Starbucks faces a difficult and controversial management challenge. The company’s most recent market research has revealed unexpected findings implicating that Starbuck is not always meeting customer’s expectations in the area of customer satisfaction. The purpose of this memo is to analyze and provide recommendation on whether or not the company should go forth with a $40 million investment in additional labor in the stores. This $40 million investment is necessary in order to bring service time down to a three-minute interval and ultimately increase customer satisfaction. A marketing strategy and corresponding recommendation will be provided for your approval. Situation Analysis:
Numerous factors accounted for Starbucks’ extraordinary success in the early 1990’s. To begin, Starbucks was the first coffee house to provide a premium coffee based on Italian values to the United States population. This high quality coffee attracted a great deal of people, especially affluent, well-educated, white-collar women between the ages of 24 and 44. They were able to achieve such high standards for their products by controlling as much of their supply chain as possible. In addition to their high quality products, Starbucks offered the public great product variety. They introduced and launched an array of products on a regular basis, ranging from new holiday beverages to their Frappuccino beverages, distributed by PepsiCo. This product innovation is one of the leading factors contributed to Starbucks’ positive sales growth throughout the years. Customer service also played a key role in Starbucks’ success in the early 1990’s. The company offers extensive training to their “partners” or “baristas” in order to provide customers with the most optimal, personalized experience. Starbucks trains their employees on both hard and soft skills, allowing them to ensure product quality and also provide the best service possible. Lastly, Starbucks’ ability to reach their customers everywhere they can has brought the company great success. Starbucks has numerous channels of distribution. The majority of their stores are located in “high-traffic, high-visibility settings, such as retail centers, office buildings and university campuses”. However, Starbucks additionally sells products through non-company-operated retail channels called “Specialty Operations” and also grocery stores and warehouse clubs. As a result, the company is able to reach customers in their home, but also where they work, travel, shop and dine. This broad distribution strategy proved to be extremely successful.
It is evident that Starbucks has flourished and has been an extremely successful company over the years. The aforementioned factors greatly contribute to their success in addition to Starbucks’ compelling value proposition. Starbucks sought out to create an “experience around the consumption of their coffee”. They wanted this experience to coincide with their customer’s daily lives. Secondly, they wanted to create an experience of “customer intimacy” within their stores. They do this through the ability to personalize and customize products to meet customer preferences. Lastly, Starbucks sought out to create a specific atmosphere based on “human spirit, a sense of community and the need for people to want to come together”. Starbucks hopes to persuade people to enter the store through friendly employees and a comfortable setting. I believe these three components of the company’s value proposition and branding strategy evoke substantial interest and admiration in a powerful way. At the time, I believe Starbucks hoped to create a brand image of “high quality coffee on the go”. The company wanted to give customers a perceived image that they could provide premium coffee anywhere, adding to the appeal of their value proposition.
After research, Starbucks’ market research team discovered that customer satisfaction scores...