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Starbucks Marketing Plan
Katie Tewell
Bethany Odom
Kelly Snider
December 12, 2006
Executive Summary
What was once a small coffee shop opened by Gerald Baldwin, Gordon Bowker,
and Ziev Siegl in 1971, Starbucks Coffee Company has grown into the number one
specialty coffee retailer. With over 10,000 coffee shops in more than 30 countries, of
which 4,200 are licensed and franchised and 6,000 are owned, the company’s main
objective is to establish Starbucks as the “most recognized and respected brand in the
world,” (Moon).
Currently, Starbucks is relying on retail expansion, product innovation, and
service innovation to achieve a long-term goal once set by current chairman Howard
Schultz:
“The idea was to create a chain of coffeehouses that would become
America’s “third place.” At the time, most Americans had two places in
their lives – home and work. But I believed that people needed another
place, a place where they could go to relax and enjoy others, or just be by
themselves. I envisioned a place that would be separate from home or
work, a place that would mean different things to different people,”
(Moon).
By working toward this goal, Starbucks wants to open new stores in both new and
existing markets, expand their product development process, and cater to customers’
needs to eventually improve their financial position and dominate market share.
Market Summary
• Target Markets
o In the early stages of development for Starbucks, Schultz identified their
target market as “affluent, well-educated, white-collar patrons (skewed
female) between the ages of 25 and 44,” (Moon).
o Over time, market research teams have recognized the new target market
as “younger, less well-educated, and in a lower income bracket than their
more established customers,” (Moon).
o Nonetheless, the original target market has not disappeared, but has
expanded into the demographic of the store location. For example,
southern California stores cater to a growing number of Hispanic
customers.
• Market Demographics
o Geographics (Moon)
Data from 2002 showed that in the Southeast there was only one
store for every 110,000 people. Whereas in the Pacific Northwest,
there was one store for every 20,000 people. Hence, the company
was far from reaching existing markets.
International plans showed Starbucks was operating in over 300
company-owned stores in the United Kingdom, Australia, and
Thailand. Also, 900 licensed stores were operating in Asia,
Europe, the Middle East, Africa, and Latin America.
o Demographics
Young, affluent, tech-savvy customers (Hoovers)
A 1999 estimate showed that 70% of customers were internet
users, and today the estimate has exceeded 90% (Hoovers).
Moms with strollers (Hoovers)
People combining work and a coffee break (Hoovers)
The most frequent customers average 18 visits per month, whereas
the typical customer visits five times per month (Moon).
Average age for an established customer was 40, new customers
was 36 (Moon).
Customers that started visiting Starbucks in 2002 were 45%
female, 55% male (Moon).
• Market Needs
o Starbucks wants to create an experience for their customers that combine
their on-the-go schedule, as well as a place to relax. Senior vice president
of administration in North America Christine Day explains that, “people
come here for the coffee, but ambience is what makes them want to stay,”
(Moon).
o Selection
Starbucks menu contains brewed coffee, espresso traditions and
favorites, cold beverages, coffee alternatives, frappuccinos, and the
sale of whole beans.
o Accessibility
Starbucks operates over 10,000 retail stores. Most of the 4,200
franchised stores are located in shopping malls and airports.
Starbucks coffee brands are also marketed through grocery stores
in the form of beans and even ice cream flavors.
o Customer Service
Starbucks employees are referred to as “partners.” As of 2002,
Starbucks employed 60,000 partners worldwide, 50,000 of those in
the United States. From the beginning when Howard Schultz took
over Starbucks, he believed, “Partner satisfaction leads to customer
satisfaction,” (Moon).
o Competitive Pricing
For North American stores in the 2002 fiscal year, the average
price of an order was $3.85. The drinks come in three sizes: tall,
grande, and venti (Italian for small, medium, and large). The least
expensive price for a tall drink is $1.40 for brewed Coffee of the
Day. The most expensive price for a venti is $4.15 for
frappuccino. Whole beans are sold in half and whole pound bags
ranging from $5.20 to $15.95 (Moon).
Starbucks brand coffee sold in grocery stores are similar to these
prices found in the cafes.
• Market Trends (Moon)
o Total U.S. Retail Coffee Market (both in-home and out-of-home
consumption):
2002E - $21.5 billion 2005E - $22 billion
Starbucks Share of Starbucks Share of
Specialty Coffee Market Specialty Coffee Market
42% (estimate) 50% (estimate)
Specialty Specialt
Coffee y Coffee
27% 31% Traditio
Tradition nal
al Coffee Coffee
73% 69%
o Estimates for the U.S. retail coffee market in 2002 include:
In-the-home consumption was an estimated $3.2 billion business.
Starbucks was estimated to have a 4% share.
Specialty coffee was an estimated $5 billion business in the food-
service channel. Starbucks was estimated to have a 5% share.
• Market Forecast (Moon)
o Over the next few years, an estimate for the U.S. retail coffee market
expects specialty coffee to have a compound annual growth rate (CAGR)
between 9%-10%.
o Starbucks was also estimated in 2002 to grow at a CAGR of about 20%
top-line revenue growth.
o As of 2002, coffee consumption had risen with more than half of the
population (about 109 million people) drinking coffee everyday, and an
additional 52 million drinking coffee on occasion.
• Market Growth
o Reports show in 2002, the number of specialty coffee drinkers has become
the market’s biggest growth.
o An estimated one-third of all U.S. coffee consumption takes place outside
of the home and in places such as offices, restaurants, and coffee shops
(Moon).
SWOT Analysis
• Strengths
o The company is good at taking advantage of opportunities.
o Starbucks is very profitable and has a strong financial base, therefore allowing
the company to undertake new business ventures.
Revenue increased to $5294.2 million in 2004, a 29.9% increase from
2003 (DataMonitor)
Profits increased to $610 million in 2004, a 43.7% increase from 2003.
Net earnings increased 46% (SWOT).
o The company is internationally recognized and has a global presence.
Their reputation is one of fine products and services.
Almost 9,000 cafes in almost 40 countries (SWOT)
Widespread brand recognition, which in turn becomes brand
preference, and ideally eventually brand loyalty
Strong customer base
o Respected employer
Values its workforce
Voted onto Fortune’s “Top 100 Companies to Work For” (2005)
o Strong ethical values and mission statement
o Disciplined innovator
Understands the Adapt-or-Die theory of marketing
Has the ability to roll out new products relatively quickly, which
translates into a considerable competitive advantage
o Clusters company units
Expands business with the continuing growth of the coffee market,
especially in areas where the company is already well established, and
groups stores in an area, therefore able to dominate the region
Leads to considerable financial reward without suffering from
cannibalism (DataMonitor)
Focus on opening stores that have convenient access for pedestrians
and drivers
Helps the company capture an increasing share of the coffee market
• Weaknesses
o Reliance on beverage innovation
Vulnerable to the possibility that their innovation may falter over time
Company growth is mostly driven by beverage innovation.
If U.S. store growth decreases, stock is lowered in value.
Diminishing return from beverage innovation would have an adverse
effect (DataMonitor).
o More than 75% of the company’s stores are in the USA (DataMonitor).
May need to look for an assortment of countries in which to open more
shops in order to spread business risk
85% of revenue is from its domestic US market (DataMonitor).
• Has high international brand recognition and should look to
generate a greater proportion of revenue from outside the USA
• Would suffer greatly if U.S. stores underperformed because of
economic conditions or increased levels of competition
o Dependent on the retail of coffee, which could make them slow to diversify
into other divisions if the need should arise
o Employee efficiency is poor.
Lower revenue per employee ($71,544—fiscal 2004) compared to the
industry average ($110,841) (DataMonitor)
Lower income per employee ($5,294) compared to the industry
average ($9,500) (DataMonitor)
o Lower Return on Equity than peers
Company’s 5 year average ROE (13.65%) have been lower than the
industry average (15.09%) (DataMonitor).
Need to effectively manage its finances to ensure that returns are at par
of higher than industry average
o Problems in some international operations
Problems of expansion: A number of openings are failing to be
successful.
Japanese operations: The company has experienced some same-store
sluggishness.
Closures of stores in Israel and Tel Aviv: Hurts growth prospects in
the region
• Opportunities
o In 2004, created a CD-burning service where customers can create their own
music CD
o Opportunities for revenue growth by expanding its global operations
New markets for coffee are beginning to emerge; for example, in India
and the Pacific Rim (SWOT).
Targeting 15,000 international stores in the next few years
• Expansion potential questionable in Brazil, India, and Russia
• China could be one of the largest markets, and therefore the
company will focus on Beijing and Shanghai.
o Large urban population
o Rising economy
o Increase in coffee consumption
o Co-branding with other manufacturers of food and drinks and brand-
franchising to manufacturers of other goods and services
Creates loyalty for Starbucks brand
Recently signed agreement with Jim Beam Brands to develop and
market a Starbucks-branded coffee liqueur drink (DataMonitor), which
has strong revenue potential because:
• Liqueurs represent $4-5 billion opportunity (DataMonitor).
• Liqueurs with coffee represent a considerable segment of the
liqueur market.
• There is a significant overlap between consumers of liqueurs
and consumers loyal to the Starbucks brand (DataMonitor).
o Growth in coffee markets: Starbucks has a market share of over 40% of the
special coffee market (DataMonitor). Therefore growth in this category would
result in considerable opportunities for further growth and expansion in the
near future.
• Threats
o Coffee may not stay in favor with customers, and another type of beverage or
leisure activity could replace it.
o Rises in the costs of dairy products could affect the company’s margins.
o Competition
Competitive coffee shops
Copy cat brands
Restaurants
Street carts
Competition could enter the market at any time.
• The U.S. specialty coffee market continues to grow, and an
increasing number of firms are looking to enter.
• At any time, a company with greater financial, marketing, and
operating resources could enter the market and compete
directly with Starbucks.
o Volatile nature of the coffee market
Multiple factors, including weather, political, and economic conditions
for example, can potentially negatively affect the company’s business.
Green coffee prices may be affected due to agreements establishing
export quotas or restricting global coffee supplies.
o Slowing U.S. retail sales
Domestic retail accounts for about 75% of the company’s revenue
growth and an even greater proportion of profit growth (DataMonitor).
If current U.S. store growth continues, saturation levels within the
North American division may be reached within five years. Before
reaching this point, US retail sales growth will slow significantly
(DataMonitor).
• Competition
o Competition comes in several forms:
Independent/Local coffee shops
Social and inclusive
Diverse and intellectual
Artsy and funky, typically cozy and very welcoming
Liberal and free-spirited
Lingering encouraged
Particularly appealing to younger coffee house customers
Wide variety of beverages/food
Appeals to the non-traditional crowd
Franchise/Large Companies
o Generally well-recognized names (McDonald’s, Krispy Kreme,
Dunkin’ Donuts, etc.)
o More convenient and accessible
o Easy access in and out
o Appeals to the more mainstream coffee drinkers
• Services (Company)
o Starbucks purchases roasts of the highest quality of whole bean coffees.
o Fresh and rich brewed Italian espresso
o Offers pastries and other appetizing confections
o Sells coffee-related accessories (mugs, coffee makers, cups, espresso, etc.)
o Expanded sales into supermarkets of whole bean coffee
o Introduction the widely popular drink, Frappuccino, to the public
o Strives for satisfied customers and a welcoming environment
o Works to have highest standards of excellence in way of business
o Offers newspapers and other reading material, popular music, and Internet
access (provided by T-Mobile)
• Keys to Success (Company)
o Rapidly expand retail operations
o Growth in its specialty sales and other operations
o Selectively pursue opportunities to leverage the Starbucks brand through the
introduction of new products
o Continue to be widely available and welcoming
o Maintain reputation for having specialty and gourmet coffee
o Make customers feel welcome with friendly service
• Critical Issues (Moon)
o Must increase customer satisfaction through improvements to service
o Friendlier and more attentive staff
o Faster and more efficient service
o Increase in personal treatment (remember customer’s name and order)
o More knowledgeable staff
o Better overall service
o Offer better prices/incentive programs
Free cups after “x” number of visits
Reduction of price
Offer promotions, sales to increase customer satisfaction
o OTHER
Offer better quality and variety of products
Improve atmosphere (friendly, welcoming)
Reaching out to community through involvement and awareness
More stores and convenient locations
o Other critical issues Starbucks is criticized for and must be aware of are:
Clustering
Driving out independents
Loss of diversity
Its policy toward farming communities in developing countries
Fair trade
Many of these issues are vital for Starbucks to improve their
customers’ satisfaction (Simmons).
Increase Customer
Critical Issues Satisfaction through
Improvements to
Service
Offer Better
Prices/Incentive
28% 34% Programs
OTHER
21%
31% Undecided/Already
Satisfied
Slice 5
Marketing Strategy
• Starbucks Mission Statement (Company)
“Establish Starbucks as the premier purveyor of the finest coffee in the
world while maintaining our uncompromising principles while we grow.
The following six guiding principles will help us measure the
appropriateness of our decisions:
o Provide a great work environment and treat each other with respect
and dignity.
o Embrace diversity as an essential component in the way we do
business.
o Apply the highest standards of excellence to the purchasing, roasting,
and delivery of our fresh coffee
o Develop enthusiastically satisfied customers all of the time.
o Contribute positively to our communities and our environment.
o Recognize that profitability is essential to our future success.”
• Environmental Mission Statement (Company)
“Starbucks is committed to a role of environmental leadership in all facets
of our business.
We fulfill this mission by a commitment to:
o Understanding of environmental issues and sharing information with
our partners.
o Developing innovative and flexible solutions to bring about change.
o Striving to buy, sell, and use environmentally friendly products.
o Recognizing that fiscal responsibility is essential to our environmental
future.
o Instilling environmental responsibility as a corporate value.
o Measuring and monitoring our progress for each project.
o Encouraging all partners to share in our mission.”
• Other points of importance to Starbucks:
o “Building customer loyalty around cappuccinos, lattes, and other fancy
beverages,” (Overholt).
o Want to create a sense of community
o Want to create a memorable experience for a customer that inspires the
customer to return often, as well as to tell a friend
o Striving to become the most recognized and respected brand in the
world
o Putting people before products (Company)
o What a Starbucks store should be: “An authentic coffee experience
that conveyed the artistry of espresso making, a place to think and
imagine, a spot where people could gather and talk over a great cup of
coffee, a comforting refuge that provided a sense of community, a
third place for people to congregate beyond work or the home, a place
that welcomed people and rewarded them for coming, and a layout that
could accommodate both fast service and quiet moments”
(Thompson).
• Marketing Objectives (Moon)
o To create a Starbucks experience that makes people come for the coffee,
stay for the ambience and environment, and return for the connection
o To build an image separate from smaller coffee chains
o To clearly communicate the values and commitments of the Starbucks
business to their customers, instead of only growth plans publicized in the
media
• Financial Objectives (Moon)
o Have each store reach a $20,000 weekly sales level
o Open new stores with lower store-opening costs (about $315,000 per store
on average).
• Target Marketing (Moon)
o Based on a sample of Starbucks’ 2002 customer base, the attitudes toward
the brand were:
NEW EXISTING
CUSTOMERS CUSTOMERS
(FIRST VISIT (FIRST VISIT 5+
THIS YEAR) YEARS AGO)
High-quality brand 34% 51%
Brand I trust 30% 50%
For someone like me 15% 40%
Worth paying more for 8% 32%
Known for specialty coffee 44% 60%
Known as the coffee expert 31% 45%
Best-tasting coffee 20% 31%
Highest-quality coffee 26% 41%
Overall opinion of Starbucks 25% 44%
o The chart shows that the new customers have a poorer attitude toward
Starbucks in every category than the existing customers.
o The new customer type that needs attention is:
45% female, 55% male
Average age of 36
37% have a college degree
Average income is $65,000
Drink an average of 15 cups of coffee per week
• Store Expansion Strategy (Thompson)
o Target areas with favorable demographic profiles, as well as areas that can
be serviced and supported by the company’s operations infrastructure.
For each targeted area, select a large city to serve as a focal point.
• Goal of each focal city: Open 20 or more stores in that city
in the first two years.
• Once stores cover the city, open additional stores in
smaller, surrounding areas in the region.
With this plan, the company had only closed 2 of the 1,500 sites it
had opened between 1992 and 1997.
o Stores must be custom-designed.
The company does not buy freestanding structures, and therefore
each store is a different shape and size.
Most stores range in size from 1,000 to 1,500 square feet.
o Most stores are located in high-trafficked, high-visibility areas, such as:
Office buildings
Downtown and suburban retail centers
Airport terminals
University campuses
Busy neighborhood shopping areas convenient to pedestrian traffic
o International expansion (Moon)
As of 2004, the company operated over 300 company-owned
stores in the United Kingdom, Australia, and Thailand, as well as
900 licensed stores in Asia, Europe, the Middle East, Africa, and
Latin America.
Goal: Have 15,000 international stores
o Other things to consider:
Kiosks
Drive-through windows
• Positioning
o Store Ambience
Goal: To make customers want to linger
Social Appeal—Offer a sense of community, a place where people
can come together
Physical layout
• Seating areas to encourage lounging
• Appear upscale yet inviting
Aromas
• Smoking is banned in all stores
• Employees are asked to refrain from wearing perfumes or
colognes, and prepared foods are kept covered so
customers would only smell coffee aromas.
Sounds
• Play soothing CDs that are also for sale
• Often offer live music
o Customer Service
The company sees a direct link between customer satisfaction and
customer loyalty.
The company believes that employee satisfaction leads to customer
satisfaction (Moon).
• Voted onto Fortune’s Top 100 Places to Work
• Employee satisfaction remains consistently around 80-90%.
• Turnover rate is 70%, one of the lowest in the industry
• Focuses on manager stability in order to decrease employee
turnover, but also to help recognize regular customers and
provide personalized services
Employees are trained to connect with customers and focus on
“customer intimacy.”
• Greet customers with a smile.
• Enthusiastically welcome customers into the store.
• Establish eye contact.
• Try to remember customers’ names and orders if they are
frequent customers.
“Just Say Yes” policy, in order to keep the customer happy, which
may go beyond store rules
• Example: Always compensate dissatisfied customers with
a Starbucks coupon entitling them to a free drink
• Example: Give a customer a free refill if he/she spills their
drink.
o Advertising—The company spends very little on advertising and depends
on word-of-mouth promotion.
o Involvement in the Community
Contributing positively to surrounding communities is one of
Starbucks’ guiding principles in the company’s mission statement.
Howard Schultz had the plan to “build a company with soul
(Student).
Starbucks has been the largest corporate contributor in North
America to CARE, a worldwide relief and development
organization to help Third World countries where Starbucks
purchases its coffee supplies.
The company has an Environmental Committee that looks for
ways to reduce, reuse, and recycle waste, as well as contribute to
local community environmental efforts.
The company donated almost $200,000 to literacy improvement
efforts (Student).
Starbucks has many community building programs to “contribute
positively to the communities where our partners (employees) and
customers live, work, and play” (Corporate).
“As part of Starbucks ongoing commitment to share the comfort of
coffee during times of crisis, the company continues to
demonstrate our support of the men and women serving in the U.S.
military overseas” (Company).
The Starbucks Foundation (Company)
• Established in 1997 by Howard Schultz
• Inspired by Schultz’s childhood experiences and those of
other inner city children
• Dedicated to creating hope, discovery, and opportunity in
the communities of Starbucks
• Marketing Mix
• Marketing Research
o Schultz wanted to use research in order for Starbucks to challenge the
status quo, be more innovative and take bigger risks.
o Examples of questions he asked were (Moon):
What could Starbucks do to make its stores an even more elegant
“third place” that welcomed, rewarded, and surprised customers?
What new products and new experiences could the company
provide that would uniquely belong to or be associated with
Starbucks?
What could coffee be – besides being hot or liquid?
How could Starbucks reach people who were not coffee drinkers?
What strategic paths should Starbucks pursue to achieve its
objective of becoming the most recognized and respected brand of
coffee in the world?
o At the retail stores, a pamphlet is available for customers to share their
thoughts about their Starbucks experience. *See Exhibit 1
o Starbucks uses “Customer Snapshots,” similar to mystery shoppers, to
evaluate partner performance in the retail stores (Moon).
The four basic service evaluations include:
• Service – Did the register partner verbally greet the
customer? Did the partners make eye contact with the
customer? Say thank you?
• Cleanliness – Was the store clean? The counters? The
tables? The restrooms?
• Product Quality – Was the order filled accurately? Was the
temperature of the drink within range? Was the beverage
properly presented?
• Speed of Service – How long did the customer have to
wait? The company’s goal was to serve a customer within
three minutes, from back-of-the-line to drink-in-hand.
2001-2003 Customer Snapshot Scores (North American Stores):
Financials
• Recent Financial Information
o Attached is a graph from www.starbucks.com, showing historical
revenues dating back to the 1995 fiscal year up to the 2006 fiscal year.
*See Exhibit 2
Starbucks Corporation
Annual Income Statements
amounts in millions of US dollars (except per share amounts)
Gross Operating Total Net Diluted EPS (Net
Year Revenue Profit Income Income Income)
Sept. '05 6,369.3 3,764.1 780.6 494.5 0.61
Sept. '04 5,294.3 3,102.8 608.2 390.6 0.47
Sept. '03 4,075.5 2,389.6 424.7 268.4 0.34
Quarterly Income Statements
amounts in millions of US dollars (except per share amounts)
Gross Operating Total Net Diluted EPS (Net
Year Revenue Profit Income Income Income)
June '06 1,963.7 1,158.8 214.6 145.5 0.18
Mar. '06 1,885.8 1,124.9 201.9 127.3 0.16
Dec. '05 1,934.1 1,156.0 279.9 174.2 0.22
Sept. '05 1,659.2 980.3 196.4 123.6 0.16
June '05 1,601.8 952.0 199.6 125.6 0.16
source: Hoover's, Inc. 2006. D&B Company. 4 Dec. 2006 <http://hoovers.com>.
Starbucks Corporation
Annual Balance Sheet
amounts in millions of US dollars (except per share amounts)
Sept. '05 Sept. '04 Sept. '03
Assets
Current Assets
Cash 307.0 653.0 350.0
Net Receivables 261.6 203.9 175.9
Inventories 546.3 422.7 342.9
Other Current Assets 94.4 71.3 55.2
Total Current Assets 1,209.3 1,350.9 924.0
Net Fixed Assets 1,842.0 1,551.4 1,384.9
Other Noncurrent Assets 462.7 488.2 420.8
Total Assets 3,514.1 3,390.6 2,729.8
Liabilities and Shareholders' Equity
Liabilities
Current Liabilities
Accounts Payable 774.2 624.2 534.5
Short-Term Debt 277.8 0.7 0.7
Other Current Liabilities 175.1 121.4 73.5
Total Current Liabilities 1,227.0 746.3 608.7
Long-Term Debt 2.9 3.6 4.3
Other Noncurrent Liabilities 193.6 166.4 34.3
Total Liabilities 1,423.4 916.3 647.3
Shareholders' Equity
Preferred Stock Equity -- -- --
Common Stock Equity 2,090.6 2,474.2 2,082.4
Total Equity 2,090.6 2,474.2 2,082.4
Shares Outstanding (mil.) 767.4 397.4 396.5
source: Hoover's, Inc. 2006. D&B Company. 4 Dec. 2006 <http://hoovers.com>.
Starbucks Corporation
Annual Cash Flow Statement
amounts in millions of US dollars (except per share amounts)
Sept. '05 Sept. '04 Sept. '03
Net Operating Cash Flow 923.6 820.2 566.5
Net Investing Cash Flow (221.3) (658.5) (499.3)
Net Financing Cash Flow (673.8) (66.5) 30.8
Net Change in Cash 28.8 98.2 101.2
Depreciation & Amortization 377.3 325.6 256.3
Capital Expenditures (644.0) (412.5) (365.3)
Cash Dividends Paid -- -- --
source: Hoover's, Inc. 2006. D&B Company. 4 Dec. 2006 <http://hoovers.com>.
Starbucks Corporation
Earnings Estimates
Period Mean # of
Period Ends EPS Estimates Year Ago Actual
Q1 Dec. '06 0.26 17 0.17
Q2 Mar. '07 0.19 16 0.18
Q3 Jun. '07 0.22 16 0.16
Q4 Sept. '07 0.22 16 0.22
P/E Ratio: 39.79
5-Year Growth Rate: 26.55
source: Hoover's, Inc. 2006. D&B Company. 4 Dec. 2006 <http://hoovers.com>.
Starbucks Corporation
Comparison To Industry & Market
Valuation Company Industry1 Market2
Price/Sales Ratio 1,963.7 1,158.8 214.6
Price/Earnings Ratio 1,885.8 1,124.9 201.9
Price/Book Ratio 1,934.1 1,156.0 279.9
Price/Cash Flow Ratio 1,659.2 980.3 196.4
1
Industry: Eating and Drinking Places
2
Market: Public companies trading on the NYSE, AMEX, and NASDAQ
Top Competitors
New World
Starbucks Diedrich Coffee Dunkin Restaurants
Annual Sales 6,369 59.5 517.0 389.1
Employees 115,000 -- 953 7830
Market Cap ($ mil.) 27,047 17.9 0.0 0.0
source: Hoover's, Inc. 2006. D&B Company. 4 Dec. 2006 <http://hoovers.com>.
Controls
• Problems and Solutions (Moon)
o In 2002, our fellow associates, including Christine Day, recognized that
customer service needed to be improved upon, and one idea to conquer
this problem was to invest $40 million annually in 4,500 stores.
o By adding almost $9,000 to each store, this would allow an additional 20
hours of labor per week.
o Day said, “The idea is to improve speed-of-service and thereby increase
customer satisfaction.”
o According to a survey of customers, 65% believed fast service was a key
attribute to their satisfaction.
o In the past when we thought of adding more labor hours to our retail
stores, we decided against it due to the struggling economy, especially
since labor was already our biggest expense.
o Another option instead of increasing labor hours is to increase the
efficiency of the partners that we currently employ. We removed the non-
value-added tasks, simplified the production process, and manipulated the
store layout to take better advantage of store space.
o Additionally, we installed an automatic espresso machine that was faster,
reduced waste, and improved consistency while still fulfilling our
customer’s needs. We want to continually implement the use of these
machines in more of our stores.
o Furthermore, we want to add more drive-thru lanes to our stores. In doing
so, we can still serve our customers who want a taste of Starbucks on-the-
go.
• Marketing Organizations
o Although we have been considered one of the world’s most effective
marketing organizations, we lack a strategic marketing group (Moon).
o Instead, we have smaller divisions (Moon):
Market research group – gathered and analyzed market data
Category group – developed new products and managed the menu
Marketing group – developed quarterly promotional plans
o However, we need to find a way to get these divisions to collaborate so
information about market and customer trends is not overlooked like it has
been in the past and we can make better decisions about driving our
business in the future.
o In 1995, a “Stores of the Future” project team was formed (Student).
Their goal was to come up with the next generation of Starbucks
stores to be debuted in 1996.
Schultz communicated with the team and envisioned the retail
stores to look and feel like, “an authentic coffee experience that
conveyed the artistry of espresso making, a place to think and
imagine, a spot where people could gather and talk over a great
cup of coffee, a comforting refuge that provided a sense of
community, a third place for people to congregate beyond work or
the home, a place that welcomed people and rewarded them for
coming, and a layout that could accommodate both fast service and
quiet moments.”
The team researched the art and literature of coffee throughout the
ages, studied coffee-growing and coffee-making techniques, and
looked at how our retail stores have already evolved in terms of
design, logos, colors, and mood.
The team decided upon four store layout designs:
• A store for each stage of coffee making: growing, roasting,
brewing, and aroma.
• Each store had its own color combinations, lighting
scheme, and component materials.
• Also, the stores adapted to the environment, whether the
store was downtown or on a college campus, for example.
• Contingency Planning
• Time Implementation
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