Analysis of Starbucks Delivering Customer Service

At the current moment, Senior VP of Administration Christine Day is contemplating how she will pitch her plan to improve Starbucks customer satisfaction scores. On paper, the companies self imposed snap shot program of mystery shoppers paints a picture that the stores are operating effectively in the areas they feel drive customer satisfaction. However, recent surveys have revealed that the companys perception of what drives customer satisfaction varies from the actual expectations of the customer. According to Starbucks 2010 Annual Report, customer satisfaction scores continue to increase, and at several points within the report it is mentioned that the key drivers for customer satisfaction are superior customer service/speed, along with partner friendliness and cleanliness. It is worth noting that the two former factors were the top two responses for how Starbucks could improve perceived value, while cleanliness was ranked as the most important attribute for customer satisfaction. It can be perceived that an additional focus has been placed on these areas since the article was written as CEO Howard Schultz mentioned them all in his letter to investors. In order to convince Smith and Schultz of the proposed $40 million plan to increase each stores allotted sales, Day must tie customer satisfaction to customer loyalty, and place an emphasis on how this will translate to an increase in sales. In the HBR article Putting the Service-Profit Chain to Work, the authors lay a groundwork for what drives customer loyalty and the substantial impact that a lifelong customer can have on the bottom line. They state that increasing employee satisfaction yields an increase in employee retention/productivity, which improves customer satisfaction, and that ultimately increase loyalty and profitability. It was

mentioned that Starbucks partners have highly positive opinion surveys, but that increasingly more difficult and time-consuming beverages are adding strain to their operations. With the additional labor dollars, this could make the partners day to day tasks less stressful and improve their ability to focus on the speed of service, their level of friendliness and also on the cleanliness of the store. To make the argument stronger and to put it in financial terms, the $40 million spread over 4500 stores would equate to $8888 per store per year, or $171 per week. Currently the hourly employee labor poor is about $3240 for a store running about $15400 per week. This results in a labor cost of 21.04%. In order to keep the labor % of net sales at the same level, the store would have to run an additional $812 per week. With an average ticket hovering around $4, this would mean the stores would need an additional 203 transactions per week, or about 800 per month. Exhibit 9 shows that guests that are extremely satisfied tend to nearly double their visits from 4.4 to 8.3 per month, so if they were able to eventually wow 200 current, satisfied customers and make them extremely satisfied, yielding them loyal to the company, they would more than meet their investment. This calculation doesnt include the almost certain increase in visits from individuals who are currently unsatisfied, nor does it take into account the exponentially more important customer life, both of which are worth noting.

y Customer considered a coffee connoisseur and well educated y Customer is predominantly a professional female y Customer enjoys the process of being served coffee by a professionally trained barista y

Customer enjoys conversing with staff and being recognized as a regular customer 2002 PRESENT y Customer type is changing and broadening y Customer is becoming more concerned about price, convenience, and fast service y Income and education level of customer is more varied y Complexity of the product ordered and the menu is more time consuming to make for thecustomer I believe that customer satisfaction scores have declined because of the change in the type of Starbucks customer over the years. The problem is that our service has stayed the same. Thecoffee market has increased with other small caf type local businesses emerging as well aslarger chains joining in to enticing our customers. Our new customers just dont seem to fit themold. So, that brings us to what the new Starbucks customer wants. They want faster service,along with convenience, and a lower price for all of what we offer. We have made a choice toexpand, and with this expansion so has our customer. Our original customer is different from theone today and we need to direct our intentions to that new customer, as we continue to developnew products and maintain and increase our service to our patrons. The following are myrecommendations regarding our investment in the future of Starbucks and the steps we need totake to insure profit and growth. REC OMM E NDATIONS CREATE A CENTRALIZED MARKETING PROGRAMThere seems to be a lack of coordination within the marketing department. There needs to be afocus on researching the Starbucks customer of today and their needs, and the potentialcustomers for the future. Once identified, Starbucks needs to fine tune their research to regionsand quite possibly limit new store openings to save costs, and support already established Starbucks in a particular area limiting the cannibalization of other stores. Also through thisresearch it can be established when traffic is higher than average and additional baristas wouldthen take up those particular hours.ADVERTISE MOREThere should be an increased effort in advertising to our customers. We need to do a better jobwith branding. We assume that everybody just knows Starbucks and our product. Initiating amajor advertising campaign once established through a better centralized marketing departmentwill distinguish us from others in the market.CUSTOMER SATISFACTIONThat brings us to the real problem, improving our customers satisfaction in their Starbucksexperience. Because of the increase in customers and the preparation of our made-to-order product, the workload for our baristas has increased. In order to speed up the process withoutlosing customers and serving happy customers, this is where the bulk of our investment shouldbe allocated.In order to accomplish this, I have listed the

following initiatives. y