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Starbucks: Delivering Customer Service
Transcript of Starbucks: Delivering Customer Service
Dunkin Donuts: flavored coffee & non-coffee alternatives CAFFEINATING THE WORLD INSPIRATION: America's "Third Place"
TARGET MARKET: Affluent, well-educated, white-collar, skewed towards females, aged 25-44
OBJECTIVE: to establish Starbucks as the "most recognized and respected brand in the world." ENVIRONMENTAL: high-traffic, high-visibility settings
IPO: raised $25 million
In 2002, sales rose by 40%, earnings by 50%.
Serving 20 million customers in 5,000+ stores around the globe. Opening 3 new stores a day. In 2002, Starbucks owned close to 1/3 of America’s coffee bars
AGGRESSIVE GROWTH: Planned to expand to at least 10,000 stores in North America and 15,000 international stores. EXPERIENTIAL BRANDING STRATEGY
"Live coffee" VALUE PROPOSITION COFFEE: broad distribution strategy
SERVICE: product quality, cleanliness, speed of service
ATMOSPHERE: ambiance, sense of community STARBUCKS PARTNERS Partner satisfaction translates to customer satisfaction COMPETITORS: variety of small-scale independent, regional specialty coffee chains. Each sought ways to differentiate from Starbucks. -- Company-operated retail stores: premium beverages accounted for 77% of sales
-- Non-company-operated retail channels -- Handcrafted beverages customized to customer preferences
-- Connecting with customers on personnel level
-- "Just say yes" policy
-- Store cleanliness
-- 3 minute service goal -- Lowest employee turnover rates in the industry PROBLEM AREAS Rampant Growth
Lack of integrated Marketing group
Increased job complexities -- Starbucks values
-- Neglected "big picture"
-- Tension between product quality, speed of delivery, and customer satisfaction
-- Does speed equate to customer satisfaction? Rediscovering the Starbucks Customer What types of customers should Starbucks focus on when improving customer service?
CLTV increase from satisfied customer to highly satisfied customer significantly larger.
How much should Starbucks pay to change a satisfied customer into a highly satisfied customer? Breaking Down the LTV Further Companies should be worried about the lasting impact of buying “cheap customers”.
It is a good idea to invest in “good customers” as they are more likely to hang around longer.
Starbucks should focus on improving customer service based on what satisfied customers want or what highly satisfied customers want. Investing in “Good” Customers Improving sales, improving customer service, improving the experience of a diversity of customers. Facing the Market, Facing the Customer Addressing a diversity of demographics in the market Customers who want it fast.
Customers who want it customized.
Customers who want it "chill" Customer Experience > Simple Numbers Goal One brand, multiple formulas-- a diversified brand
can match a diversity of customers. Diversify the Brand, Diversify the Experience Volume Oriented, get people in, get people out! Starbucks "EXPRESS" Formula "Lounge" "EXPRESS" Focus on efficiency of layout on both sides of the counter.
Bring the menu production down to a science
Minimal seating, or no seating at all! Starbucks "Lounge" Getting the Cafe experience Focus on atmosphere
Train the Baristas here to be sociable
Sofas! And other seating that force "comfort"
Wifi and other amenities Diversifying operations in store
Division of "Custom" and "Standard"
Division of station
Division of Barista class Improving Effeciency In-Store "Genius Bar-ista(?)" Rampant Growth - It's a Starbucks world Central Marketing Team The difficulties of Barista life Increased Job Complexities Building a house of cards with no integration
Neglecting the "Big picture" Expansion is something that any successful company will experience
and although a positive thing it can also cause... Rapid growth made customers feel neglected
Felt that Starbucks only cared about: Sales and
Creating new locations
Executives began to question if the values of
Starbucks were being communicated to their
customers. (A common problem) I was into Starbucks before it was cool Ev -Every hipster ever Starbucks became seen as a "mainstream" business and as a result was potentially losing it's "Mom and Pop" dynamic and purest groups. Standby me.... a lack of an integrated marketing group As of 2002, Starbucks had no one marketing division in it's company.
Marketing was handled by three separate: Market Research, Category group, and a marketing group. (From left to right)Market research, category group, marketing group. The companies policy was that ALL of Starbucks was a part of the marketing system.
As a result the organizational system for marketing sometimes missed the "big picture"
Starbucks had missed changes in trends in the past due to this same problem. Perhaps the biggest problem was with customer satisfaction.
As the complexity of orders increased with new flavors and customer customization the quality, speed, and satisfaction with Starbucks began to fall. Main points and problems recap! Rampant growth caused tension between customers and Starbucks 52% of whom believed Starbucks was in it for "The money".
A changing customer demographic.
A lack of differentiation with other companies products and also the complexity and speed of the products already offered.
Lack of integration in the marketing team which caused the company to not see the "Big picture"
Should Starbucks spend 40million to improve customer satisfaction? So, wait... you wanted the ....
I'm sorry, I have no idea what I'm doing Customer Satisfaction is very important
95% of students won't come back and will tell 11 people.
5 % will come back if you make amends and tell 5 people So, how should we solve this problem. The case suggest we spend 40 million on labor... but should we...
(Speed, quality, items, marketing? What should be done?)
Seeing the bigger picture in analyzing the customer base Create a
cohesive marketing plan Starbucks vs. Competition Branding Opportunity Areas Reduce conflicting
marketing strategies Utilize scale of business to re-apply
effective practices Utilize Market Research LINK: http://www.starbucks.com/card/rewards Deeper insight of the frequent visiting customers’ purchasing habits
Encourage more purchasing power from “roamers” Starbucks Loyalty Card Provides focus by customer segment
The more profitable customers
Customer Satisfaction drivers
Loyalty vs. Frequent Visitors Why is LTV important? Helps justify an investment in a marketing program Good marketing focuses on customer development and customer retention Knowing the LTV helps you attack not only the acquisition and retention piece but also the development piece