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Starbucks: Delivering

Customer Service

Nidhun ThankachanPGP/16/093CRM Sec A

1. What factors contributed to the early success of Starbucks?\2. What was the core value proposition of Starbucks?3. Why did the customer satisfaction scores of Starbucks decline?4. How did Starbucks and their customers change over the year?5.Who is the ideal customer from the POV of Starbucks and how will you satisfy her/him?6.Do you recommend making the  $40 million investment and why?

Case Questions

Created a 3rd place-recreational spot of Americans Maintained standards by controlling supply chain Raised $25mn through IPO Targeted specific audience white collar, educated Attracted affluent customer by providing superior service

consistently Large reach- retail outlets, hotels, airports, Kraft foods, Pepsi

Cola and Dreyer’s etc. Selected high-traffic, visibility setting locations Used word of mouth and spent almost nothing on advertising Invested in R&D Lowest employee turnover rate

Factors Contributing to early success

“Live Coffee” Mantra Use of highest quality coffee beans Created superior customer experience Maintained good ambience in coffee shop upscale yet

inviting environment Maintained ‘customer intimacy’ by

Recognizing the customer Indulging in friendly talk Offering customized drinks

“Just say Yes” policy

Core Value Proposition

Long waiting period and service time Tension between focus on product quality and customer

interaction Less focus on what the customer needs

Cause for decline of customer satisfaction

Customer base 70s: niche market of coffee purists and aficionados 80s-90s: shift to affluent white collar patrons 2000s: young college going, lower income bracket patrons

Value proposition Convenient coffee joint coffee on the move Customer perception: Service oriented profit oriented

Product Whole Arabica coffee beans coffee beans+beverages

Beans+beverages+accessories+games+other products (juices, sodas, pastries etc.)

50% rev. by coffee beans (1992) 77% rev. through beverages (2002)

Complex and customized products

Changes in Starbucks and its customers

A loyal customer Visits store 18+ times a month Spends $4.42 on average on every visit Average life of 8.3 years Prefers ready-made products or easy to make beverages Value of ideal customer: 18*4.42*8.3*12= $7924

How to satisfy them?

Create clean store image and provide convenience of use Improve coffee taste/flavour Create pleasant, upscale environment Treat every customer as a valuable customer Quick, improved services Knowledgeable and friendly staff Offer incentive and loyalty programsThe ideal customers and how to satisfy them

Yes, they should go for this $40mn investment To make service operations more quick, streamlined

and efficient To increase customer satisfaction levels by decreasing

service time and building long term relationships To commission extensive market research studies to

understand the changing needs of customers today Difference between a satisfied and an unsatisfied

customer is a whopping $172.39 every year

The new investment option?

{Thank you!