Case Study Analysis: Starbucks: Delivering Customer Service Anitra Joiner Marketing 300C. 1 Dr. Laura Pogue May 29, 2011 Specialty-coffeehouse culture is well interwoven into the fabric of American society at this point and we can thank Starbucks for ushering in the phenomenon. Back when three coffee connoisseurs assembled to open the first Starbucks store in Seattle, I’m sure they could not imagine its behemoth future. With the vision of Howard Schultz, Starbucks has grown to become one of the most internationally recognized brands.
With distribution that includes company-operated retail stores, global Specialty Operations, and licensing today Starbucks generates over 2 billion in revenues (starbucks. com). This growth, however, was not always a well-organized effort. This case study analysis reviews Starbucks’ position as of 2002 and analyzes its options as it planned to move forward in executing their growth strategy. History Starbucks began with the idea of creating a chain of coffeehouses that would become America’s “third place;” “a place outside of work and home where people could enjoy a cup of coffee and the company of others.
Starbuck’s brand strategy was to create an experience around the consumption of coffee, an experience that people could weave into the fabric of their everyday lives” (Moon & Quelch, 2003). “Three components made up this experiential branding strategy. Starbucks set out to provide the highest quality coffee in the world, in which they sourced coffee from Africa, Central and South America, and Asia-Pacific regions.
They also exacted coffee standards by overseeing the custom-roasting process for the company’s various blends. The second piece of the strategy was service. Starbucks trained employees, called partners, to create “customer intimacy” by engaging customers in conversation, remembering names or their usual coffee blend. The last brand component was the atmosphere inside the store. Starbucks focused on creating the type of ambience that makes customers want to stay. ” (Moon & Quelch, 2003, p. 3).
Starbucks’ continued to focus on growth and according to its 2002 Annual Report, their goal was to establish the brand as the “most recognized and respected brand in the world. ” Their strategy focused on “expanding retail locations and product innovation” (Moon & Quelch, 2003). Although Starbucks dominated the retail coffee landscape, owning “close to one-third of America’s coffee bars, it had plans to open 525 company-operated and 225 licensed North American stores in 2003” (Moon & Quelch, 2003).
Product innovation included introducing new drinks and the introduction of the Starbucks’ stored-value card. While the introduction of new specialty drinks, was “internally considered one of the most significant factors in comparable store sales growth, customers rated the new innovations as being much lower in importance than customer service,” yet Starbucks was placing high importance on developing them (Moon & Quelch, 2003).
According to Moon & Quelch, the new specialty drinks generally took more steps to make, increasing the complexity of the barista’s job and increasing the time to make a beverage, conversely decreasing the speed of service and minimizing the barista’s ability to connect with customers; an activity promoted by the company and valued by customers (Starbucks: Delivering Customer Service, pp. 5,8,19). Problems The overarching problem I find in this case study is Starbucks lacks a centralized structured strategic marketing group to direct decision making. Starbucks’ marketing department functioned as three separate groups, a market research group that gathered and analyzed market data requested by other business units, a category group that developed new products and managed the menu and margins, and a marketing group that developed quarterly promotional plans. Such an organizational structure meant that market and consumer related trends could sometimes be overlooked. (Moon & Quelch, 2003). It was stated by Day, “We tend to be great at measuring things, at collecting market data, but we are not very disciplined when it comes to using this data to drive decision making” (Moon & Quelch, 2003). Starbucks’ lack of a structured marketing program lent itself to a plethora of interrelated problems including the following: •Poor communication between departments caused market and consumer-related trends like ustomer’s change in perception about the brand, shift in customer base, and decline in consumer satisfaction to be overlooked. •Customers rated product innovation as being much lower in importance than customer service, yet Starbucks placed high importance on developing them. •Despite Starbucks’ ubiquitous presence, there was very little image/brand differentiation between Starbucks and competition in the minds of customers. Starbucks operated under the assumption that they were doing well in customer service but in reality, communication with the customer was lost and their focus on opening stores had become evident to customers. •Clustered new store openings in the same area within 150 out of 300 metro areas, which led to self-cannibalization of a third of retail stores daily. •Starbucks’ relied on Snapshot and Legendary Service scores for market research but the assessments were unable to accurately track customer satisfaction, which was linked to customer loyalty.
Without a structured strategic marketing unit to develop a true customer focused strategic marketing plan, conduct market research, and establish ongoing communication with the customer, the corporate objective to become the most recognized and respected brand, ultimately lost sight of their original value proposition. Solutions The following is a list of possible alternative solutions to the aforementioned problems: •Create a centralized marketing department to coordinate all marketing efforts, which would focus on customer and eliminate inter-departmental communication breakdown. Define marketing strategies starting with proper research metrics to evaluate what the customer wants. •Invest in major marketing campaign focusing on product differentiation, positioning the Starbucks’ brand image, and highlighting customer service. •Analyze the innovative product sales to determine the effect on labor costs and determine if sales support the cost and the potential investment in labor because research indicates that innovative products are not as important to the customer as quick and pleasant sales; product mix may be inappropriate. Concentrate new store openings in areas where there is no store presence like the remaining 150 metro areas. This would eliminate cannibalization. •Design a CRM database in order to create an ongoing dialogue with customers. •Promote use of SVC cards for consumer tracking; embed tags in cards which identify the customer and incorporate information into a CRM database. Recommendations
The chief global strategist of Starbucks, Howard Schultz’s primary goal is to make Starbucks one of the most recognized global brands; joining the ranks of giants like Nike, Coke, and McDonalds. In order to accomplish this, Schultz must recall the company’s original value proposition, which from a retail perspective, means creating an ”experience” around the consumption of coffee. I recommend that Starbucks immediately organize a centralized strategic marketing unit and adopt all of the solutions previously listed.
I believe if Starbucks has the capital to invest $40 million, annually, in providing each store with 20 extra labor hours a week, those funds can be better served if used to build a centralized marketing department to lay out a strategic customer-centric marketing plan, identify growing economic regions within the remaining 150 metro areas to open stores, develop a CRM program and use in-store promotions to encourage use of the store value card, which has customer tracking potential. In conclusion, the law of big numbers almost always catches up to a growing company, which we see in the cannibalization of Northern American retail stores.
Starbucks could benefit from going back to where it all started; the customer. A strategic marketing program will sift through customer and market research to create a strategy that focuses on creating the experience that the new and old Starbucks customer appreciates. Works Cited Moon, Y. , & Quelch, J. (2003). Starbucks: Delivering Customer Service. Harvard Business School, 1-20. Investor Relations. Retrieved from http://investor. starbucks. com/phoenix. zhtml? c=99518=irol-irhome