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 ean help the organization to get ino 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 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 ereative products ‘exploit opportunities offered by growing e-commerce trend bby exploiting creative thinking capabilities ofits workforce The well-developed and efficiently integrated IT infrastructure of Starbucks Delivering Customer Service can improve the customer Starbucks Delivering Cus crviee allow it to ake advantage of service to generate the positive word of mouth on different social emerging innovative te 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 ata lower cost can help it avereome the threat imposed by rising inflation ‘Competent and committed human capital of Starbucks Delivering, Customer Service ean overcome the labor shortage problem in the smatket Workplace diversity can help an organization to take the globalization as an opportunity instead of threat due to high eross= cultural intelligence development activities to cope the competitive pressure duc to the rising number of indirect and direct competitors The organization can improve waste management practices and integrate sustainability in business operations. will help the ‘organization fo effectively handle environmental pressure The pricing strategy cen be resctted and realigned to maximize the value for money and overcome challenges imposed by deteriorating ‘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? + Toset 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.Qs 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,