Starbucks Case Analysis

Topics: Coffee, Espresso, Customer Pages: 7 (1889 words) Published: November 12, 2011
Starbucks Case Analysis

Starbucks has always taken exceptional care in keeping its brand value.  In fact, Starbucks prides itself in its brand, particularly the power it has to keep its customer base strong. Before analyzing this loyal customer base it is best to consider the particular characteristics of the brand that has led to Starbucks having such devoted patrons. First, Starbucks believes that the quality of its coffee products always needs to be perfect. Starbucks took quality control to a new level. When the freshness of coffee bean shipments is in question, Starbucks donates those beans to charity by the thousands of pounds. In addition to this measure of excellence, Starbucks helped incorporate a new coffeehouse vocabulary throughout the United States found in no other establishment. Customers received whatever they ordered, from “dupio” to extra foam with “legs.” Second, Starbucks began to offer an atmosphere inspired by what many would consider the Mecca of coffee: The Italian coffeehouse. Starbucks believed that its customers should feel comfortable beginning their day at their shop, and end it in the evening socializing with friends there too. The atmosphere was specific to individual neighborhoods with either bar stools for the fast pace urban environment or more comfortable seating for those looking to relax and socialize.

Starbucks’ Customer Base
Starbucks’ unique brand-growing strategy has led to a sharp increase in its number of customers, revenues, and customer loyalty. According to O’Farrell (2011) Starbucks, “Holds around 33 percent of the market share for coffee (para.1).” Specifically, this translates into sales of $10.7 billion and a net income of $945 million in 2010 (Daily Finance, 2011). Moreover, Trevis (2010) projects, “An increase in daily customers per store from 468 in 2010 to 575 in 2016 (Para. 4).” Starbucks’ brand value, its coffee quality, and the stores’ warm atmosphere have attracted a strong customer base, dominated by “49 percent men and women between 25 and 40, and 40 percent young adults aged 18-24 (O’Farrell, 2011).  Where Starbucks’ adult customers prefer the “hip, contemporary [store] design, its younger adults are drawn to the cool image cultivated by Starbucks’ marketing campaigns by way of ‘technology and social networking sites’ (O’Farrell, 2001).” Adults value Starbucks’ ambience as a status symbol while younger adults appreciate the store’s smart combination of social and academic environments (O’Farrell, 2011). Clearly, a 33 percent market share for a price-elastic product (coffee) in today’s economic environment requires a strong marketing strategy, constant product innovation and product redevelopment to attract and retain customers. Since it is difficult to measure customer loyalty effectively, Starbucks developed internal metrics, which partially capture customer loyalty. According to the Associated Press (2006), “96 million Starbucks cards have been activated since November 2001 [and these users have] reloaded their cards about 38.6 million times (para.7). As Starbucks’ customers sip their Grande Frappucinos and surf the Internet courtesy of Starbucks’ free Wi-Fi network, the seeds of loyalty spread quickly around the world.

Product Issue
When Dorosin purchased the Estro 410 espresso machine inside a damaged box, the staff should have checked whether the machine was sellable and functional (see Exhibit 1). The staff’s behavior and excuses were unacceptable. Even though some damaged packages with functioning machines could be delivered from Europe, it was unacceptable to sell the machine in a damaged box to Mr. Dorosin. Negligence issues on the part of the store’s staff could be present as a result. There must be an inventory control issue and quality issue at Starbucks because the machine was rusty, had missing parts and was missing an instruction manual. The store manager displayed a distinct lack of inventory and...
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