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Mert Utku Goneyle

on 1 November 2013

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Transcript of Starbucks

Value Proposition
Brief Story of Starbucks
In 1982, Schultz joined the Starbucks marketing team; after his journeys to Italy, he was impressed by the coffe culture in Italy and wondered if it would work in States too.

Would that be possible to create a 3rd Place for Americans ?

Prominent Marketing Strategy ?
Background of the Company
Founder and Chairman: Howard Schultz
CEO: Orin Smith
11th consecutive year of 5% or higher comparable store sales growth
The Idea was to create a chain of coffehouses that would become America’s «third place.» after home & work.

Idea !
The Third Place where people:
Relax !
Enjoy Others !
Be Themselves !
Point of sale materials

Word of Mouth

Local Store Marketing
Nothing but:
White collars
Especially females within the range of 25-44 yrs.
Delivering Customer Service

Instructor: Armagan Onal

Target Group
Value Proposition
Product Itself
Customer Intimacy
That shouldn't feel like only drinking coffee...

It should be a new experience for everyone !

Channels of Distrubution
Company-operated store locations: reatil centers, office buildings and university campuses. (high traffic & visibility)
It sells:
Whole-bean coffees, rich-brewed coffees, Italian-style espresso drinks, cold-blended beverages, and premium teas.
A variety of pastries, sodas, and juices, along with coffee-related accessories and equipment, music CDs, games, and seasonal novelty items.
Sandwiches and salads.
Beverages accounted for the largest percentage of sales in these stores (77%)

Non company operated retail channels:
a) Sales of whole beans and ground coffees to hotels, airlines, restaurants, airports stores, international licensed stores, grocery stores and warehouse clubs, online and mail order sales.
b)Partnershp with Kraft Foods, PepsiCola and Dreyer Ice Cream
Employees (Partners)
All Starbucks employees are called «partners».

They think partner satisfaction leads to customer satisfaction.

They offer health insurance, stock options to every partners.

Ranked 47th in the Fortune magazine list of best places to work.

Lowest employee turnover rates in the industry.

Their goal: «To make the position as a lifetime job»

About 70% of the company’s store managers were ex baristas(partners), and about 60% of its district managers were ex-store managers.

Delivering on Service
There are two types of training for a partner:
Hard skills (how to use cash register and prepare drinks)
Soft skills (to connect with customers—to enthusiastically welcome them to the store, to establish eye contact, to smile, and to try to remember their names and orders if they’re regulars)

«Just Say Yes» Policy
Partners to provide the best service possible, even if it required going beyond company rules. “This means that if a customer spills a drink and asks for a refill, they’ll give it to him,”

Installing automated machines which decreased the number of steps required to make an beverage, reduced waste, improved consistency, and had generated positive customer and barista response.

Measuring Service Performance
Mystery Shopper Program called the «Customer Snapshot»
Every store was visited by an anonymous mystery shopper three times a quarter. The shopper would rate the store on four “Basic Service” criteria:
• Service—Did the register partner verbally greet the customer? Did the barista and register partner make eye contact with the customer? Say thank you?
• Cleanliness
• Product quality—Was the order filled accurately? Was the temperature of the drink within range? Was the beverage properly presented?
• Speed of service—The company’s goal was to serve a customer within three minutes, from back-of-the-line to drink-in-hand. The three-minute standard is a key component in how current Starbucks customers defined “excellent service.”

Growth Strategy
Objective: «to be the most recognized and respected brand in the world»

Two biggest drivers of company growth strategy

Retail Expansion (at least 10,000 stores in N. America)

A) Starbucks’ strategy for expanding its retail business was to open stores in new markets while geographically clustering stores in existing markets. Although the latter often resulted in significant cannibalization, the company believed that this was more than offset by the total incremental sales associated with the increased store concentration

B) Product Innovation
Starbucks introduced at least one new hot beverage every holiday season.

C) Service Innovation

Starbucks’ stored-value card (prepaid, swipeable smart card)
Wireless Internet Service
New Customer Acquisition

Market Research Results
Independents Shops vs Starbucks
a) Independents:
• Social and inclusive, Diverse and intellectual
• Artsy and funky, Liberal and free-spirited
• Lingering encouraged, Particularly appealing to younger coffeehouse customers
• Somewhat intimidating to older, more mainstream coffeehouse customers

b) Starbucks:
• Everywhere—the trend, Good coffee on the run
• Place to meet and move on, Convenience oriented; on the way to work
• Accessible and consistent

“Starbucks cares primarily about making money” was up from 53% in 2000 to 61% in 2001,
“Starbucks cares primarily about building more stores” was up from 48% to 55%.

• Known for specialty/gourmet coffee (54% strongly agree)
• Widely available (43% strongly agree)
• Corporate (42% strongly agree)
• Trendy (41% strongly agree)
• Always feel welcome at Starbucks (39% strongly agree)

Starbucks customer base is evolving. Newer customers tend to be younger, less-well educated, in lower income. They visit the stores less frequently.

Speed of Service

relaxing the labor-hour controls in the stores to add an additional 20 hours of labor, per week, per store, at a cost of an extra $40 million per year. To bring service time down to the three-minute level in all of our stores, regardless of the time of day.

Customer Satisfaction
What Evidence Do We Have ???
Answer 1
Fast Service is the 6th important thing

Only 10% of the customers desires faster service

It is locational-dependent

Investment should be done peculliarly to the stores considering the # Customers / Staff

Staff may lose the customer relations due to the rush
Answer 2
Creating an internal marketing strategy team

77% of the revenue comes from the hand crafted beverages, to increase the speed and satisfaction first the company should increase productivity and efficiency

Money could be spent on increasing the soft skills of the partners as well
Answer 3
In the recent years company's reputation has also evolved in to corporate and coffee to go instead of initial comfort & quality

They should find a balance between technology-growth and customer satisfaction
Mert Utku Göneyle

Can Cihan Cankat
Full transcript