Starbucks Leadership

Case Study: Starbucks

Why have Starbuck’s customer satisfaction scores declined? What impact is this having on their brand image?

Starbucks has seen an enormous growth since 1998 (see chart below), such expansive growth can cause quality control issues in the product and service areas. While it does not seem to have affected the product the customer satisfaction ratings have taken a hit. Starbucks growth has been in both company stores and licensed stores which account for almost one third of the total stores in FY 2002. Starbucks may be feeling a bit of the backlash of being too big, too corporate, driving the local coffee houses out of business.

Total Number of Starbucks Stores

• Starbucks has experienced over 300% increase in number of stores over a 5 year period.

• Licensed stores (kiosks in grocery stores, hotels, airports, etc.) has seen an 800% increase

Starbucks used 3 components in branding strategy to create a loyal customer base.

The coffee, controlling the supply chain as much as possible

The service, create an uplifting experience or customer intimacy

The atmosphere, seating areas to encourage lounging, in an upscale yet inviting setting

By growing the number of kiosks in such numbers, Starbucks has been able to offer customers easy access to Starbucks but most of the kiosk locations do not have the atmosphere that the Company-operated locations have such as seating areas to encourage lounging in an upscale yet inviting setting. This has compromised the 3rd component in Starbucks branding strategy and what helped developed a loyal customer base in the beginning, keeping the coffee culture alive. However, the customer base has changed significantly from Starbucks inception in 1982.

Compare Contrast Starbucks in 1992 versus 2002 in terms of value proposition and their customer base. How do established customers differ from new customers and what problems is this causing?

It should not be a surprise that the customer base is changing for Starbuck’s by increasing the amount of stores and availability you are reaching out to more people and your base will change simply because of the availability of the product.