Starbucks: Delivering Customer Service

S TA R B U C K S : D E L I V E R I N G C U S T O M E R
S E RV I C E
GROUP 4
A B H I S H E K C H A U D H A RY
A K S H I T G U P TA
ANUSHKA JAIN
DEBAJYOTI
K R AT I J A I N
MOHD. SAHIL ZAIDI
CASE SUMMARY
• Company background
• Major value proposition
• Competition
• Service delivery
• Growth drivers
• Changing customer base

W H AT F A C T O R S A C C O U N T E D F O R T H E S U C C E S S
O F S T A R B U C K S I N T H E E A R LY 1 9 9 0 ’ S ?
Following are some of the factors that accounted to success to Starbucks success in
the early 1990’s-
1. Atmosphere: Schultz’s idea to make Starbucks a place where people can enjoy
their social interactions, relax, or just spent some time by themselves. In essence,
the Starbucks idea changed the norm from “buying coffee as a drink” to “the
experience of enjoying coffee”.
2. Coffee quality: Starbucks strategy was to open only company‐owned stores and
avoid franchising. At the same, Starbucks tried to control as much of the supply
chain as possible, this enabled the company to keep full control of quality of coffee
at high and consistent levels.
3. Service: Partners were trained on both “hard skills” and “soft skills” when hired to
work for a Starbucks retail store. This equal emphasis on the “hard” and “soft”
skills further highlighted Starbucks strategy to make the experience pleasant for
the customer.
4. Partner satisfaction: Starbucks partners were among the highest paid hourly
workers, they enjoyed health benefits and they had stock options. This resulted in one
of the lowest employee turnover rates in the industry and a consistently high
employee satisfaction rate.
5. Specific target audience: Starbucks coffee in the 1990’s was targeted primarily
towards the affluent, well‐educated, white‐collar people. Being able to attract such an
affluent demographic and serving them by providing superior service, helped in being
able to provide the service at a consistent level and keep the customers satisfied.
6. Attractive market: The concept of Starbucks was new and the notion of turning the
coffee drinking into a social experience was almost unexploited in the U.S. In the
early 1990’s Starbucks did not face fierce competition.
W H AT W A S S O C O M P E L L I N G A B O U T T H E
S TA R B U C K S VA L U E P R O P O S I T I O N ?
Starbucks value proposition is compelling because-
• It places the customer and the service delivered to the customer above everything
else.
• With its value proposition, Starbucks moves away from the tangible benefits that
the coffee offers and concentrates on the quality of its coffee and the intangible
benefits of the experience of drinking Starbucks coffee.
• Starbucks value proposition is not about coffee, it is about the experience of

drinking coffee in a Starbucks store integrating the product with the emotional
benefits.
W H Y H A S S TA R B U C K S C U S T O M E R S AT I S F A C T I O N
S C O R E S D E C L I N E D ? H A S T H E C O M PA N Y ’ S
S E R V I C E D E C L I N E D , O R I S I T S I M P LY M E A S U R I N G
C U S T O M E R S AT I S F A C T I O N T H E W R O N G W AY ?
• The tool used for measuring Service performance is not perfect: Customer
Snapshot
• Every store was visited by an anonymous mystery shopper three times a quarter
• Rate the store on four Basic Service criteria: Service, Cleanliness, Product quality
and Speed of service
• Legendary Service: Behavior that created a memorable experience for a customer

• According to market research team, Starbucks’ brand image has rough edges, it
cares about making money and building more stores (No. of respondents who
agreed with the first statement was up from 53% in 2000 to 61% in 2001 and for the
latter one it up from 48% to 55%)
• Customized drinks created a tension between product quality and customer focus
for Starbucks which results in unsatisfactory service of partners
• There was very little image or product differentiation between Starbucks and the
other smaller coffee chains in the minds of specialty coffeehouse customers
• Speed of service: Customized drinks slowed down the process of delivering (to
make a “venti tazoberry crème”, it required 10 different steps)
• Starbucks was somehow less trendy as compared to others (regardless of the

market- urban versus rural, new versus established- customers tended to use the
stores the same way
DIFFERENCE FROM
1992 TO 2002
• Retail Expansion- Increase in Number of

stores from 140 to around 4500
• More Complexity with addition of new items

and beverages
• In 1992, about half of the company’s sales

came from sales of whole‐bean coffees
whereas in 2002 about 77% of the sales
came from beverages
• Change in Demography of customers
• Change in Brand Image

D E S C R I B E T H E I D E A L S TA R B U C K S
C U S T O M E R F R O M A P R O F I TA B L E
S TA N D P O I N T. W H AT W O U L D I T TA K E T O
E N S U R E T H AT T H I S C U S T O M E R I S H I G H LY
S AT I S F I E D ? H O W VA L U A B L E I S A H I G H LY
S AT I S F I E D C U S T O M E R T O S TA R B U C K S ?
• Affluent, well-educated, white collared female aged between 24-44 initially, but
also expanded to younger, less educated and lower income bracket crowd.
• Diversified products, improvement of services, enhanced speed-of-service

delivery.
• A highly satisfied customer would contribute to growth in brand value and

increased sales to a targeted $20000 per week in each stores.
S H O U L D S TA R B U C K S M A K E T H E $ 4 0
MILLION INVESTMENT?
S H O U L D S TA R B U C K S M A K E T H E $ 4 0
MILLION INVESTMENT?
$40 million investment in labor for its 4574 stores = $8,750 for each store.
The goal of this investment is to increase satisfaction let’s see how this translates
into number of customers that need to go from being satisfied to being highly
satisfied.
Average daily customer count, per store is 570. Starbucks needs to turn 50 of 570
or 9% of its customers from satisfied to highly satisfied in order to break even.
A first assumption is Speed of Service- Starbucks customers, fast service ranks

#6 in importance.
A second assumption is that all stores are equal in size, number of people they
serve, location and prices and that all the stores need this additional investment.
New customers- Additional 32,000 customers per year for all stores.
$0.05 additional- Each customer in each visit in order to break even.
It is evident that only 10% of the Starbucks customers have asked for a faster,
more efficient service.
Customer base and Identify areas where people are less satisfied.
To establish an internal strategic marketing group that would coordinate actions

of the market research group, the category group and the marketing group.
As 77% of the company’s revenues came from beverages which were

handcrafted.
“THANKS FOR LISTENING”
–GROUP 4

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S TA R B U C K S : D E L I V E R I N G C U S T O M E R

• Major value proposition

• Changing customer base

Starbucks value proposition is compelling because-

• Starbucks value proposition is not about coffee, it is about the experience of

• Legendary Service: Behavior that created a memorable experience for a customer

• Starbucks was somehow less trendy as compared to others (regardless of the

• Retail Expansion- Increase in Number of

• More Complexity with addition of new items

• In 1992, about half of the company’s sales

• Change in Demography of customers

• Change in Brand Image

• Diversified products, improvement of services, enhanced speed-of-service

• A highly satisfied customer would contribute to growth in brand value and

A first assumption is Speed of Service- Starbucks customers, fast service ranks

$0.05 additional- Each customer in each visit in order to break even.

To establish an internal strategic marketing group that would coordinate actions

As 77% of the company’s revenues came from beverages which were

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