPROVE MOT IN STARBUCKS

● Identify and prioritize each customer episode or contact

● Decide which responses will delight the customer

● Strive to provide breakthrough quality on specific MOT by using personal creativity

CRITICAL INCIDENCE● A specific encounter between

customer and service provider in which the outcome has proved especially satisfying or dissatisfying for one or both parties.

● Satisfying – SVC (stored value cards), T- mobile wireless internet Service.

● Dissatisfying – Customer needs evaluated on their own scales not on customer requirements, Service time.

MEASURING SERVICE PERFORMANCE● Starbucks used a very

unique program called the customer snapshot which rated the store on four basic criteria :

1. service

2. cleanliness

3. product quality

4. speed of service● Legendary Service.

CORE SERVICE OF STARBUCKS

• Specialty- coffee brand

• Customer service oriented to deliver the best service

• Consumers can have their drink in the shop or take it

away, mail order and delivery

• The company`s goal was to serve a customer within

three minute, from back of the line to drink in hand

SUPPLEMENTARY SERVICES OF STARBUCKS• Enhancing service

1) Company also offer snack, sodas , juice and

salads.

2) Joint venture with Pepsi-Cola to distribute bottled

Frappuccino

3) T-Mobile Hot Spot wireless Internet service

SUPPLEMENTARY SERVICES OF STARBUCKS

• Facilitating service

1) Atmosphere

2) Starbucks` Stored Value Card (SVC)

3) Music CD, game and novelty item equipment

CUSTOMER SATISFACTION● Organizations use the

business term CS to measure how their products and services meet or surpass customer expectation

● In a growing competitive market CS has become a key element of business strategy

STARBUCKS CUSTOMER BEHAVIOR BY SATISFACTION

LEVEL● Despite high customer

snapshot scores Starbucks realized that they were not meeting expectations in terms of customer satisfaction

● This was attributed to the service gap between Starbucks scores and customer expectations

INITIAL

• affluent, well educated, white collar patrons between age

group 25-44

• Educated people

CURRENT

• Largest segment: 18-24 years old

• Young executives

• Lifestyle generation

• People who prefer customized beverages

SEGMENTATION

• Provider of 'Premium coffee'

• Offers a wide range of specialty coffee

• Tagged itself as the 3rd place

• Has been positioned as 'High on Quality &

High on Price'

POSITIONING

• Transcendental

• Product based

• User based

• Manufacturing based

• Value based

PERSPECTIVES ON SERVICE QUALITY

• What factors accounted for Starbucks’ success

in the early 1990s and what was so compelling

about its value proposition?

• What brand image did Starbucks develop

during this period?

QUESTION 1

1. Success factors– 3 min service– Product mixes– Wide reach (distribution)– Accessible and consistent– No advertising expense– Positioning– Public issue– Target audience

ANSWER 1

2. Value propositionBrand Strategy - Mantra of “live coffee”.

Components –- Coffee- service- atmosphere

ANSWER 1

3. Brand image - good coffee on the run - everywhere: the trend - place to meet and move on - always feel welcomed - widely available

ANSWER 1

• Why have Starbucks’ customer satisfaction

scores declined?

• Has the company service declined Or is it

simply measuring satisfaction the wrong way?

QUESTION 2

1. Declined customer satisfaction• Customization of drinks• Delay in service• Customer perception• Service gap• Little product differentiation (smaller coffee

chains)

ANSWER 2

2. Measurement of satisfaction in wrong way

• Customer snapshot

• Legendary service

• No strategic marketing group

• Changed customer base – too late to realize

ANSWER 2

• How has Starbucks changed since its early

days?

QUESTION 3

• Owns close to 1/3 America’s coffee bars• Number of coffee shops increased• Customer base changed• Service innovation• Product innovation• Corporate• Known for specialty / gourmet coffee• Lowest employee turnover rates

ANSWER 3

• Describe the ideal Starbucks customer from a

profitability stand point.

• How valuable to Starbucks is a highly satisfied

customer?

• What would it take to ensure that this

customer is highly satisfied?

QUESTION 4

1. Ideal customer- Frequent visits- Ready to experiment- Brand loyal- Working class- Stored Value Card user- Referrals

ANSWER 4

2. Ensuring satisfaction- service- ambience- consistent prices- convenience orientation- cleanliness- product quality- speed of service

ANSWER 4

QUESTION 5

• Should Starbucks make the $40 million

investment in labor in the stores?

• What's the goal in this investment?

• Is it possible for a mega brand to deliver

customer intimacy?

ANSWER 5 1. Goal in the investment

- customer oriented investment- better and faster service- more labor- increased customer satisfaction- future plan- stronger term relationship

ANSWER 52. Customer intimacy

- original value proposition- formation of strategic marketing group- increase in labor force

COFFEE AND CONVERSATION?