Starbucks Case Study Online
What factors accounted for the extraordinary success of Starbucks in the early 1990s? What was so compelling about the Starbucks value proposition? What brand image did Starbucks develop during this period? In 1971 Gerald Baldwin, Gordon Bowker and Ziev Siegl opened a specialized arabica beans coffee shop in Seattle’s “Pike Place Market”. In 1982 Schulz joined the team and he went to Italy to understand more about coffee shops. Some years later Schulz bought the company from the other 3 members. Starbuck’s major success was that the company went public in 1992 and raised $25 million.
With that money they could afford to open more coffee shops around the country. Moreover, Starbucks specialized in offering to the public a place where they could have a specialty coffee in a nice location where they could relax and enjoy the experience. In Italy Schulz noticed how people enjoy coffee everyday as a part of their life. He had the idea to offer a 3rd place (not at home, not at work) in a nice location where you could enjoy quality coffee in a comfortable environment. The brand strategy during the 1990’s was to sell their coffee as a “life coffee”.
To sell not only coffee, but the “everyday life experience” that drinking coffee promotes.
Where are you? How does it taste? Are you going to talk to someone? The 3 elements of branding strategy were: * High-quality coffee from Central and South America, Africa, and Asia-Pacific regions * Service: Recognizing loyal customers and knowing their drinks * Atmosphere: Comfortable place to stay for a while Starbucks increased tremendously their brand image. They didn’t spend much time on advertising; however, their sales increased 40% a year since 1992. In 2002 Starbucks was the major specialty-coffee brand in North America. . Why has Starbuck’s customer satisfaction scores declined? Has the company’s service declined, or is simply measuring satisfaction the wrong way? As products have been added to the Starbucks line, consumers have learned to customize their choices to their specific tastes. Due to these specifications, the service provided by the baristas has slowed down for all customers.
An extremely long line at a popular time and location was not uncommon. Service has declined somewhat due to the new products, the variety of products offered and the customizations requested by a large percentage of established customers.
Starbucks found that their heaviest users were always the most demanding. Baristas are trained to a pre-established quality standard for making all the beverages on the menu, yet they must deal with customization to keep their customer satisfied. As the company implemented the “Customer Snapshot” program, they tracked what the mystery shopper observed by the four “Basic Service” criteria; service, cleanliness, product quality and speed of service. During 2002, the company found that scores had increased across all stores.
They believed that the program was doing a good job of measuring trends.
What they did not find from the program was how the customer would specifically rate that same visit. This is why they had conflicting information when additional surveys would indicate that the customer was looking for better service performance. 3. How does Starbucks of 2002 differ from the Starbuck of 1992? Starbucks of 1992 was a much smaller company in all aspects.
They had gone from 140 stores in 1992 to almost 5900 stores in 2002. They had also expanded significantly internationally to over 1300 stores. They wanted to bring that special experience across the globe.
The products they offered were primarily coffee beverages and whole beans back in 1992, but their menu eventually expanded to over 30 types of coffee and non-coffee beverages along with food items and coffee equipment and accessories. Starbucks had also added their products to other retail outlets. They placed their bottled Frappaccino beverages in numerous locations.
You could now find them in vending machines, grocery stores, and gas stations. By this point most major hotels and airlines were serving brewed Starbucks coffee to their customers.
Starbucks had also started offering their coffee beans in grocery stores so that new customers could experience a cup of Starbucks coffee in the comfort of their own home and not feel intimidated by using the unfamiliar lingo in the Starbucks stores. They are still focusing on that special coffee experience, but have presented it to a much larger audience that has happily accepted it. 4. Describe the ideal Starbucks customer from a profitability standpoint.
What would it take to ensure that this customer is highly satisfied? How valuable is a highly satisfied customer to Starbucks?
Looking at the graph on page eleven 21% of Starbucks’ customers make up 62% of their transaction, i. e. the old 80/20 rule. The heaviest consumers make up the majority of the sales. One of the things that you can infer from this is that Starbucks is doing something right, or these customers wouldn’t keep coming back. The trick is to keep giving the customer what they want sot they continue coming back.
At the most fundamental level Starbucks customers expect to get their coffee in a timely manner, and that means that there need to be enough partners staffed to service the customers in a timely manner.
It is also a fine balance between continuing to give the customers what they want and what they are used to, but continue to offer new products to keep them interested. Items that complement the coffee assortment like pastries and muffins drive incremental sales. These products increase the market basket, and help grow additional revenue without cannibalizing the core product. Starbucks should continue to offer new products and expand its offering.
Additionally this will help retain customers’ long term by keeping them interested in the brand. 5. Should Starbucks make the $40 million investment in labor in the stores?
If so, explain why. (What is the goal of this investment? ) Is it possible for a mega-brand to deliver customer intimacy? Part of Starbucks’ success was driven by its customer service. They are not the only place that consumers can buy a cup of coffee, but they are one of the few that can get away with charging 8 bucks for it.
Starbucks manages this by creating an atmosphere and an experience. One of the crucial elements of this is how their partners interact with their customers. The level of service partially justifies the price of their product, and helps reinforce the experience.
In today’s marketplace the buying experience is often detached and impersonal. Because of cost cutting measures many operations run a light staff intentionally. Oftentimes when you can actually find a salesperson to ask for help they make you feel like you are bothering them.
When you get rung up to pay you are rarely greeted with a smile, there is not small talk, just silence. You can even check yourself out many places, and it is completely feasible that you made a purchase with no human interaction. We as a society are unfortunately used to this, which is sad because the art of personal selling has become lost.
Personal interaction is a powerful selling tool, the associate on site is the human face of the company and important in humanizing an otherwise faceless cooperation. I believe Starbucks realizes this and understand the value that good customer service brings.
Consumers are saturated with selling messages in the media everyone wants to pick your pocket and we know it, this makes us cynical and skeptical. Targeted messages in the mass media are still mass messages; the only tool a marketer has to target specific customers is its associates.
They can remember your name and greet you with it; they know what you drink and how you like it. These are important to selling and customer retention. People respond to people.
A mega-brand can deliver customer intimacy, it is harder than a local operation but it is possible. It is done the same way by personal selling skills, but the company has to enable its associates to achieve this goal by giving them the time and training to do it. These questions are to be used for a written paper of 3 to 5 pages, and a 10 minute oral group presentation consisting of an overview of the case and the answers to the above questions.
