Starbucks Case Analysis
I. Market Research Reveals a Service Gap at Starbucks Retail Stores
In 2002, Starbucks was a high-growth company, successfully implementing ambitious retail expansion and product innovation in spite of the economic downturn. However, despite uninterrupted growth, recent market research suggested that everything was not going according to plan for the company. Starbucks built its empire on a foundation of customer service, but data collected in 2002 suggested that its consumer base did not feel a high level of satisfaction at Starbucks stores.
Christine Day, a Starbucks senior VP, was concerned by data which showed that service performance in their retail stores was not meeting customer expectations. Specifically, Day believed that speed of service was a key factor in customer satisfaction and proposed a $40M investment in labor hours to serve customers with-in three minutes (from back of the line to drink in hand). Most importantly, the market research findings called into question one of Starbucks key value propositions – service or “customer intimacy”. Without a cohesive marketing department, Starbucks overlooked an alarming “service gap” – customer satisfaction did not reflect the brand strategy Starbucks believed they were executing.
It is clear that improving customer satisfaction at Starbucks retail stores is a critical issue and closely tied to maintaining the company’s brand strategy. Day’s attention to market research was relevant to keep loyal customers coming back and timely for acquiring new customers. Our objective was to understand the impact of investments that improve customer satisfaction on Starbucks bottom line. Key assumptions and calculations are explained below.
II. Day’s Proposal
After careful deliberation, we’ve concluded that the $40 million investment under Ms. Day’s proposed plan is not advisable. We support making an investment designed to improve customer satisfaction in general, but not under the terms of the stated plan. Our
In 2002, Starbucks was a high-growth company, successfully implementing ambitious retail expansion and product innovation in spite of the economic downturn. However, despite uninterrupted growth, recent market research suggested that everything was not going according to plan for the company. Starbucks built its empire on a foundation of customer service, but data collected in 2002 suggested that its consumer base did not feel a high level of satisfaction at Starbucks stores.
Christine Day, a Starbucks senior VP, was concerned by data which showed that service performance in their retail stores was not meeting customer expectations. Specifically, Day believed that speed of service was a key factor in customer satisfaction and proposed a $40M investment in labor hours to serve customers with-in three minutes (from back of the line to drink in hand). Most importantly, the market research findings called into question one of Starbucks key value propositions – service or “customer intimacy”. Without a cohesive marketing department, Starbucks overlooked an alarming “service gap” – customer satisfaction did not reflect the brand strategy Starbucks believed they were executing.
It is clear that improving customer satisfaction at Starbucks retail stores is a critical issue and closely tied to maintaining the company’s brand strategy. Day’s attention to market research was relevant to keep loyal customers coming back and timely for acquiring new customers. Our objective was to understand the impact of investments that improve customer satisfaction on Starbucks bottom line. Key assumptions and calculations are explained below.
II. Day’s Proposal
After careful deliberation, we’ve concluded that the $40 million investment under Ms. Day’s proposed plan is not advisable. We support making an investment designed to improve customer satisfaction in general, but not under the terms of the stated plan. Our