Starbucks

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In late 2002, Christine Day, Starbucks’ senior vice president of administration in North America, considered to invest $40 million per year in order to improve customer service.

In my opinion, Starbucks should invest $40 million per year to increase labor hours per store in order to improve quality of service and customer satisfaction. It is important to move customers to highly satisfied, because Starbucks can generate more revenues from customer retention and life time value of every customer. By improving customer satisfaction, Starbucks will enhance customer retention and life time value.

According to the data, Starbucks faced the problem of not meeting our customers’ expectations in the area of customer satisfaction. If Starbucks invest an additional $40 million annually in the company’s 4,500 stores, it would allow each store to add the equivalent of 20 hours of labor a week. But if Starbucks make this move, what will the impact be on our sales and profitability?

Starbucks’ partners’ job complexity became higher due to the increasing in number of customers and the demand of customized drink, which led to the decrease of quality of service. In this situation, the partners (baristas) had more work pressure and less time to communicate with customers. Customers also had longer waiting time. On the other hand, Exhibit 10 showed that “Convenient”, “Treated as a valuable customer”, “Friendly staff” and “Fast service” were important factors that decided the customer satisfaction. Investing $40 million annually can solve the problems of quality of service and improve customer satisfaction.

Starbucks will generate more profits, because enhanced customer retention and life time value will bring more sales and more loyal customers. Exhibit 8 showed that Starbucks’ newer customers tend to be younger, less educated, and with a lower income. Their attitudes toward Starbucks were mush worse than that of established customers. Improving customer service can...
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