Prestige Institute of Management Research

Indore
2022 - 2023

SUBJECT –SERVICE
SERVICE MARKETING (PT505MMAJ)

INTERNAL ASSIGNMENT ( Case Study–3)

Submitted To : Submitted By :

Dr. Arpit Loya Rishabh Vishwakarma

MBA (PT) – 5th Sem
Scholar
Schola No - 1121312616
 INTERNAL ASSIGNMENT (CASE STUDY– 3)
STARBUCKS: Delivering Customer Service
- Summary -
Lifetime Value For Unsatisfied, Satisfied, And Highly Satisfied Customers. The story of Starbucks'
transformation from a small independent coffee shop tucked away in a corner of Seattle's Pike
Place Market to a cultural phenomenon pning the globe is legendary. A number of factors have
been attributed to the success - one being a keen understanding of its patrons. There are multiple
methods used to obtain customer information and the value derived therein. Customer lifetime
value is one. Customers are assets, and their values grow and decline. Segmenting customers
based on their lifetime value is a powerful way to target them because marketing mix activities
can then aim at enhancing customer value. Roughly translated, customer lifetime value is the
projected profits that a customer will generate during their lifetime. We used the case data to
segment Starbucks customers into three distinct categories of unsatisfied, satisfied, and highly
satisfied. Fortunately, the case provided some useful data to make our initial assumptions about
the stream of expected revenues from each category. The data allowed us to calculate the annual
expected revenues by taking 12, the number of months in a year, times the product of each
component given in Exhibit 9 for each category of customer.
- SWOT Analysis
Strengths-Opportunities Weaknesses-Opportunities
.
The geographic presence of Starbucks Delivering Customer Service Project management practices can be improved to exploit the
in different regions can help the organization to get into the opportunities offered by emerging market segments. It will allow the
international market and target the geographically dispersed organization to successfully handle new product development
customer base projects

Strong online presence on different social networking sites of Starbucks Delivering Customer Service can reduce the job stress
Starbucks Delivering Customer Service can allow the organization to and increase workers’ morale to launch new and creative products
exploit opportunities offered by growing e-commerce trend by exploiting creative thinking capabilities of its workforce

The well-developed and efficiently integrated IT infrastructure of Starbucks Delivering Customer Service can improve the customer
Starbucks Delivering Customer Service allow it to take advantage of service to generate the positive word of mouth on different social
emerging innovative technologies networking sites

Strengths-Threats Weaknesses-Threats

Starbucks Delivering Customer Service's access to the suppliers that An organization may increase the expenditure on the research and
offer raw material at a lower cost can help it overcome the threat development activities to cope the competitive pressure due to the
imposed by rising inflation rising number of indirect and direct competitors
.
Competent and committed human capital of Starbucks Delivering The organization can improve waste management practices and
Customer Service can overcome the labor shortage problem in the integrate sustainability in business operations. It will help the
market organization to effectively handle environmental pressure

Workplace diversity can help an organization to take the The pricing strategy can be resettled and realigned to maximize the
globalization as an opportunity instead of threat due to high cross- value for money and overcome challenges imposed by deteriorating
cultural intelligence economic conditions
 - Questions
Q1. What factors accounted for the extraordinary success of Starbucks in the early 1990s? What
was so compelling about the Starbucks value proposition? What brand image did Starbucks
develop during this period?

 To set up an espresso bar, inspired by Milan’s coffee culture.

 The aim is to make America’s “third place.”
 They created an experience around the consumption of coffee.
 Employees were called partners. The company offered benefits, which resulted in the
company’s partner satisfaction rate in an 80% -90% range.
 Stable prices and new products were launched regularly. The company also conducted R&D,
in-store experiments, and market tests.

Q2. Why has Starbucks’ customer satisfaction score declined? Has the company’s service declined,
or simply measuring satisfaction the wrong way?

 The current way of measurement does not capture the correct consumer profile.
 The decline in service level – trained only to please the affluent customers.
 Diluting value proposition
 The rising perception is that the primary motive of making money and building more stores.
 Very little image or product differentiation between Starbucks and smaller coffee chains
 The company has hundreds of combinations of coffee, leading to a larger service time and
lower customer satisfaction.

Que3. How has Starbucks’ changed since its early days?

Ans3. Since its early days, Starbucks has changed in a number of ways. There has been a focus on
Retail expansion. Another thing which contributed to the change drive is the company's growth
expansion is product innovation. In the 2000.star buck owned one third of the American coffee
beverage market. This was greater than the combined total of the next five competitors. They
had a rapid expansion based on the findings that the coffee consumption in America was on the
rise. There were 8 states in the US with out a company operated coffee brewing which offered a
large potential market for expansion the belief of the company that it is far away from reaching
the saturation level The second thing that changed since the early says is the product innovation.
Starbucks introduce.
Que4. Describe the ideal Starbucks customer from a profitability standpoint? What would it
take to ensure that this customer is highly satisfied? How valuable to Starbucks is a highly
satisfied customer?

ANS. For Starbucks an ideal customer is who is satisfied because he/she will spend more time
there and will consume more. Also he/she will come again for further consumption and refer
others to try Starbucks. This will result in customer loyalty and profitability.

They should focus more on service quality to satisfy customers. Also they should bring service
time down to three minutes in all stores. Environment and ambience are also very imperative.
Interaction with the customers is also very important. Lastly they should focus on building long
term relations with their customers. The satisfied customer is of much value to Starbucks.
Q5 Should Starbucks make the 40 million investments in labor in the stores? What’s the goal of
this investment? Is it possible for a mega brand to deliver customer intimacy?

ANS. With the help of the facts derived from the case study we reach the conclusion that
Starbucks should not invest 40 m in labor because this will increase its cost to an extend that it
will generate very few profits. It should focus on its service quality and improve it to satisfy their
customers. First of all they should reduce customers waiting time. Secondly they can give free
coffee to their loyal customers after a specified number of visits. This will help in increasing
customer intimacy. Also they can give sample coffee to choose among the variety of coffee given.
This will help in getting new customers and making existing customers more loyal.

As it is mentioned in the case automated machines were installed in some stores, so installing
such machines in every store will help in gaining customer satisfaction.

The data which is available to them through cards is not being used yet. They can use it to bring in
new strategies to satisfy customers. Also the data should be translated into measurable metrics
and can impact both profitability and customer satisfaction.

Product mix should be designed according to the demographics of the customers visiting that
store. Environment of the store also plays a vital role. So it should be environmental friendly. Also
it should differentiate its brand from others.

Another important factor in satisfying the customers is friendly staff. There should be proper
measures to evaluate staff and educate them this will help customers feel that they are valued.