Starbucks : Delivering Customer Service

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Starbucks : Delivering Customer Service

Contents
• • • • • • • Case Summary Company Background The Starbucks Value Proposition Delivering on Service Caffeinating the World Starbucks’ Market Research: Trouble Brewing? Rediscovering the Starbucks Customer

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Case Summary
• > 5% ann. sales growth during 11years in a row (~2002) • close to a recession-proof product (Howard Schultz) • Lack of strategic marketing group and customer relationship management : Overlooking of market and customer-related trends. • Conducted market research and found out significant gap between company’s assumption and customers’ perception in terms of brand image and customer satisfaction • Invest extra $40m annually in 4,500 stores to improve?

Company Background
Legend : Commodity to Upscale cultural phenomenon : Starbucks Story ••In 1982, Schultz joined In 1982, Schultz joined ••Opened an espresso bar Opened an espresso bar in Seattle: in Seattle: prototype for long term prototype for long term vision vision ••The third place for The third place for Americans: Americans: positioning based on positioning based on customers’ need customers’ need ••Company taking over Company taking over ••Store expansion up to 140 Store expansion up to 140 ••Product : : Product Whole bean, premiumWhole bean, premiumpriced coffee beverages priced coffee beverages ••Customer profile: Customer profile: Affluent, well-educated, Affluent, well-educated, white-collar, 25~44, white-collar, 25~44, skewed female. skewed female. ••IPO in 1992 ($25m) IPO in 1992 ($25m) ••Unequivocally dominant Unequivocally dominant specialty-coffee brand specialty-coffee brand ••Sales CAGR of 40% since Sales CAGR of 40% since IPO IPO ••Net earnings CAGR of Net earnings CAGR of 50% 50% ••20million customers 20million customers ••5,000 stores in globe 5,000 stores in globe ••33new stores aaday (av.) new stores day (av.) ••Shultz remained as Shultz remained as chairman and chief global chairman and chief global strategist (2002) strategist (2002)

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Starbucks Value Proposition
Brand Strategy : Live Coffee
Keeping the national coffee culture alive Creating an “experience” around the consumption of coffee

Three Components :
Coffee Service Atmosphere
Make customers want to stay Growing Roasting Distribution Customer intimacy Recognizing Customizing Upscale Inviting

Value Proposition – Channels of Distribution
Broad distribution Strategy : Reach customers (work, travel, shop, and dine) Establish relationships with third parties sharing values and commitment to quality in order to reach newcomers with Starbucks. About 40% of new coffeehouse customers tried Starbucks through third parties

Stores :
Company-operated stores (high-traffic, high-visibility settings) Whole bean coffee, rich-brewed coffees, Italian-style espresso, drinks, cold-blended beverages, premium teas, pastries, sodas, juices, coffee-related accessories and equipments, music CDs, games, seasonal novelty items, sandwiches, salads. Specialty Operations (non-company retail channels – 15% of net rev. North American food-service accounts (hotels, airlines, restaurants, etc.) - 27% Domestic retail store licenses (eg. licensed stores in airports) - 18% Various sources : international licensed stores, grocery stores, warehouse clubs, online & mail order sales, JV with Pepsi and Dreyer’s Grand Ice Cream – 55%

Value Proposition – Starbucks “Partners”
Starbucks’ DNA : Partner satisfaction leads to customer satisfaction 60,000 partners worldwide (mostly hourly-wage employees, baristas) health insurances and stock options for partners partner satisfaction rate (80~90%) ranked 47th in he Fortune magazine list of best places to work lowest turnover rate (70%; industry average is 300%)

Human resource management :
Life time job position; Manager stability is key Promotion from within internal staffs 70% of store managers from ex-baristas, 60% of...
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