Starbucks Case Analysis
Starbucks: Case Analysis
Problem Statement Based on net income and revenue growth, in 2002, Starbucks was performing exceedingly well. As per Exhibit 1, net income had grown by 214% from 1998 to 2002 while revenue has grown 151% in the same period. However, a survey had revealed the concern that Starbucks was not meeting expectations of customers in the area of customer satisfaction. In order to address this issue, Christine Day, the senior vice president of administration in North America asked her team to come up with a plan of improving customer satisfaction. According to her team, superior speed of service would enhance customer satisfaction and improvement in speed of service could be achieved by investing in an additional 20 hours of labor in each store at a total cost of $40 million annually. However, Day was not convinced that meeting this stated customer expectation would indeed deliver sufficient returns in terms of sales and profitability and hence was not sure if she could make this recommendation to the CEO.
Critical Issues:
1. In the absence of a strategic marketing group, data collected on customer satisfaction were not being translated into insights, trends and recommendations in a timely manner.
2. Starbucks’ brand image had some negative aspects. Surveys had indicated that the company was increasingly viewed as more interested in growth and profitability and not on customer experience.
3. Customer profile was changing with newer customers being increasingly lower income and younger. New customers consumed less coffee and had a lower opinion of Starbucks (Exhibit 8)
4. The market research study referred to above had indicated a downward trend in customer satisfaction but there was lack of evidence that improving customer satisfaction will improve the net income (Page 20). Though there was a high degree of correlation between customer satisfaction and spending in Starbucks stores (Exhibit 9) there was no data on return on investment for
Problem Statement Based on net income and revenue growth, in 2002, Starbucks was performing exceedingly well. As per Exhibit 1, net income had grown by 214% from 1998 to 2002 while revenue has grown 151% in the same period. However, a survey had revealed the concern that Starbucks was not meeting expectations of customers in the area of customer satisfaction. In order to address this issue, Christine Day, the senior vice president of administration in North America asked her team to come up with a plan of improving customer satisfaction. According to her team, superior speed of service would enhance customer satisfaction and improvement in speed of service could be achieved by investing in an additional 20 hours of labor in each store at a total cost of $40 million annually. However, Day was not convinced that meeting this stated customer expectation would indeed deliver sufficient returns in terms of sales and profitability and hence was not sure if she could make this recommendation to the CEO.
Critical Issues:
1. In the absence of a strategic marketing group, data collected on customer satisfaction were not being translated into insights, trends and recommendations in a timely manner.
2. Starbucks’ brand image had some negative aspects. Surveys had indicated that the company was increasingly viewed as more interested in growth and profitability and not on customer experience.
3. Customer profile was changing with newer customers being increasingly lower income and younger. New customers consumed less coffee and had a lower opinion of Starbucks (Exhibit 8)
4. The market research study referred to above had indicated a downward trend in customer satisfaction but there was lack of evidence that improving customer satisfaction will improve the net income (Page 20). Though there was a high degree of correlation between customer satisfaction and spending in Starbucks stores (Exhibit 9) there was no data on return on investment for