8/7/2019 Starbucks Assignment_Ankur Shah_49

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Name: Ankur M ShahRoll NO: 49Assignment Submission: Starbucks’

Questions-Answers

(1) Why is Starbucks’ image getting declined?

The customer satisfaction scores do suggest that Starbucks’ image has declined, the waypeople view it has changed over the decade since it was incepted. From the data given in thecase, we can infer that Starbucks’ has been adding new customers over the past 1-2 years on alarge scale. About 47% were included in the past 2 years (from exhibit 8). The case alsodiscusses that the older customers are not as dissatisfied as the new ones. According to me,making decisions on the backing of data collected where there is a lot of new opinion in theimage is a little tricky.Also if one looks at the exhibit 7, the service and cleanliness are perfectly fine but thecustomers demand quicker service indicated by snapshot scores of increase in average

waiting time. So the company could go on with its investment plan in the staff expenses.

(2) Who are the Ideal Starbucks’ customers from ‘profitability’ standpoint?

The customers that are loyal and ‘frequent’( in this case) will always remain any company’smost ideal customers from the profitability standpoint.From exhibit 9, the highly satisfied customer’s average ticket size is 4.42$ and the number of visits are also higher than any of the other categories. Thus Starbucks’ should try to convertas many customers as possible to the most satisfied customer category.If we look at exhibit 10 that tells us how customers want Starbucks’ to ideally be, thefollowing are the various attributes that are most needed to be heeded:

- Cleanliness- Friendly staff - Highest quality coffee and flavour - Fast serviceIf we look at the Figure A of customer visit frequency, we find that the customer visiting 8+times a month are just 21% of the total but they account for 62% of total transactions.This essentially means that those who are frequent visitors are among the major contributorsto the bottom line of star bucks. There is bound to be high levels of customer satisfactionamong frequent visitors towards star bucks.

(3) Do an analysis to calculate the no. of customers Starbucks’ would have toconvert from satisfied to highly satisfied to make the $40 million

investment payoff.

As we can see that the average revenue from a highly satisfied customer is about 382 $ andthat from a satisfies one is 210$. This means the difference of 172$ can be achieved per customer by converting him to a highly satisfied one.Assuming all other expense ratios remaining same, the number of customers to be convertedto highly satisfied ones would be 40mn/172 = 232558 i.e. about 40 customers per store (if weconsider all stores)

8/7/2019 Starbucks Assignment_Ankur Shah_49

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(4) Can the Starbuck's philosophies and strategies be applied to Indian coffee

chains? If yes, how? If not, then in the same way, what changes would you

suggest?

Starbucks’ as a brand has evolved over the years and is one of the most popular coffee shop

chains in the world. It has delivered consistently due to its sheer customer focus and servicequality.According to me, Indian coffee shop chains are in a growing phase with the customers beingupper middle class, with rising disposable incomes. Obviously there lies tremendous potentialfor Indian coffee shop chains to expand to cater to this emerging market. Indian coffee shopchains can take the Starbucks’ philosophy of service.Personally I have not been a coffee shop visitor (might have gone once or twice but that’s notenough to comment on the service quality levels there). So to conclude I will say that takingcues from such a success story like star bucks must be among the priorities of anyone in thesimilar business.