Starbucks Delivering Customer Service Case Study Harvard


Starbucks: Delivering Customer Service

the value proposition is not only about the coffee but also the experience around itsconsumption.

Question . Why has Starbucks/ customer satisfaction scores declined!


differentiated value #ro#osition

 designed for its target market revolved around"

service0 ambience and #roduct %uality.

Though latter two were consistent service wasshowing signs of

strains in terms of customer #erce#tions

 as brought out by decliningcustomer satisfaction scores. ,verall rating of Starbucks was especially low among the newcustomers. 2owever

Starbucks/ selfassessment scores "ere sho"ing a #ositive u#"ardtrend


Changing customer demogra#hics $ ex#ectations:

The new customers were youngerfrom a lesser income bracket had different perceptions about the brand. This differencein brand perception * service expectations i.e. fast service versus customization andlounging is another reason for low satisfaction scores. 8hile case mentions that most of the service delivery design and metrics were still keeping in mind the establishedcustomers.

Service decline $ measurement ga#:

The case mentions customer satisfaction gapcould possibly be an outcome of service gap. $ large number of customers 3:;5 believed service was an area Starbucks could improve upon.

2riendlier and fasterservice "as a higher rated attribute

 by customers than personal treatment which was anessential part of Starbucks measurement system. The amount of customization in drinksmade serving customers within time difficult for the baristas.

3rand 'dentity and 'mage:

(n spite of attempts to differentiate Starbucks from other specialty coffeehouses there was

little differentiation

in the minds of consumers.6ecause of their limited presence the specialty coffeehouses were able to deliver differentiated service to a niche crowd which was difficult for Starbucks to achieveconsidering its ubi#uity. Starbucks which positioned itself as the <third place/ was now being perceived as a place for

coffee on run


Starbucks came to be seen not as a coffeechain "ith a difference0 but as cor#orate

 which <

cared primarily about making money


4osing sight of core #ro#osition:

The recent focus of the company had been


as well as to

ex#and ra#idly

 versus the customer centric approach adoptedearlier. (n their drive to build brand and introduce new products they lost sight of changing consumer needs. The tenuous connection between customer satisfaction andgrowth seems to have been disrupted by focusing too much on brand building.

Question *. Describe the ideal Starbucks customer from a #rofitability stand#oint. What"ould it take to ensure that this customer is highly satisfied!

$ large portion of Starbucks/ sales came from the loyal customers. =1; of the customerscontributed to around >=; of all the transactions i.e. an average of 19 transactions per customer.(n addition the case gives the customer life time value per customer as shown in exhibit 1 fromwhich it is amply clear that a highly satisfied customer is a source of a higher revenue. $ newcustomer accounts for about 1 coffee cups? week while an established customer accounts for 19coffee cups? week. $s per the case from a cost standpoint labour was Starbucks/ largest expense.Store operating expenses accounted for about :1; of the total store revenue.



Analysis of Starbucks Delivering Customer Service

At the current moment, Senior VP of Administration Christine Day is contemplating howshe will pitch her plan to improve Starbucks’ customer satisfaction scores. On paper, thecompanies self imposed “snap shot” program of mystery shoppers paints a picture thatthe stores are operating effectively in the areas they feel drive customer satisfaction.However, recent surveys have revealed that the company’s perception of what drivescustomer satisfaction varies from the actual expectations of the customer.

According to Starbucks’ 2010 Annual Report, customer satisfaction scores continue toincrease, and at several points within the report it is mentioned that the key drivers for customer satisfaction are superior customer service/speed, along with partner friendlinessand cleanliness. It is worth noting that the two former factors were the top two responsesfor how Starbucks could improve perceived value, while cleanliness was ranked as themost important attribute for customer satisfaction. It can be perceived that an additionalfocus has been placed on these areas since the article was written as CEO HowardSchultz mentioned them all in his letter to investors.

In order to convince Smith and Schultz of the proposed $40 million plan to increase eachstores allotted sales, Day must tie customer satisfaction to customer loyalty, and place anemphasis on how this will translate to an increase in sales. In the HBR article “Puttingthe Service-Profit Chain to Work,” the authors lay a groundwork for what drivescustomer loyalty and the substantial impact that a lifelong customer can have on the bottom line. They state that increasing employee satisfaction yields an increase inemployee retention/productivity, which improves customer satisfaction, and that

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