Presented By: Naveen Manwani (GL)Soumavo Dutta ChoudhuryPriya GuptaKaran MalhotraRishabh JainSayantan SahaGaurav Goel

Case Study – Starbucks

MOS Group no. 3

Project Group no. 10

Mr. Dorosin

• A loyal customer of Starbucks.

• A coffee aficionado.

• Looks upon Starbucks to satisfy all of his coffee related needs.

• Consumer of Starbucks coffee as well as merchandise.

• Highly indulged and influenced by Starbucks.

Starbucks..

Aims at providing a wholesome coffee experience.

Starbucks objective is to establish itself as a premier specialty coffee brand.

Product mix consists of coffee to drink, coffee beans, coffee making equipment.

Believes that customer relationships are based on trust that are renewed each coming day.

Total customer satisfaction is of utmost importance.

The Seeds of Conflict

Dorosin buys a Vapore espresso maker for $299.

Finds it defective.

An Estro 410 is issued as a loaner till the defective Vapore is replaced.

The $189 Estro 410 is found to be becoming to Dorosin.

The Vapore is replaced. Dorosin buys an Estro 410 for the purpose of gifting.

The Estro 410 purchased, was packaged in a damaged box.

free coffee with the Estro was not provided. The Estro didn’t carry an instruction manual, was rusting, and had parts missing.

The Vapore goes defunct for the second time.

Follow up of events

Upon not getting the free coffee and finding the instruction manual missing, Dorosin contacts the store manager.

The store manager apologizes and promises the free coffee, the manual and a free cup of coffee to compensate for the inconvenience caused.

When his Vapore fails again, Dorosin demanded apologies for te defective gift machine and a $2495 coffee machine for a $189 defective Estro.

Such demands were ineligible according to Starbucks and not worth compensating to.

Dorosin on not having have his demands met, starts placing ads, appearing on public radio and television against Starbucks.

Dorosin’s reaction

As a consumer Dorosin’s behaviour is seen to change from that of a voicer to a terrorist.

But the events that occurred and the inconveniences caused were not of a magnitude that prompted actions taken up Dorosin.

Service recovery on the part of Starbucks was delayed but not ineffective.

Dorosin blowed up the issue

“Service Recovery of Starbucks”

The loaner for the defective machine (Starbucks Estro Vapore Expresso Machine) was given without a letter of apology.

Urgent effort and Empathy from the cashier were missing when he refused to sell the loaner without asking his higher authority.

Compensation was there as the loaner- Estro 401 and Dorosin was

satisfied with it.

Follow up was not there as no officials called up Dorosin.

Problems with the first machine…

Problems with the gift machine(buying)..

Dorosin did not get the apology from the cashier but finally got it from the store manager.

Urgent effort was missing, there was not a hint of setting things right from the cashier as he sold the machine in the damaged box.

Dorosin bought it for his friend's remarriage who struggled out from cancer and explained this to the store manager. The action from the store manager was more of sympathetic for a loyal customer like Dorosin and it missed empathy. “ Cashier – ‘ You get nothing!’ Dorosin to newspapers – ‘ It was humiliating to be surrounded with customers in

the store and be treated that way’” Source:

www.customermath.com

Compensation for this inconvenience was also not there.

Dorosin was never approached by any starbucks officials, so the follow up was also weak.

Problems with the gift machine(after sales)…

Urgent effort was not there as Dorosin had to bear all the trouble to call the officials and narrate the story.

Empathy was not there. Dorosin was embarrassed and the negotiation with starbucks was more frustrating for him.

Compensation was perfect as the cumulative price of both the machine was more than the cost price.

Follow up was partly there, as Dorosin did maximum of the calling but Stein followed him back.

Dorosin and Stein…

Apology was there, as apology letters were sent to both Dorosin and his friend.

Urgent Effort was there as Stein came up with the offers pretty quickly and a win-win situation.

Empathy was still not there, because it was no longer the money issue. In reply to Dorosin’s threat of advertisements – Stein – “Gee, I’m sorry you feel this way” in a patronizing tone

Source: www.customermath.com

• Compensation was there but not as expected by Dorosin.

• Follow up was there as Stein made sure to listen to Dorosin’s demand carefully and act accordingly.

Battle of Advertisements

Apology letter was sent to Dorosin’s friend but the kind of apology Dorosin expected was unrealistic.

Urgent effort was not there as the amount to be deposited as charity got delayed and all the conversation was over the phone, Starbucks would have invited him Dorosin and his friend for complementary coffees and solve the matter.

Empathy was not possible as the customer turned himself into a “monster” with the advertisements and the demand of sponsoring and supporting a juvenile runaway shelter.

Compensation by Reese was perfect from the company’s point of view but it was too little for a customer who has already paid $40,000 on his publicity stunt.

Follow up was there with the replacement products and the calls.

Product Mix of Starbucks

The Product Mix of Starbucks

Coffee Beverages

Whole Coffee Beans

Food Items and Confections

Coffee-related equipments Hardware

Accessories

included coffee mugs, coffee grinders, storage containers, coffee filters, and specialty food products

Company’s Mix of Merchandise of Retail Sales

The product mix is each store varied

It dependent o the size of the store and location

The larger starbucks retail stores carried a range of

I. Coffee related productII. Coffee making

equipmentIII. Espresso machines

Importance of Hardware and Equipment

It constituted only 10% of the total mix of merchandise The competition faced by it in the espresso machine market

was intense The customers could purchase these specialty coffee makers

from local department stores, gourmet kitchen specialty stores, and the national discount retails at a wide range of prices so it was important for the company to not only create new customers but also retain them

People can link with the company sitting at home. Target people who cannot come to the café due to lag of time. Help them gaining place in frequent coffee consumer’s

market.

Porter’s model of Competitive Advantage and Strategy for the Starbucks

Competitive Advantage..

Starbucks approach towards a sustainable competitive advantage is Focus differentiation.

Differentiation

• They have positioned themselves as providers of consistent and good customer service through a thorough training process.

• Corporate reputation for quality and creative flair

• Priced its coffees at or above the prevailing high-end coffee prices in each of its markets, reflecting the higher quality of coffees

• Developing the quality everyday experience

• Differentiation of the experience

• Their stores provide a high degree of customizability.

The company doesn’t follow the principle of

‘one shoe fits all’; rather they adjust their products according to the local market.

Target consumer was a wealthy, educated, coffee drinker who preferred quality and customer service over a discounted price

Focus..

Strategies..

Serve niche buyers better than rival.Open licensed retail locations inside of grocery

storesTo expand its sales, Starbucks can began

releasing new, but related products like bottled drinks, Ice Creams, and Liqueur

Starbucks has tremendous amount of financials and effort to develop partners in its value chain.

Advertisements can be used to increase awareness and sales.

Were the demands of Dorosin justified at any stage? How can now he be handled to save the company, money and reputation?

As seen the initial demand of Mr. Dorosin were acceptable since he had suffered due to company twice consecutively. The trouble faced by him instead of being resolved at once was again faced by him incase of the gift he bought for his friend.

The manager as highlighted proposed Mr. Dorosin with a refund which was not very considerate. The manager should have personally taken the feedback and worked on it ever since the first complaint was encountered and should have kept a check on the further dealings with the same or different customers also.

Demands of Dorosin..

It was due to the managers mistake at first that Mr. Dorosin changed from a voicer to an activist where in staked the company’s reputation by giving advertisements against Starbucks in Wall Street journal, opening toll free no. wherein the other people could talk about there sufferings, also he appeared on TV shows and Radio telecasts discussing about the case.

Firstly, the feedback was not taken seriously and a refund was offered. The manager should have apologized for the problem faced by Mr. Dorosin and should have taken a personal note of it.

Demands of Dorosin..

The representative should have made Mr. Dorosin feel that the company is trying to set things right as soon as possible, the actions should have presented that the things are being worked out to put them right for the customer.

The concern and care from the companies end should have been communicated at once whereas in this case the customer put across the sufferings thrice to the company officials, which reflected that the officials were unaware and uninterested of the situations and troubles being faced by Mr. Dorosin.

The representative should have also made sure that the promises made once should be completed else it adds to customers aggression. The treatment should not fall below the standards set and promised.

Actions should have been taken..

Building Brand Loyalty – Like Tata Sky featured advertisements showing letters of satisfied customers

Celebrity Buzz Marketing – Like Cadbury used Amitabh Bachchan after the worm controversy

Can advertise on its defense by print/ media commercials - Like ICICI

Should not be battered for being ethical – No link between mistake and the demandsMust not succumb to outrageous demands or else

people will take advantage

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