Howard Schultz’s idea with Starbucks in the mid 1980’s was to create a chain of coffeehouses with a product differentiation of specialty “live coffee”, service or customer intimacy with an “experience”, and an atmosphere of a “third place” to add to their work and home alternatives. The original stores sold whole beans and premium-priced coffee beverages by the cup and catered primarily to affluent, well educated, white-collar patrons (skewed female) between the ages of 25 and 44. By 2002, there were over 5,000 stores around the globe. The company spent minimal dollars on advertising to promote a brand concept. Enforced exacting coffee standards by controlling the supply chain as much as possible, and maintain control over the operations at the retail level. Starbucks research indicated that customers did perceive many independent coffee houses as a “third place”, but Starbucks was seen more as a convenient, quick, and consistently good coffee provider. This is in contrast to the way Starbucks management viewed the company. Sales were comprised as follows: Product Mix with % sales
Other- 15% Revenue Source
Recent Market Research shows a decline in Customer Satisfaction at Starbucks. To stay on plan with their aggressive growth strategy, should $40 million be invested in the 4,500 stores focusing on improving the speed of customer service? Will this improvement lead to increased satisfaction that will translate in to an increase in sales and profitability? Does this investment align with the growth strategy of retail expansion and product innovation?
Mission Statement “live coffee”
The Starbucks Value Proposition:
To create an “experience” around the consumption of coffee, an experience that people would weave into their lives To create an uplifting experience in “Customer intimacy” To create an “ambience” based on human spirit, sense of community, and the need for people to come together
Matters of Concern
Starbucks is suddenly in a position of: BUT 1. Low customer satisfaction 2. Customized drinks 3. Hand crafted Drinks 4. Competition A variety of regionally concentrated small scale Specialty coffee, bagel and donut chains Involve Time Slows down the service process Slows down the service process Strain on workers Low speed of service Consistent sales
Recent Findings of people’s experiences:
Starbucks cares primarily about making money Up from 54% to 61%
Starbucks cares about building more stores Up from 48% to 55%
Top 5 Attributes of Starbucks: 1. 2. 3. 4. 5. Known for specialty/gourmet coffee (54% strongly agree) Widely available (43% strongly agree) Corporate (42% strongly agree) Trendy (41.5% strongly agree) Always feel welcome at Starbucks (39% strongly agree)
Background and Problems
The specialty items included strategic alliances with Pepsi Cola to sell alternative beverages, Dreyer’s to develop and distribute a line of ice cream, Kraft Foods handled sales of coffee and alternative products to warehouse clubs, and various grocery store chains for their coffee. Baristas (employees) were encouraged to interact with customers in a friendly and prompt manner, and were paid higher than average wages and benefits. Employees were considered partners and promotions were usually from within the company. Recent indications were that customer satisfaction was declining due to the time required to be served and employee attitude. Starbucks had a system set up to track customer satisfaction While Starbucks was the largest specialty coffee chain, many other chains competed directly with Starbucks, and many other chains could at any time enter retail specialty coffee sales (e.g. Dunkin Donuts, convenience stores, and many similar retail food stores. New innovation was based upon partner acceptance. Customers rated the new innovations as being much lower in importance than customer service, yet Starbucks was placing a high...