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CB Starbucks Grp6
CB Starbucks Grp6
Case: STARBUCKS
Submitted by Group 6
Date of submission: 16th June, 2019
Starbucks Case Background
In early years Starbucks' Store Growth
7000
• Founded by Gerald Baldwin, Gordon Bowker & Zev Siegel in 1971, in
Seattle 6000 5886
5000
• Early name was Starbucks Coffee Tea and Spice 4709
4000
• Sold only whole-Arabica bean coffee to niche market of coffee pursuit. 3501
3000
2498
In 1980’s 2000 1886
1000
• Howard Schultz became Chairman and Chief global strategist
0
• CEO- Orin Smith who joined company in 1990. FY 1998 FY 1999 FY 2000 FY 2001 FY 2002
“Starbucks cares primarily about making money”, was up from 53% in 2000 to 61% in 2001. Similarly, respondents who strongly agreed
that “Starbucks cares primarily about building more stores”, was from 48% to 55%.
• Also, a 2002 survey revealed that only 39% of respondents strongly agreed that they always feel welcome at Starbucks.
• As per Exhibit 10, to create customer satisfaction, being treated as a valuable customer was rated by 75% of respondents and friendly
staff by 73%.
• According to Exhibit 11, in a survey, 34% of respondent felt service needs to improve, primarily 29% felt Starbucks should have
friendlier, more attentive staff and faster, more efficient service.
• This clearly indicates that the quality of service of Starbucks has declined. This was due to several factors:
• Baristas were now handling more variations. This engages them more in coffee making process rather than paying more
attention towards the customer intimacy.
• The time required to make the coffee increased due to customization, this lead to longer ques. Hence, stressed baristas were
not able to serve the customers properly resulting in customer dissatisfaction.
• Also, due to changing demography of Starbuck’s consumers, the younger ones might feel the premium prices to be higher and hence
31% feel that Starbucks should offer reasonable prices.
• With changing customer, now mostly younger, less well educated and in lower income bracket, Starbucks noticed that the typical
customer visits only 5 times a month. Hence the target segment was clearly changed for Starbucks now.
It was pretty evident that he customer satisfaction scores declined. As per a market research, respondents who strongly agreed that
“Starbucks cares primarily about making money”, was up from 53% in 2000 to 61% in 2001. Similarly, respondents who strongly agreed
that “Starbucks cares primarily about building more stores”, was from 48% to 55%.
• Also, a 2002 survey revealed that only 39% of respondents strongly agreed that they always feel welcome at Starbucks.
• As per Exhibit 10, to create customer satisfaction, being treated as a valuable customer was rated by 75% of respondents and friendly
staff by 73%.
• According to Exhibit 11, in a survey, 34% of respondent felt service needs to improve, primarily 29% felt Starbucks should have
friendlier, more attentive staff and faster, more efficient service.
• This clearly indicates that the quality of service of Starbucks has declined. This was due to several factors:
• Baristas were now handling more variations. This engages them more in coffee making process rather than paying more
attention towards the customer intimacy.
• The time required to make the coffee increased due to customization, this lead to longer ques. Hence, stressed baristas were
not able to serve the customers properly resulting in customer dissatisfaction.
• Also, due to changing demography of Starbuck’s consumers, the younger ones might feel the premium prices to be higher and hence
31% feel that Starbucks should offer reasonable prices.
• With changing customer, now mostly younger, less well educated and in lower income bracket, Starbucks noticed that the typical
customer visits only 5 times a month. Hence the target segment was clearly changed for Starbucks now.
In 2002:
In 1992: The brand became more accessible. Starbucks retail footprint had increased
The target customers were affluent, well- dramatically as it grew from 142 stores in 1990’s to 5000 in 2002. It was also
educated, white collared(mostly female) between experimenting with the new retail formats like drive-throughs. Starbuck also sold
the ages of 25 and 44. These were the people who coffee through non-company retail chains, which accounted for 15% of net revenue.
liked premium coffee and wanted to gain the Starbucks also innovate stored-value card(SVC) for non-cash transactions.
experience of a third place to relax. The customer base for Starbucks has changed. The present consumers are mostly
The consumption pattern was mostly linger, relax younger, less well educated and in lower income bracket and have different criteria
and enjoy the coffee. It was an experience of for customer satisfaction. 40% of the present consumers have already tried
indulgence in premium coffee. Starbucks brand before even visiting the store. Located in supermarkets, airplanes,
Starbucks brand perception was best premium and hotels, have become important customer acquisition tools for the company.
coffee, upscale and the third place to relax. The product diversity has increased a lot. There is a lot of variations and complexity in
Starbucks was able to create this by providing the present menu. Starbucks always innovated its product. But now the hand crafted
premium coffee, great service philosophy by best beverages accounts for 77% of its total sales. And only 6% is from whole bean coffee.
customer intimacy and creating physical Also, the menu now contains a lot of non coffee drinks. This clearly indicates that the
environment where one can linger and relax, while focus target segment of Starbucks is regular consumer rather than a coffee loving
feeling in an upscale. consumers 10 years ago.
Even the baristas are under pressure now. There are more drink variations for baristas
to handle. Also, almost every customer now orders a hand-crafted beverage, putting
tremendous pressure on the baristas to churn out drinks as quickly as possible which
leaves less time for any conversation with the customer.
1. With more partners, the customer satisfaction levels should increase. It will also help in serving a customer faster. Further, now a
barista will be able to provide the customer intimacy as there will be more baristas to attend to the customers.
2. It is rather easier for a mega-brand to deliver customer intimacy as not only a well-trained and satisfied employee will always
deliver a better service to its customer, helping in having a loyal and satisfied customer, but also the customer takes pride in
associating itself with the brand. It is a win-win situation, where even an investment in technology can help having better
understanding of the customer’s requirement and mood. This makes a customer feel special prompting it to come back for that
experience.
1. Core Values of the organization are always important which we saw changed in case of Starbucks.
2. Customer friendliness(1990) and low service time(2002) shows shift in core values.
3. Importance of segmentation
How difference of demographics (Change of focus from females to youth) and psychographics (less educated youths and
hence low foot fall) plays role in consumer satisfaction
4. Customer doesn’t know what they want- too much customization at Starbucks made customer service slow and hence impact on
satisfaction index.
5. Benefits to Organization and to customers should be quality balances to keep customer satisfied and increasing company’s growth.