Starbucks

• Starbucks is enjoying its 11th consecutive year of 5% or higher comparable store sales growth.

• According to market research, Starbucks is not always meeting its customers’ expectations in the area of customer satisfaction.

• Need to improve speed of service and thereby increase customer satisfaction by spending $40 million annually by allowing each store to have an additional 20 hours of labor weekly.

• What will be the impact on sales and profitability after meeting the market research on customer satisfaction?

• Starbucks were selling whole beans and premium-priced coffee beverages by the cup and catered primarily to affluent, well educated, white-collar patrons (skewed female) between the ages of 25 and 44.

• In 1992 Starbucks had 140 stores in the Northwest and Chicago. It becomes public limited company in the same year.

• By 2002 Starbucks had become the dominant specialty-coffee brand in North America. Sales had climbed at a compound Annual Growth Rate (CAGR) of 40% from 1992 to 2002. Net earnings had risen at a CARG of 50%.

• In 2002 Starbucks had well over 5000 stores globally and were serving 20 million unique customers. It was opening average three stores daily.

• Starbucks had spent almost nothing on advertising.

• Starbucks first branding strategy focused on its product by maintaining its coffee standards.

• Starbucks seconds branding strategy was customer service.

• Starbucks third branding strategy is store environment. Starbucks had seating environment encourage lounging and layouts were designed to provide an upscale yet inviting environment for those who wants to linger.

• Store location was important for Starbucks. It selects store location where it will have high traffic and high visibility.

• Starbucks were also selling mix products (music CDs, games, seasonal novelty items, etc…) besides it’s beverage selections.

• Beverages accounted largest percentage of sales (77%) in 2002. In 1992, half of stores revenues had come from whole-bean coffees.

• 15% of net revenues were coming from ‘Specialty Stores’ not owned by Starbucks.

o 27% of these revenues came from North American food-service accounts (whole bean and ground coffee to hotels, airlines, restaurants, etc…)

o 18% of these revenues came from domestic retail store licenses where no other desirable retail space was available.

o 55% of these revenues came from international licensed store, grocery stores, warehouse clubs, online and mail-order sales.

• About 40% of Starbucks new coffeehouse customers have tried starbucks brand

before they walk through stores

o This is an important area of advertisements/promotion to attract more customers into stores.

• Starbucks philosophy was partner (employee) satisfaction leads to customer satisfaction.

o According to business strategy, Starbucks spent maximum on its employee for their satisfaction. It has one of the best medical plans, employee stock options, promotions were normally made among employees.

• Starbucks is committed to satisfy customers by providing handcrafted coffee and excellent customer services through its employees.

o Employees normally engaged with customer by some kind of conversation while serving their orders. Also remembering customer name, drinks they order gives personalized environment to customers.

• Almost half of Starbucks’ customers customize their drinks. With the variety of products it has created a tension between product quality and customer focus for Starbucks.

o Employees requires more time to serve regular customers because of their need on customized drinks which was slowing down serving time for other customers.

o Starbucks focused on employee efficiency by removing non-value-added tasks. It installed automated espresso machines in its North America cafes, which has decreased the number of steps required to make an espresso beverage, reduced waste, improved consistency, and had generated on overwhelmingly positive