MARKETING-II ASSIGNMENT

Case

Starbucks: Delivering Customer Service

Submitted to: Prof Bipul Kumar

Submitted by: Group 4, Sec B

Aditya Sainia- 2018PGP027

Choppara Sree Harsha- 2018PGP449

Gargi Roy- 2018PGP132

Ishita Lalwani- 2015IPM042

Mayank Khanna- 2018PGP212

Prasun Bharti- 2018PGP268

Shikha Thakur- 2018PGP348

Identification of the problem:

The customer research report of Starbucks indicated that the company is not meeting customer
expectations in the area of customer satisfaction. (Exhibit 11- 34% ‘Valued customers’ stated
that Starbucks could make them feel more valued by improving the services.) The primary cause
seems to be decline in speed of service due to multiple product offerings and customization
options. The company wants to bring down the service time to an ideal time of 3 minutes per
order from ‘in-line’ to ‘drink in hand’ to increase customer satisfaction and improve customer
throughput.

In order to achieve this, the company has to decide whether to invest an amount of $40 million
per year to add an additional 20 hrs of labor per week per store and how it will affect sales and
profitability.

Analysis of the situation and the problem

 The company was struggling with a diminishing brand image that was perceived to be
focusing more on expansion and making money.
 The customer base was evolving, from affluent well educated white collar females aged 24-
44 to younger less well educated and in a lower income bracket. As a result overall opinion
about Starbucks was taking a toll.
 Despite high customer snapshot scores, Starbucks was not meeting expectations in terms of
customer satisfaction. It is critical because there is a direct link between customer satisfaction
customer loyalty. This gap was attributed to service gap between Starbucks scores on key
attributes on customer expectations.
 There was little image or product differentiation between Starbucks and smaller coffee chains
. Also independent specialty coffee houses were perceived to be trendier than Starbucks.
 The tool used for measuring customer satisfaction: Customer Snapshot was imperfect as it
took into account only four parameters: service, cleanliness, product and average wait time,
whereas there were several other parameters that customers gave importance to ( Exhibit 10).
Recommendations

1. The following analysis illustrates whether an investment of $40 million is viable or not. More
number of loyal customers can be achieved by converting satisfied into highly satisfied
customers.
Income from a highly satisfied customer in a year = 7.2 *4.42 *12 = $381.88
Income from a satisfied customer in a year = 4.3 *4.06*12= $ 209.496
Increase in income = $ 172.392
Total no of stores= 5886
Total investment= $ 40 million per year
Investment per store= 40 million/ 5886= $ 6796
No of customers to be satisfied= 40
Avg daily customer count per store=570
Thus, 40 more customers out 570 in a store need to be highly satisfied to break even. Thus an
investment of $40 million is feasible as it will improve the service which is a major factor in
driving value proposition.
2. Since satisfaction of baristas is directly linked to customer satisfaction, automation by
increasing the number of espresso machines will decrease the load on baristas and
automatically their friendliness level will increase.
3. Measuring service performance by " Customer Snapshot" can be improved if the number of
performance parameters can be increased from currently 4 to several other parameters that
customers gave importance to ( Exhibit 10). Based on ratings, Importance-Performance
Analysis can be done in order to determine the parameters that need to be concentrated on the
most as well as those which are possible overkills. 1
4. As inferred from Exhibit 11, factors that drive "Valued Customer" perceptions are friendlier
,more attentive staff, faster and more efficient services and incentive programs such as free
cups after x number of visits. Thus, along with increasing the number of labour hours, the
company should also focus on improving these factors by other means.

1
Kotler-Chapter 14 Design and managing services-Best practices of top service companies.