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									Starbucks: Delivering Customer Service
                          Presented by group 8
•   Brief History
•   Factors driving early success
•   Value Proposition
•   Customer – score
•   Customer profitability relationship
•   Steps to improve customer satisfaction
•   40 million investment yes/ no
• 1971
   – Gerald Baldwin, Gordon Bowker, Ziev Siegl started
   – Small shop in Seattle’s Pike Place
• 1982
   – Howard Schultz, starbucks marketing team
   – After few years took over the chain
• 1992
   – Whole bean, premium priced coffee
   – White collared patrons (Age: 25 – 44)
• 2002
   – CAGR sales 40% annually
   – CAGR earnings 50% annually
      Key Factors of Early success
• Highly motivated employees (Barista)
   – Treated as partners
   – Low employee turnover rates 70% ( industrial std. 300%)
• Highly oriented value proposition for the customer base
   – Resulting in repeat purchase
   – Establish niche and value driven service proposition
               Value Proposition
• Experience of ‘Live Coffee’
   – First component
      • Highest quality coffee in the world
      • Sourced from Africa, central and south America and Asia-
         Pacific regions
   – Second component
      • Customer intimacy
   – Third Component
      • Atmosphere
      • “People come here for coffee, but atmosphere is what makes
         them want to say.”
      Customer & customer score
• Change in customer profile
   – Established Customer
      • High salaried, highly educated, brand loyal and customers
        who valued coffee of Starbucks differently
   – New Customer
      • Relatively low salary, and low in education qualification
      • Low on brand loyalty and hence less willing to pay
          Customer -profitability
• Exhibit 9
   – Increase of customer satisfaction
       → increase of average Ticket Size/ Visit
       → increase of average customer life
• Figure A (pg. 11)
   – Repeat customers
       → Increase in number of transaction hence revenue
• Thus satisfied customer visit more time have high ticket size and
  also higher number of transaction, they also seems to stay longer
  with the company.
                Low profitability
• Revenue/ store is reducing at a rate of 3 - 10% annually
• Operating and admin expenses / store is either increasing of
  reducing at a rate much lower than revenue
• Operating Profit is reducing at a rate 2 – 9%
• Joint venture profit have been increasing in a better manner.

• Starbucks also has low reach in terms of their aspiration hence
  might need to redefine service proposition and expand.
          Steps to improve customer
        Redefine their marketing strategies
    –    proper research of customer wants.
•    Analyze the customers, and potential customers
•    Research non frequent customers
   –     perception of Starbucks
   –     Preference of drinks etc.
•    Create a centralized marketing department
   –     Coordinate marketing efforts
   –     lack of harmony between collecting data
5.   Analyze effect on labor costs
6.   Concentrate optimal location for new store openings
7.   Brand Starbucks
8.   Separate serving customers with customized orders.
9.   Extend the utility of the cards by embedding RFID tags to identify the
     customer and the orders to add to a database
10. Introduce more customer operated machines to reduce wait time.
   40 million investment Yes/ No
• Sample investment in some of the company operated stores to get a
  cost –benefit analysis to generalize the same

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