3. II Giomale acquires
Starbucks assets
2000
140 Stores in
Northwest
and Chicago
& Went
Public
Changes name to
Starbucks Corp.
New CEO- Orin
Smith
2002
1992
1984
Schultz joined
Marketing
Team
1987
1982
1971
Starbucks
location in
Seattle
Schultz founded
II Giomale
offering brewed
coffee &
espresso
beverages w/
Starbucks
coffee beans
Schultz remained
-Chairman and
Chief Global
Strategist
Established leading brand N. America
CAGR 40%
20 million unique customer
Over 5000 stores
Opening average 3 stores a day
T i m e
l i n e -
S t a r b u c k s
8. Coffee Itself
offering the highest-quality coffee in the world, coffee
standards by controlling the supply chain as possible and
the distribution to retail stores
9. Customer Intimacy
Senior VP Retail: Jim Alling Says
Our Goal is to create an uplifting Customer
experience every time you walk through our
door
12. To reach customers where they work, travel,
shop, and dine
Good Location: Company-operated stores located
in high-traffic, high-visibility settings
13. Product mixed tended to vary depending on a
store’s size and location
Non-company-operated retail channels, foodservice accounts, domestic retail store
licenses
17. Generous policy of giving health insurance and
stock options
High partner satisfaction rate (80% to 90%),
well above the industry norm.
18. Lowest employee turnover rates in the industry
(just 70%, compared with fast-food industry
averages as high as 300%)
Lower managers turnover rates & encouraged
promotion from within its own ranks
27. Small scale Specialty coffee chains concentrated regionally
1000 of independent specialty coffee shops
Donut and bagel chains (Dunkin donuts)
29. In the home, specialty coffee was
estimated to be a $3.2 billion business, of
which Starbucks was estimated to have a
4% share.
30. In the food-service channel, specialty
coffee was estimated to be a $5
billion business, of which Starbucks
was estimated to have a 5% share
31. In grocery stores, Starbucks was estimated
to have a 7.3% share in the ground-coffee
category and a 21.7% share in the whole-
beans category.
32. It was estimated that over the next
several years, the overall retail market
would grow less than 1% per annum,
but growth in the specialty-coffee
category would be strong, with
compound annual growth rate (CAGR)
of 9% to 10%
33. Starbucks’ U.S. business was projected to grow at a
CAGR of approximately 20% top-line revenue growth
36. Coffee consumption was on the rise in the United States
Half of US population drank coffee everyday
1/3 of coffee consumption took place outside home
37. 8 states in the US without a
150 of the roughly 300
single company-operated
metropolitan statistical areas in
Starbucks.
the nation
38. the company believed it
was far from reaching
saturation levels in many
existing markets
For example
only one store for every 110,000 people
only seven states had more than 100 Starbucks locations
39. the company believed it
was far from reaching
saturation levels in many
existing markets
For example
only one store for every 110,000 people
only seven states had more than 100 Starbucks locations
40. Retail business was to open stores in new markets
Clustering stores
Resulted in Cannibalization
But Total incremental sales
41. United Kingdom, Australia, and Thailand
Licenced Store: Asia, Europe, the Middle East, Africa, and Latin America
The company’s goal was to ultimately have 15,000 international stores
43. New product launched in every holiday
season
Product development took 12-18 months
Ergonomic flow
1995
Coffee and non-coffee-based line of Frappuccino beverages
boosting traffic during nonpeak hours
“We’ve learned that no matter
how great a drink it is, if our
partners aren’t excited about it, it
won’t sell,” - Alling.
45. Store Value Card -2001
“The most
significant product
introduction since Frappuccino
August 2002
gift recipients are being introduced to brand for the first time
T-Mobile Hotspot wireless
Internet service
Can use to pay for transactions company-operated store in
North America
cardholders tended to visit Starbucks twice
customer-transaction data
47. 3 separate groups
lacked a strategic
marketing group
had no chief marketing
Officer
Market research
Category group
Marketing group
market research contradicted
fundamentals
Were not looking at big picture
“Marketing is everywhere at Starbucks—it just doesn’t necessarily show up in a line
item called ‘marketing.’
50. The Top Five Attributes Consumers Associate with the
Starbucks Brand
Known for specialty/gourmet coffee (54% strongly agree)
Widely available (43% strongly agree)
Corporate (42% strongly agree)
Trendy (41% strongly agree)
Always feel welcome at Starbucks (39% strongly agree)
52. Evolving customer base
Newer customers tended to be younger, less well-educated, and in a lower
income bracket than Starbucks’ more established customers.
57. Starbucks was not meeting expectations in terms of customer satisfaction
58. 83% of Starbucks’ customers
rate a clean store as being
highly important (90+ on a
100-point scale) in creating
customer satisfaction.
Service gap between
Starbucks scores on key attributes and
customer expectations
63. “Buying coffee as a drink, The experience of enjoying coffee”
Changed the coffee drinking experience in the U.S
Starbucks wanted to create a chain of coffeehouses that would become America’s
‘Third place’
Starbucks was a place where people can enjoy their social interactions,
relax, or just spent some time by themselves.
Courtesy: Ramya, Vighnesh, Venketraman, Sharath (Amrita School of Business, Coimbatore)
64. First Mover Advantage
The concept was new
There was no competition
Courtesy: Ramya, Vighnesh, Venketraman, Sharath (Amrita School of Business, Coimbatore)
65. Customer Service
Customer Intimacy’ : “Our goal is to create an uplifting experience every time you walk
through the door.”
‘Speed of Service : They served the
customer within 3 minutes
‘Just Say Yes Policy’ : Provide the best
service possible, even it required going
beyond company rules
If a customer spills and asks for a
re drink, they did provide
Courtesy: Ramya, Vighnesh, Venketraman, Sharath (Amrita School of Business, Coimbatore)
66. Ambience
Starbucks had seating areas to encourage
lounging
It had universal appeal
Courtesy: Ramya, Vighnesh, Venketraman, Sharath (Amrita School of Business, Coimbatore)
67. Partner Satisfaction = Customer Satisfaction
Generous benefits even to most entry level partners
Partners were among the highest paid hourly workers
Lowest turnover in the industry
Courtesy: Ramya, Vighnesh, Venketraman, Sharath (Amrita School of Business, Coimbatore)
68. Coffee Quality
Starbucks offered highest quality coffee in the world, sourced from Africa, Central
& South America etc
Courtesy: Ramya, Vighnesh, Venketraman, Sharath (Amrita School of Business, Coimbatore)
It controlled its supply chain to ensure coffee
standards
69. Target Audience
Targeted primarily towards
the affluent, well ‐ educated,
white ‐ collar people (Age
group: 25 – 44)
Courtesy: Ramya, Vighnesh, Venketraman, Sharath (Amrita School of Business, Coimbatore)
71. It places the customer and the service delivered to the customer above everything else.
It moved away from the tangible benefits that the coffee offers, such as taste to intangible
benefits of experiencing a Starbucks coffee
Courtesy: Ramya, Vighnesh, Venketraman, Sharath (Amrita School of Business, Coimbatore)
72. The Brand Image
Starbucks was known for being widely available
Their specialty coffee, and being trendy.
Customers also though that the stores were clean and were satisfied with the
Starbucks product.
Courtesy: Ramya, Vighnesh, Venketraman, Sharath (Amrita School of Business, Coimbatore)
73. Questions 3
WHY HAS STARBUCKS’ CUSTOMER SATISFACTION
SCORES DECLINED? OR IS IT MEASURING IT IN A
WRONG WAY
74. Despite the overwhelming presence and convenience, the
scores declined
There was very little image or product differentiation between Starbucks
and the smaller coffee chains
The brand image of Starbucks also had some rough edges
Courtesy: Ramya, Vighnesh, Venketraman, Sharath (Amrita School of Business, Coimbatore)
75. Market research data shows that customer satisfaction has declined
The satisfaction level of customers varies with the type of customer.
The demographics of its customers are changing
Expectations could have increased
It set the standards very high for its customers
With the expansion and product innovation, it was not able to meet the standards
Customized drinks might have had harmful effect
Increasing lead time
Courtesy: Ramya, Vighnesh, Venketraman, Sharath (Amrita School of Business, Coimbatore)
76. Starbucks is measuring much on how people view the company
More customers were beginning to agree with the fact the Starbucks cared
primarily about making money and building more stores.
Generally customers are satisfied with the coffee.
Courtesy: Ramya, Vighnesh, Venketraman, Sharath (Amrita School of Business, Coimbatore)
78. Retail Expansion
The store had expanded rapidly, from 140 stores in 1992 to 4500 stores in 2002
Courtesy: Ramya, Vighnesh, Venketraman, Sharath (Amrita School of Business, Coimbatore)
79. Product Concentration
In 1992, about half of the company’s sales came from sales of whole ‐ bean coffees
whereas in 2002 about 77% of the sales came from beverages.
Product Innovation Strategy
The company had added new products in menu and also sold equipment and accessories
Courtesy: Ramya, Vighnesh, Venketraman, Sharath (Amrita School of Business, Coimbatore)
80. Customer base
“Customers going to the Starbucks” “Starbucks going to the
customers”
There was a change in the demographic profile of the customer base
Affluent, upper class professionals Young and low income group
Courtesy: Ramya, Vighnesh, Venketraman, Sharath (Amrita School of Business, Coimbatore)
81. Brand Image
The Starbucks image to the public started changing
1992 : ‘Third Place’: Get the best coffee and relax
2002: A convenient place to hangout and the coffee was just good
Courtesy: Ramya, Vighnesh, Venketraman, Sharath (Amrita School of Business, Coimbatore)
83. 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 throughput
Reach as close to $20000 level in terms of weekly sales
Courtesy: Ramya, Vighnesh, Venketraman, Sharath (Amrita School of Business, Coimbatore)
84. Questions 6
WHAT WOULD IT TAKE TO ENSURE THAT THIS
CUSTOMER IS HIGHLY SATISFIED? HOW VALUABLE
IS A HIGHLY SATISFIED CUSTOMER TO STARBUCKS?
85. Cater to their needs and match/exceed their expectations.
Ensure service is as fast as customer wants it to be
Add lounging areas and more comfortable chairs and tables so
that customers feel relaxed when using hotspot also
Customer satisfaction -> loyalty-> increase in average ticket size->
higher profits
Courtesy: Ramya, Vighnesh, Venketraman, Sharath (Amrita School of Business, Coimbatore)
87. Yes!!
Allocate the money based on size of store, number of customers,
location and need for additional labour 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 on their brand image and value
proposition
Courtesy: Ramya, Vighnesh, Venketraman, Sharath (Amrita School of Business, Coimbatore)