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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

Consistency

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

Waiting Time

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

We decided on AVT Inc.

Candidates:

  • AVT Inc. in

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

Recommendation

  • 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
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