STARBUCKS: DELIVERING CUSTOMER EXPERIENCE

Case Study Analysis | SP Jain School of Global Management

GROUP – 5 STARBUCKS: DELIVERING CUSTOMER EXPERIENCE

Team Members: Avinash Singh - GSEP13CMM023 Kautilya Tyagi - GSEP13CMM026 Prajakta Talathi - GSEP13CMM031 Vihaan Chaudhary - GSEP13CMM037

Starbucks: Delivering Customer Experience 2014

Services Marketing Management – Group Assignment P a g e 1

Table of Contents Starbucks Case Study Summary .............................................................................................................. 2

Key Issue ................................................................................................................................................. 2

Objective ................................................................................................................................................. 2

Strategy ................................................................................................................................................... 3

Plan ......................................................................................................................................................... 3

Analysis using Models and Frameworks ................................................................................................. 5

3 C Analysis ......................................................................................................................................... 5

Competition .................................................................................................................................... 5

Company ......................................................................................................................................... 5

Customers ....................................................................................................................................... 7

Value Proposition ................................................................................................................................ 9

Live Coffee Mantra .......................................................................................................................... 9

Experience Economy ........................................................................................................................... 9

Value Creation ................................................................................................................................. 9

3 I’s ...................................................................................................................................................... 9

Triple Bottom Line............................................................................................................................. 10

Ecosystem of Interdependence ........................................................................................................ 10

Employee’s Sense of Ownership ....................................................................................................... 10

Service Evaluation ............................................................................................................................. 11

Deepening Relationship .................................................................................................................... 11

Brand Layers ...................................................................................................................................... 12

Customer Actively Immersed ............................................................................................................ 12

Brand Personality .............................................................................................................................. 12

Flower of Service ............................................................................................................................... 13

Self – Penalization ............................................................................................................................. 13

Customer Pyramid ............................................................................................................................ 14

Kano’s Model .................................................................................................................................... 14

Implementation of Plan ........................................................................................................................ 15

Assault 5 Senses ................................................................................................................................ 15

Employee Empowerment and Engagement ..................................................................................... 15

Build Relationship ............................................................................................................................. 16

Recommendation .................................................................................................................................. 16



Customer Satisfaction

Bo

tto

m L

ine

Starbucks: Delivering Customer Service

Starbucks Case Study Summary Due to rapid expansion and increasing service time there is a decrease in customer service and

customer satisfaction. This has impacted the bottom line of Starbucks. There are internal conflicts

between Christine Day, Senior Vice President of Administration and Howard Schultz, Orin Smith the

CEO of Starbucks and the CFO where Day wants to focus on customer service and customer

satisfaction and the rest want to focus only on the bottom line.

To enhance customer experience, Day has asked for an additional $ 40 million in order to relax the

labour hour controls in the stores to add an additional 20 hours of labour per week per store.

Key Issue While focusing on brand and building new products, Starbucks started losing sight of its customer.

The challenge for Day is to prove that Customer Satisfaction is directly proportional to Bottom Line.

Objective

Hence, one needs to either improve Customer Satisfaction to improve the Bottom Line or to improve

the Bottom Line and invest the profits to increase Customer Satisfaction.

Customer Satisfaction

α

Bottom Line

To prove that

Bottom Line α Customer Satisfaction



Strategy Christine Day needs to present to CEO and CFO of Starbucks, for whom bottom line is the most

important. Hence, she should follow the strategy of Contingency Model of Presentation.

Contingency Model of Presentation is to present your ideas to the audience in the way they want to

listen.

The strategy to be proposed to the management team will be to strengthen bottom line which will

generate enough funds to improve the customer satisfaction. To increase the bottom line:

Let us focus on increasing the revenues:

Plan Brand Ambassadors get more customers, frequently visit Starbucks and also have larger ticket sizes.

Lifetime Value of Customers

Increase Ticket Size

Increase Frequent

Visits

Increase Footfall

Satisfied Customers

Brand Advocates

Buzz Customers – Family/ Friends

Footfall

Expenses – Marketing etc

become

create

attracts increases

reduces savings invested in creating



In order to increase the lifetime value of the customers, convert every customer into highly satisfied

customers and then into Brand Ambassadors or Advocates:

To create pleasant memorable experience and to reduce or to eliminate pain points the following

can be done:

Reducing or eliminating their pain points

Creating pleasant memorable experience

Building Emotional

Relationship

Employee Engagement

Assault all 5 senses



Analysis using Models and Frameworks In every situation it is always advisable to begin looking internally first, improve these conditions and

then move to external conditions and improve them.

3 C Analysis

Competition

Name Place Stores Key Differentiator

Small Scale Coffee Chains

Caribou Coffee Minneapolis based

200+ stores in 9 states

Store environment – Alaskan lodge, knotty pine cabinetry, fireplaces and soft seating

Peet’s Coffee and Tea California based

About 70 stores in 5 states

Freshest coffee in the market – “Roast to order”, hand roasted beans

Independent Speciality Coffee Shops

Various Shops Different locations

Different stores across all states

Different coffee shops different offerings – wide range of F&B, Satellite TV, Internet connections, personalised services

Donut and Bagel Chains

Dunkin Donuts – 3700+ stores in 38 states

Flavoured coffee and non-coffee beverages; Dunkaccino, Vanilla Chai

Company

Mission

Statement

“to inspire and nurture the human spirit – one person, one cup and one neighbourhood at a time”

Guiding Principles

Starbucks describes 6 guiding principles in their mission statement that also communicates the

organization values



Values

Our Coffee

It has always been, and will always be, about quality. We’re passionate about ethically sourcing the finest coffee beans, roasting them with great care, and improving the lives of people who grow them. We care deeply

about all of this; our work is never done

Our Partners

We’re called partners, because it’s not just a job, it’s our passion. Together, we embrace diversity to create a place where each of us can be ourselves. We always treat each other with respect and dignity. And we hold

each other to that standard.

Our Customers

When we are fully engaged, we connect with, laugh with, and uplift the lives of our customers – even if just for a few moments. Sure, it starts with the promise of a perfectly made beverage, but our work goes far beyond

that. It’s really about human connection.

Our Stores

When our customers feel this sense of belonging, our stores become a haven, a break from the worries outside, a place where you can meet with friends. It’s about enjoyment at the speed of life – sometimes slow

and savored, sometimes faster. Always full of humanity.

Our Neighborhood

Every store is part of a community, and we take our responsibility to be good neighbors seriously. We want to be invited in wherever we do business. We can be a force for positive action – bringing together our partners,

customers, and the community to contribute every day. Now we see that our responsibility – and our potential for good – is even larger. The world is looking to Starbucks to set the new standard, yet again. We will lead.

Our Shareholders

We know that as we deliver in each of these areas, we enjoy the kind of success that rewards our shareholders. We are fully accountable to get each of these elements right so that Starbucks – and everyone

it touches – can endure and thrive.



SWOT

Below is the internal analysis (Strengths and Weakness) and external analysis (Opportunities and

Threats).

Expansion & Total Stores

Starbucks adopted aggressive growth strategy in order to be the most recognized and respected

brand. It comprised of:

1. Retail Expansion

Too many stores within North America reduced the exclusivity of Starbucks and hence minimised the wow factor of the brand.

Also, it led to one store cannibalising the other store within the same locality

2. Product Innovation

While focusing on product innovation, Starbucks ignored customer satisfaction and

customer experience.

Customers

The idea of Starbucks is to provide customers a “Third Place” after home and work.

STRENGTHS: 1. Large Market Share 2. Good Brand name 3. Trusted Brand 4. Quality , accessibility, convenience and consistent

WEAKNESS: 1. Gap between customer expectations and 2. Starbucks delivery 3. Low customer satisfaction not getting compensated by premium prices 4. Delayed sevice 5. Lack of customerfriendliness and attentiveness

THREATS: 1. Increasing number of competitors 2. Increasing number of substitutes and alternatives

OPPORTUNITIES: 1. Global market expansion 2. Increasing market size

SWOT STARBUCKS

North America

78%

International 22%

Starbucks Stores: Total 5886



Frequency

Customer Loyalty or Retention

Customer Feedback

0%

20%

40%

60%

80%

100%

Total StarbucksCustomer Base

StarbucksTransactions

42% 11%

37%

27%

21%

62%

Customer Visit Frequency

1-2 times/month 3-7 times per month

More than 8 times/month

0-1 year 27%

1-2 years ago 20%

2-5 years ago 30%

5 years plus 23%

Customer Retention

21% of Customers

perform 62% of

transactions. The more

the customers’ frequent

visits, better is their

transaction and hence

the sales.

Customers of Starbucks

are fairly loyal but some

strategies can be

implemented to further

increase the retention

levels.

Product Quality is not consistent and Average Wait Time is reducing.

Nevertheless, the wait time is still above 3 minutes which is still more

than the preferred expected time by customers.



Value Proposition

Live Coffee Mantra

Experience Economy

Value Creation

3 I’s

Low Medium High

Gratification

Configuration

Recognition

Live Coffee Mantra

Atmosphere

Customer Intimacy

Quality Coffee

Exp

erie

nce

Mass Customized Personalized

Pri

ce

Quality Coffee – Highest quality; green coffee beans; Inconsistent

Customer Intimacy – Recognizing customers and knowing or customizing their drinks; diminishing customer experience

Atmosphere – People come for coffee but stay for ambience; Upscaling and inviting environment

Starbucks offers more customized

close to personalized coffee. It

provides an excellent experience and

hence can charge a price premium.

Service time more than 3

minutes delays Instant

Gratification. Also, failure to

recognize customers and to

know or customize their drinks

reduces the Instant Recognition.



Triple Bottom Line

Low Medium High

Environmental

Social

Finance

Ecosystem of Interdependence

Employee’s Sense of Ownership

Low Medium High

Engage and Empower

Profit Sharing

Meaning

Environmental – Green coffee beans; Best eco practices

Social – Employees called as partners/Baristas; provides health insurance, stock options; lowest employee turnover rate

Finance – Starbucks focuses on profitability

Starbucks highly values its

employees and Starbucks

value chain is highly

interdependent; where

Starbucks largely controls

his suppliers.

Engage & Empower – Reward, training, feedback, good selection process etc

Profit Sharing – Provides health insurance, stock options

Meaning – Starbucks Coffeehouses should be the Third Place



Service Evaluation

Low Medium High

Reliability

Assurance

Appearance

Responsiveness

Empathy

High Medium

Competitive High

Competitive

Price

Deepening Relationship

Reliability – Reliable coffee service

Assurance – Quality is inconsistent lately and delivery speed is slow

Appearance – Ambience experience is high and assaulting 5 senses should be optimized

Responsiveness – High responsiveness at all the Touch Points/ Point of Sales

Empathy – Failure to recognize customers and to know or customize their drinks

Price – According to service evaluation, service quality has been decreasing and hence charging a Price Premium is not justified

Recently customers feel

a loss in relationship

levels. Starbucks is

proactively trying to

repair and is

continuously repairing

its relationship with

customers



Brand Layers

Customer Actively Immersed

Brand Personality

SOCIAL RESPONSIBILITY

SELF EXPRESSION

EMOTIONAL

FUNCTIONAL

• Green coffee

• Best eco-friendly practices

• Starbucks customers are thought to be elite and high class

• Third place

• Ready to go or in house, good taste coffee

•Starbucks is perceived to be genuine, kind, thoughtful and responsible

Sincerity

•Starbucks will help boost personality to accomplish things and become influential and successful

Competence

•Starbucks is perceived to be elegant and unpretentious

Sophistication

Otherwise Actively

Immersed customers

are on the verge of

becoming actively

involved and if nothing

done will soon turn

passive



Flower of Service

Self – Penalization

•Organized menu

•Display boards

•Nutrition chart

Information

Employees become Advisors

Consultation

•Systematic process

•Placing the order by self

Order Taking

Verify order - force functionality

Repeat Order

•Responsible staff

•Takes good care of customers

Safekeeping

•Excellent Value Proposition

•Blend of Quality, intimacy and atmosphere

Exception

Accuracy of bills invoice

Billing

•Card, cash, mobile payment options

•Over the counter payment

Payment

Starbucks claims good

quality coffee and it

delivers it well; in case

of failure to deliver,

replaces with a new

coffee



Customer Pyramid

Kano’s Model

•Coffee drinkers pull more footfall by creating a Buz and either get along new customers or suggest to new customers

•Consumers once convinced about the coffee will tend to be loyal

•Even though the switching cost of coffee is low, consumers once attached to coffee products and service are loyal

Basic features: 1. Coffee 2. Side snacks items 3. Good coffee shop ambience

Performance is not consistent. Mixed feedback from consumers; Not all users experience the same effect from the service

Excitement is the aspirational awe effect which the consumer perceives after availing the service. But because of mixed feedback for satisfaction, this excitement is getting reduced

Cu

sto

mer

Sat

isfa

ctio

n

Product Features



Implementation of Plan

Assault 5 Senses

Low Medium High Remarks

Smell

Delicious aroma of coffee

Sight

Extremely palatable and desirable sight; Ambience looks comfortable and cozy

Taste

Excellent quality coffee; Taste of premium-ness

Touch

Smooth touch; feel of

richness and eliteness

Sound

Put slow music during lesser queue and faster during longer queue; Longer service time -> more people waiting -> louder sound of people talking

Employee Empowerment and Engagement

Methods How?

Reward Profit sharing, awards, incentives; Recognition Feedback Instant, every day and when required; Positive Autonomy End-to-end control Training Customer service, soft skills, customer recognition, coffee making Civil Environment Respect, trust, care Fair and Transparent Ownership and profit sharing Selection Interviews and candidate matching Starbucks culture Platform Obstacle free; open door



Build Relationship

Recommendation Investing into Employee Training and Relationship Building with the customers will help create Loyal

Customers and Brand Ambassadors and create a buzz. This reduces enormous marketing expenses,

increases footfall, retains customers and also increases the ticket size per visit.

Trust, Care, Respect, Empowerment, Engagement, Meaning to job will create Employee Advocates Training for soft skills and recognising the customers will create satisfied customers who will become brand ambassadors

Customers

Employee Advocates

Brand Advocates

STARBUCKS: DELIVERING CUSTOMER EXPERIENCE

Marketing

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