STARBUCKS: DELIVERING CUSTOMER SERVICES

PRESENTED BY
Mehak Gul Durrani
Nael Nasir Chiragh
Sijal Asif Khan
Zaryan Khawar

Introduction
Leading coffee brand & coffee chain founded in 1971.
Customer base of 20million with 5000 outlets.
Different small scale specialty coffee chains & independent coffee shops are

competitors.
Eminent growth possible by going into untapped national & international

markets.
Starbucks joint venture with Pepsi cola, Starbucks RTD beverages available.

Starbucks Value Proposition

Great coffee
Environment
Service
Target audience

Value proposition & Target market Alignment

Enjoying coffee drinks in coffeehouses.

Development of certain rituals around coffee drinking.

Starbucks being the go to option of customers.

Connection establishment between baristas & customers.

STARBUCKS IN 1992
SERVICE
PHILOSPHY

PHYSICAL
ENVIRONMENT
PREMIUM
COFFEE

CONSUMPTION
PATTERNS
Tendency to linger:
Ritualistic consumption:
looking to self indulgence

BRAND PERCEPTION
Best coffee: classy
upscale: a third place

TARGET CUSTOMER
Sophisticated, affluent coffee
lover, embracing the live
coffee lifestyle

STARBUCKS CUSTOMER ACQUISITION ROUTES

Massive
store
expansion
(many more
coffee
houses)

Noncoffeehouse
channels
(groceries,res
taurants,
airplanes etc)

Non-coffee
products
(ice-cream,
frapucciono
etc)

Other feeder
mechanisms
(gift, cards,
etc)

NEW CUSTOMER ACQUISITIONS

Starbucks in 2002
More accessible
Changed customer base
Product diversity
More pressure on baristas

CONSUMPTION PATTERNS OF ESTABLISHED

CUSTOMERS VS NEW CUSTOMERS

ESTABLISHED
CUSTOMERS

NEW ACQUISITIONS

Drinking Starbucks is part of

a self-indulgent ritual

Drinking Starbucks is part of

a pragmatic routine

A tendency to linger

A tendency to be in a rush

Starbucks is a sanctuary to
escape from the real world

Starbucks is a place to pass

through on the way to
work

Starbucks is desirable for its

friendliness, its social
ambience

Starbucks is desirable for its

convenience

Decline in Consumer Satisfaction

Customer mystery snapshot program was run 3 times a quarter.
Inconsistency between different mystery shoppers regarding definition of

criteria.
One reason is growing customer base.
Three major components of value proposition have declined.
Competition of small scale coffee stores increased.
Image of Starbucks has changed.

CONFLICTING DEFINITION OF SERVICE

HOW NEW CUSTOMERS HAVE ADDED TO THE

PROBLEMS?
Self-contradictory elements
Friendly barsitas-> slower service
Effective service leading to longer ques.
Legendary service
Enhancing element (atmosphere, third place, soft-skills) were

forgone.

STARBUCKS SERVICE DETERIORATION

Too little
experienced
labor

Baristas
have no
time to chat

Lots of new
customer
acquisitions
Tendency to
order handcrafted drinks +
Desire for
customization

Grumpy
employe
es

Employee
turnover

Long lines

Dont
remembe
r me or
my order

Grumpy
customers

New product
complexity

Complex
orders

Leave before
ordering
Dont come
back as often
Lesson of a third
place
attachment(diminshe
d brand
loyalty)
Order
something
simple rather than
complex (lower ticket

Starbucks over the years :

Comparison
1992

2002

Sales

50% sales from sale

77% sales from
of whole bean coffees beverages

Menu

Whole bean coffee

Addition of new
items-Food and new
beverages

Ambience

Lounge with an
Italian coffee culture

Smaller coffee store

without lounging

Target audience

Middle to upper class

Professionals

Younger and lower

income demographic
profile

Drink
Combinations

Fewer beverages

Too many beverages

Reason:
season

Addition of a new beverage every holiday

Process

Simple

Complex

Delivery time

Faster service

Slower service

Company norm

Customers going to

Starbucks going to

Ideal Customer
Customer should be visiting frequently ,which is 18 visits a

month.

Ideal customer will be spending $4.42/visit.

The average customer life will be 8.3 years.

 Starbucks should focus on improving its

customer satisfaction scores

How to be more Efficient ?

Increase the speed of service, install labor saving verismo

machines.
Improving the store design, to increase efficiency.
The staff should be worked upon, having friendlier people.
Focus on things which increase value of product on every visit.

BRAND IMAGE
Corporate image-> business oriented
Expansion leading to brand dilution
Growing domestic competitors(e.g peets)
Authentic vs cookie cutter like outlets
High quality vs top quality

STARBUCKS CHANGING BRAND IMAGE

40 million Project viable ?

Total stores in North America : 3496
40mn/3496: 11.4k/store
67 customers need to be converted from Satisfied to highly

satisfied. (11.4k/172 : 67).

759k revenue per year for a store, average ticket size is $4.06.
187k transactions made per year (759/4.06 : 187k).
3117 customers (187k/60).

Application of the Investment

Starbucks should invest money where needed and in what

amount needed.
Identify where people are less satisfied invest there.
Establish an internal strategic marketing group.
Improve other services, like making of beverages.
Improve the skills of their partners, to treat customers well.

8 Ps of Service Marketing
Product Elements
Core (Coffee) + Supplementary
Place and Time
Efficiency and effectiveness: delivering the product in time
Ambiance of the outlets
Promotion and Education
training baristas to acquire soft and hard skills:
Soft

skills: how to greet customers

Hard skills: how to make drinks etc.

Process

Labor saving machines, improving delivery & efficiency.

Physical Environment

Aroma, Music, Dcor and Furnishings are carefully monitored

Environment which allows customers to escape hustle & bustle of the real world

People
Baristas to acquire soft and hard skills
Trained to make drinks
Treat Customers well

Productivity and Quality

By providing training on how to make drinks a quality standard can be set and it
ensures reliability: get the same product in future without any variations

The quality of products should be similar everywhere

 Relationship Marketing:
By giving each customer a sense of belonging by personalizing the experience as much as possible

could be as simple as recognizing you or knowing your drink

Reengineering Service Process:

Labor saving Verismo machines

these machines freed the baristas and decreased the number of steps to make beverage
Speed of service is enhanced

Level of Customer Expectation:

Adequate Level

Delivering the coffee within 3 minutes

Although with new products introduced, delivering within 3 minutes was becoming less possible

Zone Tolerance Level

If wrong beverage is delivered to the customer

The time taken is to deliver is too long

Expansion can be explained through Product-Market

Expansion Grid
Existing Products

Existing Markets

New Products

Market Penetration
Drive through
Product Development

New Markets

Market Development
5000 stores around the
world
Grocery stores, airplanes,
restaurants

New Beverages ,
Ice-creams introduced
Drinks for non-coffee drinker

Diversification (related)
Ice-cream, Frappuccino
etc.

Categories of Services
People Processing

Involves high contact level

baristas should be knowing how to deal with different customers

Mental Stimulus Processing

Trying to create a perception about Starbucks that it offers highest quality

coffee

Information Sharing
Consultancy services provided by baristas: their knowledge regarding the

products being served

Knowing & understanding the customers well.

The Flower of Service

Core and Supplementary Product
Information
Payment
Billing

Consultation
Core

Exceptions

KEY:

Facilitating elements
Enhancing elements

Order Taking

Hospitality
Safekeeping

FLOWER OF SERVICE
CORE PRODUCT

FACILITATING ELEMENT
Information
Payment (SVC prepaid
cards)
Billing
Order-taking

ENHANCING ELEMENT
Consultation
Hospitality (soft skills
Exception

Conclusion
Starbucks is facing a number of problems.
Need to re-evaluate their value proposition.
Examine the expansion strategy.
Cater in a better way to the different set of customers.