Starbucks:Delivering Customer Service

1. Merve BEKTAŞ
Didem ŞAHİN
Sara OSMANOĞLU

2. 
 Vision :become America's third place ,a place that would be separate from home and work.
 Mission : establish Starbucks as the most recognized and respected brand in the world.
 In 1971 opened by Gerald Baldwin ,Gordon Bowker & Zıev Sıegl.
 In 1982 Howard Schultz joined the marketing team.
 Set up an espresso bar at downtown shop.
 Schultz took over and began opening new atores
 In1992 140 stores in northwest and Chicago
 Competed against Gloria Jean’s coffee and Barnie’s coffee &tea
 In 2002, sales rose by 40%,earnings by 50% serving 20 million customers in 5,ooo stores around
the glob .Opening 3 new stores a day.
Starbuck’s Background

3. 
 Have you ever wondered where the Starbucks logo came from?
 Take a look at it. What do you see?
Starbuck Corporation:
Logo

4. 
 In 1987, the original Starbucks
Logo which was a UPS brown and
featured a two-tailed mermaid,
also known as a siren. The siren is
a mythical creature whose stories
tell of luring fisherman through
song.
 Starbucks is using the lure of
female sexuality to draw
customers attention to the coffee.
Starbuck Corporation: Logo (cont’d)

5. 
 Kitchen appliance salesman
 Hired by Starbucks in 1982
 Trip to Milan in 1983
 Left the company in 1985
 Bought the company in 1987
Howard Schultz

6. 
 Starbucks failed to meet customer expectations and
deliver satisfaction thereby losing customer loyalty
 Potential to lose loyal customer in the near future due
to the increased of number unsatisfied customers
Problem Statements

7. 
 Rough brand image of primarily making money and building
more stores.
 Insignificant perceived differentiation between Starbucks and
competition coffee chains.
 The changing customer leads to the changing of its behavior,
perceptions, and expectations toward brand
 Complexity arises due to hundreds of combinations of drinks in its
portfolio:resulted to low speed-ofservice and satisfactory service of
Partners
Why Customer Satisfaction Declined?

8. 
Declining Customer Satisfaciton
 Imperfect tool for measuring customer satisfaction :Customer Snapshot
 Mystery shopping program third in a quarter
 Rated based on 4 criteria-service,cleanliness,product quality & speed of service
 Legendary services-behaviour that created memorable experience for customers
Despite high Customer Snapshot scores,Starbucks was not meeting
expectations in terms of customer satisfaction.
Exhibit 9 Starbucks' Customer Behaviour,by Satisfaction Level
Unsatisfied
Customer
Satisfied
Customer
Highly Satisfied
Customer
Number of Starbucks visits/Month 3.9 4.3 7.2
Average Ticket Size/Visit $3.88 $4.06 $4.42
Average Customer Life(Years) 1.1 4.4 8.3

9. 
 The ideal customer from a profitability standpoint is;
 The loyal customer who visits the store 18 times a month
 Service time in all stores not exceed 3 mins
 Improve customer througput
 Reach as close to $20.000 level in terms of weekly sales
Ideal Customer & Satisfaction

10. 
Coffee
AtmosphereService
Core Value Proposition
Highest quality coffee from
the Africa,Central and South
America and Asia-Pacific
regions.«Our goal is to create an
uplifthing experience every
time you walk through our
door»
Encourage lounging and
layouts that were designed to
provide an upscale yet
inviting environment

11. 
Product Mix
Coffee Beverages
77%
Food Items
13%
Whole-Bean
Coffees
6%
Equipment&
Accessories
4%

12. 
Financial Statement
Exhibit 1 Starbucks' Financials, FY 1998 to FY 2002 ($ in millions)
FY 1998 FY 1999 FY 2000 FY 2001 FY 2002
Revenue
Co-Owned North American 1.076,8 1.375,0 1.734,9 2.086,4 2.583,8
Co-Owned Int'l (UK, Thailand, Australia) 25,8 48,4 88,7 143,2 209,1
Total Company-Operated Retail 1.102,6 1.423,4 1.823,6 2.229,6 2.792,9
Specialty Operations 206,1 263,4 354 419,4 496
Net Revenues 1.308,7 1.686,8 2.177,6 2.649,0 3.288,9
Cost of Goods Sold 578,5 747,6 961,9 1.112,8 1.350,0
Gross Profit 730,2 939,2 1.215,7 1.536,2 1.938,9
Joint-Venture Income
a
1,0 3,2 20,3 28,6 35,8
Expenses:
Store Operating Expense 418,5 543,6 704,9 875,5 1.121,1
Other Operating Expense 44,5 54,6 78,4 93,3 127,2
Depreciation & Amortization Expense 72,5 97,8 130,2 163,5 205,6
General & Admin Expense 77,6 89,7 110,2 151,4 202,1
Operating Expenses 613,1 785,7 1.023,8 1.283,7 1.656,0
Operating Profit 109,2 156,7 212,3 281,1 310,0
Net Income 68,4 101,7 94,5 181,2 215,1
% Change in Monthly Comparable Store Sales
b
North America 5% 6% 9% 5% 7%
Consolidated 5% 6% 9% 5% 6%
Net income grew
from 68.4million
in 1998 to 215.1
million dollars in
2002.

13. 
Growth Analysis
Exhibit 2 Starbucks' Growth Store
FY 1998 FY 1999 FY 2000 FY 2001 FY 2002
Total North America 1,755 2,217 2,976 3,780 4,574
Company-Operated 1,622 2,038 2,446 2,971 3,496
Licences Stores 133 179 530 809 1,078
Total International 131 281 525 929 1,312
Company-Operated 66 97 173 295 384
Licences Store 65 184 352 634 928
Total Stores 1,886 2,498 3,501 4,709 5,886
Total store grew from 1,886in 1998
to 5,886 in 2002 to 4,574 in the US.
Starbucks IPO was offered at
$17.00 a share .
Serving 20 million unique customers in over
5000 stores around the global and opining on
average three new store per day.

14. 
SWOT Matrix
 Strong market position and global brand
recognizition
 Number one brand in coffee house segment
valued at $4 billion
 Products of the highest quality
 Largest coffehouse chain in the world
 Good employee management
 Location and aesthetic appeal of its store
 There was very little product differrantiation
between Starbucks and the smaller coffee
chains in the minds of customers.
 Self-cannibalization through overcrowding
 People think that Starbucks cares primarily
about money and building more
stores(negative publicity)
 Expansion to emerging economies:international
market
 Expanding product mix and offerings
 Expansion of retail operations
 New distribution channels
 Technological advances
 Brand extension
 Increased competition
 Price volatility in the global coffee market
 Saturated markets in the developed
economies
Streghts Weakness
Opportunity Threats

15. 
Porter’s Five Forces
Rivalry
.High/moderate
. Small scale specialty
.coffee chain
.independent specialty
.Coffee chain
.Donut and bagel chains
Buyer power
.High
.Consumer have many
options of where to
purchase coffee
. Evolving customer
base
New Entrants
.Entrance into this
market is low
however Starbucks
dominates the
market .
Substitutes
. High
.other caffeinated
.shops similar to Starbucks
but also offering food drinks
. Fast food restaurants
offering specialty coffee.
Supplier Power
.Low
.Individual suppliers of coffee
bean ;paper and plastic
products ;technological
innovations..

16. 
TOWS Matrix
WO Strategies:Better training of partners to
treat customers better
 Customer may define «great service»
 Maybe decreasing time for preparing
beverage
SO Strategies: Set up a real strategic
marketing group
 For better management
 Looking big picture and making
better decision
WT Strategies:Free cup after x
number of visits
 This will be a promotion strategy
 It will help to create correct brand image
in the customer’s mind.
ST Strategies: Investing $40 million
annually into more employees
 Increasing customer satisfaction
 Retention play to keep Starbucks’
best customers happy
 Eliminate problems associated with
fast service and treating the customer
as value
Opportunities Threats
Weaknesses:Strengths

17. 
 When a partner was hired to work in Starbucks he/she had two types
of training.’Hard Skills and Soft Skills’
 Hard Skills: Learning how to use cash register and learning how to
mix drinks.Most of the Starbucks beverages are handcrafted so ensure
the quality there is prespecified process associated with each drink.
For example; making an expresso beverage required seven spesific
streps.
 Soft Skills: Learning connectting with the customers ,establishing eye
contact,smiling and trying to remember of the customer’s name.
Baristas are also encouraged to take conversations with the customers
instead of yes no questions.
TRAINING OF BARISTAS

18. 
TRAINING OF BARISTAS

19. 
Proposed wayout&Dilemma
 To improve speed-of-service by investing an additional of
$40 million annually in the company’s 4,500 stores; mostly
used for getting an additional of 20 hours of labor a week.
Dilemma
 Whether our customers are telling about what constitutes
‘excellent’ customer service
 Whether it will bring a positive impact on sales and
profitability
Proposed wayout&Dilemma

20. 
 Cater to their needs and match/exceed their
expectations
 Ensure service as fast as customer wants it to be
 Add lounging areas and more comfortable chairs
and tables so that customers feel relaxed
 More highly-satisfied customers: more often they
visit us, more money to spend, good higher profit!
Moving Forward: Ensuring the Customer
to be Highly Satisfied

21. 
 Recommend the Management to make investment;
however suggest to have a pilot project instead of
massive investment in labor
 Allocate the money based on size of store, number of
customers, location, and need for additional labor
instead of apportioning the $40 million equally to all
the stores
 Apart from making the investment, Starbucks need
to look more into their customer base and improve
their brand image and value proposition
RECOMMEDATION

22. 