Starbucks, the world leader coffee store came to realize that they were not properly using the data, which they had been collecting over the past years. After carefully reviewing it they came to the conclusion that even though they were growing at a very good pace and generating a lot of revenues, their customer satisfaction was not what they expected. Starbucks had their customers divided into three types: unsatisfied (42%), satisfied (37%) and very satisfied (21%). It is hard to believe that the customer satisfaction would be low when they were obtaining great results worldwide. Such a high number of unsatisfied clients also meant a shift on the average type of customer for Starbucks.
Their new average profile is a younger, lower income, and less educated person compared to the older, higher income, and better educated one in the past. The main concern is that this could lead to a big decrease in revenues in the long run. We are going to propose a yearly investment of 40 million dollars in order to improve the speed of service and therefore the customer satisfaction. We will do so by adding 20 more labour hours per week in each of the 4500 stores in North America. We strongly believe that customer satisfaction will increase and we will have many more satisfied and highly satisfied customers, which are the ones that bring the most profit to the company.
Problem Statement
Despite of Starbucks overwhelming presence, customer’s expectations have recently not been satisfied. Customers believe that the brand has been focusing primarily on making money and neglecting the speed-of-service, hence diminishing the customers “Starbucks experience”.
Situation Analysis
Strengths
Following a multi-pronged approach, Starbucks has become one of the world leading successful coffee brands, with stores located worldwide their market share by maximising customer satisfaction. Starbucks is trying to achieve this goal by differentiating themselves from their competitors. By providing high quality coffee and delivering great customer service Starbucks has earned itself a strong global brand awareness.
Weakness
Starbucks targets a variety of segments, with a main focus on well-educated customers between the ages of 24 and 44. However, recently their customer base is shifting to a younger less educated, lower income consumer. Since most of Starbucks products are focused towards the high-end customers they are getting less repeating and satisfied customers. Another problem that Starbucks is facing is that some stores currently have long queue times, which affect the customer satisfaction rating. As a consequence Starbucks are losing potential customers.
Threats
As Coffee is a substitute product, Starbucks has to focus on keeping their customers loyal by fulfilling their expectations. Starbucks biggest threat are their competitors such as McDonalds (Mc Café), Dunkin Donuts, and other low-cost coffee stores who are aggressively expanding and entering into the coffee market by offering good value coffee at a cheap price. Another disadvantage Starbucks has to face is that the price of coffee beans
fluctuates depending on harvesting conditions.
. Their goal is to keep increasing
Kotler, P., Keller, K., Brady, M., Goodman, M. and T. Hansen (2009), Marketing Management: European Edition, 1st
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Edition, Pearson Education Limited.
Opportunities
Starbucks aim is to get their high-end customers back and increase their loyalty towards the brand by offering them a faster service, hence a better “Starbucks experience”.
Alternatives
After analyzing what needed to be the next step to be taken by Starbucks, we came to the conclusion that they need to improve customer satisfaction. We truly believe that by improving the way customers see Starbucks, we will be able to make the current customers more loyal as well as bringing new customers in. We have evaluated several approaches that could be taken towards the pursue of Starbuck´s goal:
1) We thought about developing a very strong advertising plan to change the perspective that customers have at this moment. On the one hand advertising could have a positive impact for Starbucks, but on the other hand they have never done advertising before. If advertising is suddenly brought into the company, consumers will perceive a weakness which could therefore have a negative effect on the company in the long run.
2) Another option was not to spend any money on improving Starbucks service. Looking at the financial statements, Starbucks keeps growing each year at a very consistent rate. There is no reason to change something when the company is obtaining good results and risk money that will also risk the value of the shares. If nothing is done the company might keep growing in the short term but we will keep losing the kind of costumers that we desire as well as the most loyal ones. Therefore in order to keep growing in the long run, improving the costumers´satisfaction is a key factor for Starbucks and action needs to be taken from the company.
3) Finally we considered an investment of 40 million dollars2 speed of service at our stores. After doing some research we came to the conclusion that we only need 5.99 more orders per day with an average price of $4.04 at each store in order to make a profit with the initial investment. With this measure we are trying to capture more new clients that were not willing to wait such a long time for coffee before as well as create more loyal clients that are our most profitable ones.
Recommendations
Our main recommendation for Starbucks is for them to add more labor hours per store, by adding additional employees. We recommend Starbucks to take a course of action in order to achieve a higher overall satisfied customer rating, by lowering overall waiting time. This solution will bring in more repeating customers and raise profit per store. By adding more labor hours and additional workers to certain stores this should help bring the average wait time closer to the three minute mark. This will then increase the overall satisfied customers.
However we think that this solution will benefit some stores more than others. We decided that the best way to implement this plan was to add the labor hours based on the stores rush hour. Since the change in rush hours is going to greatest affect the overall customer satisfaction. Also some locations are just generally busier overall than others; we have decided to focus on these stores that are bringing the average waiting time up.
Implementation Plan
The plan that we would recommend to Starbucks would be to invest $40million3 dollars on increasing workers with 20 hours/week for each store. We would first focus on the stores with the highest average wait time and try to cut those done by analyzing the rush to improve essentially the 2 John Quelch, Youngme Moon. Starbuck:Delivering Customer Service. Case Study. Boston: Harvard Business School, 2006. Print. 3 IBID hours per store and seeing where the 20 hours would best be used. We also saw that the average daily customers count per store being 5704 that the average weekly store volume being 15,4005 income would be around $3603million.
Also with the current expenditures per satisfied customer being $4.066 customers with 4,5008 year. So in order for there to be an increase in profit per store there is going to need to be on average 6 new orders a day at an average price of $4.04. Given our proposal to increase work labor we are hoping to increase the overall satisfaction of customers which will lead to both new customers and more purchases per month by old customers. We found that the average volume a visit, Based on the given numbers like say that there are 9,852,2157 stores. This gives us a number around 2,189 customers per store and
