Starbucks Case Analysis: Delivering Customer Service
Headquarted in Seattle, Washington, Starbucks is the dominant brand as the provider of premium coffee beans, coffee-based beverages, and non-caffeinated beverages. Starbucks opened its first location in 1971 at Pike Place Market in Seattle. Starbucks’ main proposition is to create an “experience” around the event of drinking coffee that its consumers would incorporate into the routines of their daily lives. Currently, Starbucks’ services over 20 million customers in over 5,000 stores around the globe. Starbucks has achieved this expansion with little advertising. However, it has been shown that the customers’ expectations are not being met in terms of customer satisfaction. Background
The origin of Starbucks dates back to 1971 when three coffee fanatics – Gerald Baldwin, Gordon Bowker, and Ziev Siegl – opened a small coffee shop, as all three had a passion for fresh coffee. They began selling fresh-roasted, gourmet coffee beans and brewing and roasting accessories. In 1982, Howard Schultz joined the Starbucks marketing team, and then he traveled to Italy where he became fascinated with the Italian coffee culture. A few years later, he gave new life to the company when he set up an espresso bar that was inspired by the coffeehouse culture of Italy. Schultz took over the company after the founders agreed to sell him the company. Since Schultz has taken over the helm, Starbucks has become the most recognized brand in the world of the finest coffee. The brand is a strong global brand that has been built on a reputation of premium products, pleasant atmosphere in every location, and lack of mass advertising. The main form of their marketing is done by word of mouth from their satisfied customers. Starbucks has created very loyal customers who continue to return to Starbucks, despite the recent increase in prices for products. Yet, in 2002, market research has shown that Starbucks has developed a gap in meeting is customer’s expectations in terms of customer focus and satisfaction. Key marketing challenges
The main challenge for Starbucks is to put forth the financial investment of labor to improve the speed of service which would in turn lead to an increase in customer satisfaction. The additional investment is $40 million dollars which adds an equivalent of 20 labor-hours per week to its currently operating locations. This proposal is based on the assumption that increasing labor hours at the locations will result in faster service. This would ultimately improve customer satisfaction as customers would receive their orders in a faster manner. A component of this challenge is would the increase in customer satisfaction result in higher sales and profitability? As research has demonstrated and provided in exhibit 9 of the Starbucks case, there is a strong, positive relationship between customer satisfaction and potential sales. Customer satisfaction is a key factor to the sales growth of Starbucks’. A review of the recent customer satisfaction surveys reveals that customers have expressed increasing dissatisfaction with efficiency of orders. If Starbucks does not improve the speed of service, how extensively will that impact customer satisfaction? Additionally, is a 20 second increase in the speed of service worth a $40 million dollar investment per year? While it is important to improve customer satisfaction, the alternatives that are to be considered should remain in alignment with the core values, long term goals, and current brand image of Starbucks. Scenario 1: Free coffee for customers
The widespread popularity of Starbucks coffee throughout the United States is largely due to the well known brand name that is generally trusted and the high quality of products that are utilized. An alternative to the lower customer satisfaction scores is to implement a “free coffee for frequent customers”...