Starbucks Case Questions
1. What factors accounted for the extraordinary success of Starbucks in the early 1990s? What was so compelling about the Starbucks value proposition? What brand image did Starbucks develop during this period?
In 1971 Gerald Baldwin, Gordon Bowker and Ziev Siegl opened a specialized arabica beans coffee shop in Seattle’s “Pike Place Market”. In 1982 Schulz joined the team and he went to Italy to understand more about coffee shops. Some years later Schulz bought the company from the other 3 members.
Starbuck’s major success was that the company went public in 1992 and raised $25 million. With that money they could afford to open more coffee shops around the country. Moreover, Starbucks specialized in offering to the public a place where they could have a specialty coffee in a nice location where they could relax and enjoy the experience. In Italy Schulz noticed how people enjoy coffee everyday as a part of their life. He had the idea to offer a 3rd place (not at home, not at work) in a nice location where you could enjoy quality coffee in a comfortable environment.
The brand strategy during the 1990’s was to sell their coffee as a “life coffee”. To sell not only coffee, but the “everyday life experience” that drinking coffee promotes. Where are you? How does it taste? Are you going to talk to someone?
The 3 elements of branding strategy were:
* High-quality coffee from Central and South America, Africa, and Asia-Pacific regions * Service: Recognizing loyal customers and knowing their drinks * Atmosphere: Comfortable place to stay for a while
Starbucks increased tremendously their brand image. They didn’t spend much time on advertising; however, their sales increased 40% a year since 1992. In 2002 Starbucks was the major specialty-coffee brand in North America.
2. Why has Starbuck’s customer satisfaction scores declined? Has the company’s service declined, or is simply measuring satisfaction the wrong way?
As products have been added to the Starbucks line, consumers have learned to customize their choices to their specific tastes. Due to these specifications, the service provided by the baristas has slowed down for all customers. An extremely long line at a popular time and location was not uncommon. Service has declined somewhat due to the new products, the variety of products offered and the customizations requested by a large percentage of established customers. Starbucks found that their heaviest users were always the most demanding. Baristas are trained to a pre-established quality standard for making all the beverages on the menu, yet they must deal with customization to keep their customer satisfied.
As the company implemented the “Customer Snapshot” program, they tracked what the mystery shopper observed by the four “Basic Service” criteria; service, cleanliness, product quality and speed of service. During 2002, the company found that scores had increased across all stores. They believed that the program was doing a good job of measuring trends. What they did not find from the program was how the customer would specifically rate that same visit. This is why they had conflicting information when additional surveys would indicate that the customer was looking for better service performance.
3. How does Starbucks of 2002 differ from the Starbuck of 1992?
Starbucks of 1992 was a much smaller company in all aspects. They had gone from 140 stores in 1992 to almost 5900 stores in 2002. They had also expanded significantly internationally to over 1300 stores. They wanted to bring that special experience across the globe. The products they offered were primarily coffee beverages and whole beans back in 1992, but their menu eventually expanded to over 30 types of coffee and non-coffee beverages along with food items and coffee equipment and accessories.
Starbucks had also added their products to other retail outlets. They...
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