Starbucks Case Study

Background

Starbucks Coffee is a company that offers extraordinary coffee to its customers. It takes great pride in its retail service and providing great services to its customers. Howard Schultz, inspired and fascinated by Milan’s coffee culture in Italy, convinced his company (a shop in Seattle’s Pike Place Market) to set up an espresso bar in the corner of its only downtown Seattle shop. He envisioned coffeehouses as a “third place” to relax and enjoy others’ company that would be separate from home or work. As soon as Starbucks’ founders decided to sell, Schultz immediately bought the company. Schultz began opening new stores which sold whole beans and premium-priced coffee. When Schultz decided to take the company public, people were doubtful, but Schultz ignored and sold the company publicly. Starbucks raised more then $25 million and all proceeds went to grand openings of new stores. This was a start to a dominant specialty company. Without even advertising, net earnings still are rising to this day.

The Problem

Starbucks Coffee is known for its unique and specialty beverages, but with detailed training skills it may take time and devotion to providing these drinks to customers in a timely manner. Starbucks prided itself mainly on coffee itself. It believed that its highest-quality coffee in the world would help attract new and bring back regular customers.

Its second brand component was to create customer intimacy. This would include knowing customers’ customized drinks when they walk in the door.

The third brand was focused on a relaxed atmosphere. This would allow the people to come buy the coffee and stay at the coffee shop to lounge and relax.

Although these are all great focuses, Starbucks is forgetting the main focus on customers. Providing efficient and effective service to its customers is important to keeping a customer. That is why Christine Day, senior vice president, suggested investing $40 million annually in the company’s 4,500 stores. This $40 million would allow each store to allow more hours (20) of labor a week to improve the speed-of-service increasing customer satisfaction.

Success of Starbucks in the early 1990’s

Howard Schultz was a dedicated man and had a strong passion for coffee around the world. When he bought the company, he took a high risk and decided to make it public. People laughed, people doubted, and people even thought it was crazy. Grossing over $25 million, Schultz was more on his way to finding his dream come true. His success was mainly due to his interest in coffee culture and providing people with premium coffees. His long-term vision, which was to create a chain of coffeehouses, finally came to a reality. He wanted Americans to have a “third place” to relax and enjoy. This was a place that meant different things to different people. His brand image was to capture its “live coffee” mantra. Schultz wanted to keep the national coffee culture alive and by doing so, he wanted to create an experience around the consumption of coffee. Schultz also wanted to make coffee a daily beverage to everyone who enjoys coffee. The most compelling thing about Starbucks value proposition was that coffee could be bought by a local coffee shop or a doughnut shop for 50 cents and he was selling coffee that no one can pronounce in a paper cup for a dollar. Schultz stuck with his idea and made a chain of coffeehouses around the world.

Customer Satisfaction on the Decline

Starbuck’s customer satisfaction scores are on the decline because it is mainly focusing on the product, not the people. Starbucks has been creating new drinks to provide customers, but it has been forgetting about its customers. As mentioned earlier, with specialty drinks comes unique training which takes time and devotion to make. The customer gap of expectations may be strong on the product but on the service, it may be declining. In order to close the gap, Starbucks purchased many espresso machines to speed up the process, but this can still take time if there is a long line out the door. So Christine Day proposed to put $40 million in extending labor hours to help increase customer satisfaction.

The company’s service is not declining; it is simply measured the wrong way. Yes, the only complaint could be the long lines or the long wait, but Starbucks has been doing a great job providing customers with unique specialty beverages. Even if the $40 million proposition went through, it would not increase profits. It may increase by some, but there would not be a significant increase. Customers prefer Starbucks because