Starbucks Express
Consumption
Coffee Market
Segment
- 41% of age group, 18 to 49, reported drinking gourmet coffee at least twice a week
- 68% of participants in Dallas reported consuming gourmet coffee on a daily basis
- 57% of Seattle participants said they would rather go without their cell phone than coffee
- Boston participants consume more gourmet coffee than any other caffeinated beverage, per capita
Market Research and Surveys
Budget
- San Diego came in second in household spending on coffee
- Residents spend an average of $16/week on coffee
- New York City showed a 13% growth in the gourmet coffee segment
- Narrowed list of cities to those with suitable locations
- Traveled to and evaluated each location
- Conducted pre/post surveys via Facebook
Coffee Market
Segment (continued)
- Total revenue increased 2.7% in the overall coffee market in 2013
- Gourmet coffee segment makes up 31% of overall coffee market
- Gourmet coffee continues to increase and traditional brewed coffee declined 7% last year
National Coffee Drinking Trends 2014
Construction
Surveys
Kiosk Manufacturing
Estimate was $1,500
- Surveys were conducted on Facebook
- Total was exactly $1,235
- Developed Criteria
- Met with several top companies
- Decided on company that could perform the contract in all test locations
- Silver Bullet Construction
Kiosk Manufacturing
Estimate was $1,800,000
- Cost included lifetime warranty for each kiosk and no charge for machinery repairs
- 150 kiosks amounted to $6000 each
- The total amount spent on manufacturing was $900,000
- Developed specific criteria
- Met with several potential partners
- Made the decision based on criteria
Construction and Engineering
Estimate was $650,000
- Company charged $565,550 for complete construction at all locations
- Engineering costs totaled $65,550 for salaries and fees to Dick Winkler, structural engineer at Heigelstein, LLC
- Total was exactly $631,100
Implementation
Drinking Trends Research
Market Research
Problem 2:
- Tested concept for six month period
- Allowed time for customers to get used to concept
- Collected post-test data
Problem 1:
Estimate was $20,000
- Expenses included the report that cost $595
- Additional fees for salaries included $19,457 that was divided among the five full time team members
- These charges brought the total to exactly $20,052
Estimate was $150,000
- Amount included cost from compensation, travel, lodging, meals, and transportation costs for five full time project members
- Travel expenses totaled $67,568 (Travel made up most of the market research budget)
- Lodging expenses totaled $46,687
- Remaining sum, $43,230 took care of miscellaneous expenses including meals, stipends, and tips
- Research totaled to $157,485
Strategy
Project Objective
- Combine traditional coffee shop experience with automated coffee experience via a drive-in
Tactics
Find a way to integrate both experiences
- Convert existing locations to accommodate drive-in setting
Post Surveys
Research
Objective
Test viability of project in certain areas
Introduction
- Facebook surveys conducted during 6 month trial period
- Response was very positive
National Coffee Drinking Trends 2014
- Learned more about the consumption of coffee
- Developed a list of potential cities for testing
Market Research
Manufacturers
The Decision
Candidates:
Corona, California
- Kiosk Information Systems
in Louisville, Colorado
- Signifi Solution Inc. in Mississauga, ON, Canada
Manufacturing
Costs of Market
Research
AVT’s Capabilities
Criteria for the Manufacturer
- Design
- Worldwide design award winners
- Fabrication
- Made in America
- Product guarantee
- Assembly
- Integrated technology
- Apps, business management software, re-order points, advertising
Qualifications:
- Competitive Pricing
- Quality Product
- Smart app ordering technology
- Ability to meet our demands
- Growth rate
- Good working relationship
AVT’s Experience
- Travel, compensation, lodging, meals, and transportation for five full time employees amounted to $157,485
- Surveys were low cost and amounted to $1,235
Survey Results
How we started
- Established our needs for the manufacturer
- Met with known automated kiosk manufacturers
- Decided on a vendor we thought could best handle our needs
Positive feedback
- Over 70% of customers found Starbucks Express reduced time to purchase a cup of coffee
- Most said they would return again because of timing and service
- Many were impressed with the kiosk’s ease of use
Negative feedback
- Some locations had functionality issues
- Improvements made by further manufacturing research
How
Manufacturing Budget
End Result
Why Continue
- 11 Starbucks Express locations
- 150 total kiosks
- Priced at $6000 each
- Total Spent on AVT kiosks $900,000
- Potential spending for other manufacturers $1.8 million
- Savings $900,000
Survey Results
Fulfilled qualifications:
- Competitive pricing
- Savings of $900,000
- Quality Product
- Made in America
- Technology
- Smart app and many other functions
- Large production facility and staff to meet our growth demands
- Beginning of a good working relationship
- Long-term contracts
- 8% royalty on net sales
- 5 kiosks per location
- Just Starbucks Express locations
- Other areas
- International
Post-Visit Surveys
- Gauged customer response
- Visibility on newsfeeds played a key role
- Successful completion resulted in a complementary drink
- Customer interaction
- Feedback of Starbucks Express Concept
- Tracked likes, comments, shares, completed surveys, and offers claimed
- Starbucks market share is 36.7%
- ACSI rating decreased to 76 in 2014
- Starbucks wants to reduce waiting time and widen its brand
- 73% of surveyed people think Starbucks is overpriced
- Coffee bean prices have dropped 30% in the last year
Criteria for Locations
Other Areas
Starbucks locations in the U.S.
- New Orleans, LA
- Providence, RI
- Austin, TX
- Savannah, GA
- Nashville, TN
Expected Results
- Heavily populated areas
- Density of businesses and educational facilities
- Household incomes
- Overall coffee consumption
- Starbucks profitability in area
- Different regions throughout U.S.
- Store size
- Adaptability of location
Expand
- Company growth of at least 5%
- Market share increase to at least 43%
- Goal Achievement
- Wider brand
- Less waiting time
- Compete in automated coffee market
- Lower prices for customers
- Customer satisfaction
- ACSI rating will increase
Facebook’s Advertising System
Research Locations
- Used interactive ads
- Built up brand awareness and concept visibility
- Provided exclusive Starbucks Express incentives
- Promotional free drinks
- Massachusetts
- New York
- Pennsylvania
- Illinois
- Texas
- Arizona
- California
- Washington
- Oregon
- Boston
- New York City
- Philadelphia
- Chicago
- Houston
- Phoenix
- Los Angeles
- San Diego
- San Francisco
- Seattle
- Portland
Results
Cities by Region
Starbucks should...
East Region
Middle Region
Regional Analysis
- East region had the highest number of people visiting our facilities
- Middle region had highest number of positive survey results
- West region had the highest number of negative survey results
Boston, New York City, Philadelphia
Chicago, Houston, Phoenix
Los Angeles, San Diego, San Francisco, Seattle, Portland
Recommendation
- Continue on with Starbucks Express Brand
- Expand in qualified areas
- Expect a good result
West Region
Conclusion
Research Results
- Research was positive
- Surveyed audience loved the concept
- Sales increased
- Surveyed audience that used Starbucks Express had a good experience
- Survey participants will continue to use Starbucks Express
- Continue with Starbucks Express brand
- Expected results are positive
Reasons for Research
- Automated coffee is growing rapidly
- Americans believe Starbucks is overpriced
- Starbucks goals
- Widen the brand
- Decrease waiting time