Case Study Analysis - Starbucks: Delivering Customer Service

Case Study Analysis - Starbucks: Delivering Customer Service

1. Main Players in the Case

Summary:

Who: Starbucks

When: Late 2002

What: Delivering Customer Service

Main Players:

* Christine Day - SVP

* Howard Schultz - Founder & Chairman

* Orin Smith - CEO

* Jim Alling - SVP (North American retail)

Other Players:

* Kraft Foods

* Pepsi-Cola

* Dreyer's Grand Ice Cream

2. Major Problems and Issues in the Case

* Not always meeting the customers' expectations in the area of customer satisfaction

* Do they believe what their customers are telling them about what constitutes, "excellent" customer service?

* If Starbucks delivers what the customers' want, how will this impact their sales and profitability?

3. SWOT Analysis

Strengths: Brand Image; Benefits and quality training given to employees; Strong Financials and Growth; International Presence

The brand image of Starbucks has evolved over the years. It offers its customers a "third place" to go other than work and home. When people get together to socialize one of the first places people suggest is Starbucks. Their environment is warm and inviting and has a cozy ambience.

Starbuck employees are called "partners." Starbucks offers generous benefits to their employees. They have one of the lowest employee turnover rates which prove that Starbucks cares about their employees. They have a goal to make the positions of their "partners" a lifetime job.

Their net income increased by 7% in North America from FY2001 - FY2002 and their number of stores increased. Each year from 1998-2002, Starbucks was profitable.

Weaknesses: No structure around marketing; very little image or product differentiation; Employee efficiency;

At the time of this article Starbucks did not have an official strategic marketing department even though they were considered one of the world' most effective marketing organizations. They were good at measuring things and collecting marketing data, but they were not disciplined when it came to using the data to drive decision making. Once the newly established marketing team took notice it discovered several things. One of these things was that there was very little image or product differentiation between Starbucks and the smaller coffee chains. Now Starbucks could begin making some changes based on the new found data that they were actually paying attention to now. But imagine how much more successful they could have been if only they had come to this realization a lot sooner?

When it comes to efficiency Starbucks has a goal of a 3 minute wait time from the time you get in line till the time you get your coffee. By achieving this goal Starbucks will have more satisfied customers.

Opportunities: Product Innovation; Service Innovation

Product innovation will always be an opportunity in my opinion. No matter what a company needs to stay innovative in order to be successful and change with the needs and wants of its customers. For Starbucks, they launched a new flavor during the holidays each year (I know I look forward to what new flavor they will have). Next they introduced a non-coffee-based line of Frappucino beverages (good market towards those non-coffee drinkers). Continuing to offer new products and making changes is key. Currently they offer a variety of products from their famous coffee to tea, to pastries, oatmeal and in some locations sandwiches and salads.

Starbucks has begun to become service innovative. They launched a stored-value card (SVC) which is a pre-paid card. More than 6 million cards had been issued in less than one year. This type of card makes a great gift. When utilized as a gift some people are experiencing Starbucks for the first time which can result in new customers. The next service innovation was the T-Mobile HotSpot wireless Internet Service offered in select stores. Today Starbucks has enhanced their pre-paid card with earning rewards as you use it. Some of their store locations offer free wireless Internet Service. The continued innovation in the services they provide is an ongoing opportunity in order to stay competitive.

Threats: Competition; Economy; People's desire for coffee could change

There is so much competition out there right now such as Caribou Coffee, Peet's Coffee & Tea, Dunkin Donuts and even fast food restaurants like McDonald's and Wendy's. With the addition of the fast-food restaurants offering "Starbuck" like products, differentiation will be crucial for Starbucks to remain competitive.

The state of the economy no matter what year it is will always be a threat. Depending on the state of the economy, consumer spending could pose a threat to the overall sales growth.

The desire for coffee could change especially with so many people being more health conscious. People are more aware of the amount of caffeine and calories they are consuming.

4. Theory from the Textbook to the Case

One of the key theories from Chapter 11 I most associated

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