starbucks kiran

8/10/2019 Starbucks Kiran

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A Case-study On Service MarketingSTARBUCKS

IT IS NOT JUST COFFEE, IT IS STARBUCKS COFFEE

Presented by:

ANSHUL, ASWIN, KIRAN, KIRUBHAHARAN


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PRODUCT LINE

Larger stores:

Variety of whole coffee

beans

Gourmet food items,teas, coffee mugs,

coffee grinders, coffee-

making equipment,

filters, storage

containers

Other accessories.

COFFEE BEVERAGES, WHOLE-BEAN COFFEES, FOOD ITEMS,COFFEE-RELATED PRODUCTS AND EQUIPMENTS

The product mix in each store varied, depending on the size and location of eachoutlet

Smaller stores:

* A full line of coffee

beverages

* A limited selection ofwhole-bean coffees* A few hardware items.


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PLACE

Located in high traffic, High visibility settingsretail settings, office

Buildings, university campuses.

In-store at Barnes & Noble Retailers ; Target Retailers.

PRICE

Priced highperceived upscale image.

The average ticket price is $3.85.

PROMOTION

PHYSICAL EVIDENCE

Word of Mouth for promoting products

Starbucks cardreferral system.

Appealing to diverse customer baseinternational products.

Custom- made cup of beverage.

Clean, friendly environment , cozy chairs, sofas.

Eye-catching Pastries menu

Beautifully decorated show cases

Tempting coffee pictures.


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PEOPLE

Employees are called Partners

Happy customers start with happy staff

Employee turnover rate of 70% compared to the fast food industry

averages of 300%Friendly Baristas

PROCESS

Stage in Production

Process

Obtain

Seat TakeOrderMakeOrder DeliverOrder

Pay forOrder

Invisible process Cleaning

of room

Preparation of

Ordering of

supplies

Accounting

Procedures


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EXPLICIT SERVICE

Tasty coffee

Relatively Quicker Customer Service

IMPLICIT SERVICE

Relaxation, Comfort, Diversity

A gathering place for office-goers and friends

Home like experience

FACILITATING GOODS

Foods and Beverages asked by the consumers


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ANALYSING THE EXHIBITS

EXHIBITS 1 AND 2: Net income has more than tripled and amount of stores worldwide

almost tripled from 1998 to 2002.

EXHIBITS 3,4 and 5: They show payroll structure and income volume per location in 2002

and product mix for North American company-operated stores.

EXHIBIT 6: It shows changing in Americans coffee drinking style into specialty coffee. It is very important

for Starbucks because companys main market is specialty coffee.

EXHIBIT 7: It shows positive customer snapshot scores for North America stores suggesting about

companys success. The only issue is the product quality that went down during 3rd quarter of 2002.

EXHIBIT 8: It shows that established customers and new customers are quite different in respect of

education, income and attitudes toward Starbucks. Customers who first visited Starbucks 5 years agohave higher degree of education and higher income level. New Starbucks customers do not see it as a

brand of high value.

EXHIBIT 9: Customers visiting Starbucks stores more than 4 times monthly, are more satisfied than

customers who visit Starbucks less frequently.

EXHIBIT 10: Customers put store cleanliness as the most important attribute of the Starbucks stores. Nextare convenience, treating as valuable customer, friendly staff, coffee taste and fast service and right

prices. Fast customer service is not the most important attribute for Starbucks customers .

EXHIBIT 11: It shows that 34% of responders perceive upon better services as a factor, 19% want to see

friendlier staff and only 10% want to have faster service. From 28% of responders indicating better prices

and incentives as a factor, 19% of them believe free cup after x number of visit as the most important

improvement.


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SUMMARY OF THE CASE

Starbucks has enjoyed great success since it was

founded 30 years ago.

The company has being doing very well for last 11 yearswith 5% or more store sales increase, even with the rest

economy still reeling from the post-9/11 recession.

However recent research, conducted to Starbucks, have

showed some concerns regarding companys problem

meeting customers expectations.

To increase customer satisfaction level, Christine Day,

the Starbucks senior vice president of administration in

North America, suggested a plan to add additional 40

million annually for extra 20 hours of labor per everystore.

This move should help the company to accomplish lower

time of service to three minutes.


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PROBLEM STATEMENT

Customer Dissatisfaction has been found out as the problem

even after being a high-quality brand.

Increasing Complexity Of the Job( Customization demands)Long waiting time and Service time leading to slow service

delivery. Need to restrict the service time within 3 minutes per

customer

Losing Customer Focus and Product Differentiation

Dilemma over strategy: Product Quality or Customer Interaction??

PROPOSAL BY

STARBUCKS MANAGEMENT

Relaxing the labour-hour controls in the stores

Add an additional 20 hours of labour, per week, per store at a cost of an extra $40

million per year

GOAL

To move each store closer to the $20000 level in terms of weekly sales


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Break-Even Analysis

The Company Should Roll-Out$40million Plan in October

2002 or Not ?


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Annual Customer Value

Equation Used:

Annual Value equation is no of visits per month (VPM) X average ticket size (ATS)/visit *12

months

1. Unsatisfied Customer: 3.9VPM x $3.88 ATS x 12= $181.58 (Customer life= 1.1)

2. Satisfied Customer: 4.3 VPM x $4.06 ATS x 12= $209.50 (Customer Life= 4.4)

3. Highly Satisfied Customer: 7.2 VPM x $4.42 ATS x 12= $381.89 (Customer Life= 8.3)

[ Exibit-9]

Differences between Unsatisf ied-Satisf ied-H ighly Satisf ied

1. Unsatisfied vs. Satisfied: $209.50-181.50 = $28.00(15.38%)

2. Satisfied vs. Highly Satisfied: $381.89-$209.50 = $172.39(82.23%)

3. Highly Satisfied vs. Unsatisfied: $381.89-$181.58 = $200.31(110.32%)


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I nvestment BreakEven Analysis:

1. Calculate increase in labor cost for each North America, Company Operated Stores:

$40mil/3496 = $11,441.65[Exhibit 2].

2. Calculate breakeven point for customers switching from satisfied to highly satisfied:

$11,441.65/$172.39 = 66.67 customers.

The investment of $40 mil requires a conversion of 67 customers from satisfied to highlysatisfied to break even on the additional investment in labor.


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To find the amount of unique customers per store:

1. 15,400 X 52 weeks- 800800/3.85= 208,000( No. of Transaction )

[Exibit 3]

2. 3.9+4.3+7.2= 15.4 ; 15.4/3= 5.13 Average visits/month

[Exibit 9]

3. 5.13 X 12= 61.6Average visits per customer/year.

4. 208,000/61.6 = 3,376unique customers per store.

5. The above figure gives a perspective on the scope of capitalization the company could

achieve on the number of customers conversation.


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Conclusion

The differences between both satisfied and unsatisfied customers and highly

satisfied customers were $172.39 (82.23%) and $200.31 (110.82%).

The data suggests that Starbucks strategy should focus on improving customer

service to increase the amount of highly-satisfied customers among its client.

67 conversions per store to have a store break-even point.

1126 unique customers per store conversion of 2% of customers from satisfied

to highly satisfied would allow Starbucks to break-even.

Based on the calculations mentioned in previous slides, we have arrived to a

conclusion that the company should invest $40million in investment of labour.

Also, the company should restructure the marketing strategy by forming a

centralized strategy group for using market research data to take decision.


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ALTERNATIVE PROPOSAL

Recently, customers perception about its brand image was gettingpoorer. It can communicate the people with posters in crowd streets.

Creating an internal strategic marketing team will help Starbucks to keep

customer focus and fast responding to the customers demands.

Also strategic team can help in understanding the required investment

of 40 million for the individual stores.

Starbucks should invest in new espresso machines. This investment will

help company to speed the service time.

Bring down the expansion plans in North America and compensate with

more labour in these areas.

Smart Cards must be distributed and made available to more customers.

Phone ordering facility for customers with smart cards. Focused Training: Update job knowledge to baristas. Providing solutions

of customer-handling in unplanned situations.

Reward coupons: Tracks customer purchases and will provide more

value to customers

Design of the Starbucks-counters could be modified so that morenumber of customers could be attended b a sin le barista.


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