Starbucks Delivering Customer Service

Q 1: Starbucks performed extraordinarily because
The quality of the product (coffee) enabled the company to gain
preference to a large number of customers. Starbucks used its own stores
and avoided franchising, which enabled it to control the quality of the
product offered to the target market. Secondly, Starbucks acted as a
market leader by exploiting a new opportunity of drinking coffee as a
social experience. The firm did not have much competition because this
opportunity had not been exploited in the United States. Third, the firm
managed to target a specific segment, which comprised of well-educated,
white collar workers, and affluent persons. The target market segment
received the idea of drinking coffee as a social experience, thus
forming an attractive market for Starbucks.
The firm’s value position was so compelling because it prioritized
customer service, which enabled the firm to maintain quality.
Starbucks created a brand image by convincing customers that it was not
just taking coffee, but the emotional benefits of drinking coffee in
Starbucks stores.
Q 2: Starbucks customer satisfaction declined because the firm
maintained a consistent customer service, but the needs of the customers
were changing with time. This made Starbucks lose the loyalty of
customers who needed a change in quality and type of service. Secondly,
there was a change in brand image and target market segment. Initially,
Starbucks targeted affluent people, but the idea changed and everyone
could access the stores without paying a premium.
The data available may not be sufficient to substantiate that the
service level declined. However, it is clear that the research method
used (customer snapshot) was subjective and may have given invalid
results. This is because the variables (product quality, service, and
cleanness) used to determine the service score, may have different
meaning to different customers. For example, some clients could have
defined the quality of the product in terms of amount of quantity of
coffee added while others could have used the level of heat at which it
was served. This implies that the subjective approach was not reliable
to assess customer satisfaction.
Q 3: The 2002 Starbucks differed from 1992 Starbucks in three ways.
First, Starbucks increased its branches from 140 stores, which were
located in Chicago and parts of Northwest to 4,500 stores in 2002, which
were scattered in different parts of the world (Moon & Quelch, 2006).
Secondly, the 1992 Starbucks earned much of its revenues from whole bean
coffee while the 2002 Starbucks earned about 77 % of its revenue from
beverages. Third, the 1992 Starbucks targeted the affluent, white collar
and upper class professions while the 2002 Starbucks targeted young, low
income, and less educated customers.
Q 4: Starbucks views its customers from a profitability perspective by
defining loyal customers as those who visit their stores in at least 18
days per month and spend an average of $ 4.42 for every visit (Moon &
Quelch, 2006). Therefore, a loyal customer is expected to give the firm
an average of $ 954.72 (4.42 * 18 * 12) per year.
Starbucks can ensure that customers are satisfied by maintaining value
proposition, which can be achieved by meeting customer needs such as
speed in service delivery and offering quality products. Although the
number of customers has increased, Starbucks should also ensure that
laughing areas in every store.
Starbucks used customer satisfaction to enhance its competence and
measures its profitability in terms of revenue generated from satisfied
customers. For instant, Starbucks’ expectations of a $ 4.42 from loyal
customers who visit their stores 18 times per month suggest that the
firm values customer satisfaction than anything else.
Q 5: Starbucks should invest $ 40 million in labor because speed of
service delivery is one of the key determinants of customer
satisfaction. By investing this amount, Starbucks may break-even in
either or both of two ways improved speed of service delivery might
shift existing customers from average satisfaction with high level of
satisfaction, thus increasing the number of visits or attract new
customers who will increase revenue collections. The goal of this
investment is to serve customers faster and increase their satisfaction.
Megabrand strategy can improve consumer intimacy because it has the
capacity to increase operational efficiency as well as marketing
efficiency. However, in the case Starbucks, the firm used generic
perceptions such as “quality product” and high speed of service
deliver, which can be duplicated by other players in the market, thus
reducing the chances to create intimacy with customers. This was a shift
from the perception of drinking coffee for experience to create an
experience, which was a unique strategy with the capacity to enhance
customers’ intimacy.
Moon, Y. & Quelch, J. (2006). Starbucks: Delivering customer service.
Boston: Harvard Business School.

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