The following diction is an analysis of the Harvard Business School study on Starbucks coffee, titled “Starbucks: Delivering Customer Service.” There are many factors accounted for Starbucks extraordinary success in the 1990s. Though Starbucks offered great coffee and a great experience their customer satisfaction scores declined. There are many reasons why their customers are not satisfied, will a 40million dollar investment on labor boost their customer satisfaction?
There are many key factors that have let Starbucks to be one of the biggest known names for coffee in the US. Wherever you go you see a Starbucks, in often times there are Starbucks 500 feet away from another Starbucks and they both will have lines out the door. In 1992 Starbucks had only 140 stores, they were all in very high traffic areas, which is very visible to everyone. Every college, mall and business has a Starbucks close buy. When asked to review Starbucks online a trip advisor review had this to say about Starbucks “it’s right smack in the middle of a T-intersection in the mall and it’s terribly heavy with foot traffic.”
This is a ploy by Starbucks to put their business in the middle of everting. Buy putting themselves in the middle of everything Starbucks became the most convenient way to drink coffee outside your home. Starbucks coffee became the hip coffee, the cup was iconic. If you had a Starbucks cup in your hand you were the cool hip smart person. Not only was it hip to drink Starbucks, be honest, the coffee was better than anything that they had on the market at that time, the coffee was richly brewed and strong. Starbucks made the competition taste like water.
The value proposition of Starbucks focused on a brand strategy that was made up of three main components. Live coffee, is a phrase that mimicked the importance of keeping the domestic coffee values alive. The first component was simply the coffee, good ole Starbucks, the crack of coffee. Starbucks offered premium coffee in the world. Not only did they provide the coffee to their customers they managed the supply chain as much as they cold to insure that their customers would receive the highest quality coffee that they could. Starbucks worked directly with growers to purchase the best green coffee beans they also would oversee the custom roasting process. Their job was still not done, they also organized distribution to retail stores around the world. The second brand component was service, also referred to as “customer intimacy.” This included simple things such as remembering someone’s name or drink order. Whenever you go into Starbucks they remember your name, not only do they remember it they personalize your coffee cup with your name.
Just looking down at a cup of Starbucks with the name “Beyoncé” etched on it will make anyone smile, if only I was Beyoncé. The third brand component was atmosphere. Everyone loves to sit in Starbucks, it’s a place where you can go sit in quiet and get free Wi-Fi, outside of the office. It is a cool hip chill environment, you can go to Starbucks put your feet up on their chairs pop in your headphones and turn out the rest of the world. All of these things combined led to a captivating value proposition for Starbucks. Starbucks brand image in 1992 wasn’t as good is it is today. Starbucks was known for being everywhere. Starbucks was known for being widely available. If Starbucks was a person he would have been a white collar, female, white, blond hair between the ages of 25-44. Starbucks was focused on being the leader in gourmet specialty coffee. Customers overall were happy with Starbucks products but thought that the company cared about nothing else but building an empire.
Starbucks coffee shops were being built everywhere all over, everywhere you turned and it was a bit overwhelming. The company’s brand image was becoming a powerhouse that was focused on making money. Starbucks customer satisfaction scores declined because of their brand image, not because they should bad products, everyone loved their products. Starbucks started to be obnoxiously overwhelming, everywhere you turned there was that damn mermaid. Their presence in the market became too much for their customers, everyone likes everything in moderation and when it becomes too much they don’t want it. You can get coffee almost anywhere so why somewhere that you thought was only in this to make money to build a new Starbucks next to the old Starbucks which is across the street from the other Starbucks which is around the corner from the Starbucks that is closest to your office.? Yes there was a significant differentiation between Starbucks and other coffeehouses, but Starbucks cost something like seventy dollars a gallon. The company service has not necessarily declined.
Again, everyone is pleased with Starbucks coffee. Starbucks has become this Mecca of coffee shops, twenty something’s and above pilgrimage to get their morning brew. Mornings are a drag, MORNINGS ARE A DRAG, and most of the time people don’t even want to get out of their cars to get a cup of coffee. Wait time at Starbucks is steadily increasing, especially if the cheerful a hole in front of you is ordering fifty cups of coffee for his whole office. People don’t have time to wait, we don’t have time to do anything. The fact that people could not get their coffee and get out the door is the main reason why satisfaction has begun to decline. Starbucks is measuring their satisfaction wrong, there are three Starbucks customers; the “everyday drinker,” who does not have time to wait for anything because they are always on the go and GO GET MY COFFEE, the “part time drinker,” who can wait, because they are just here because they passed Starbucks on their way to the office, and last but not least the “weekender,” who can really wait and sit and talk to everyone because it’s the weekend and they don’t give a hoot if they wait all day because they are just there to get away from their kids.
If they broke their survey of satisfaction into those segments the company would have different satisfaction levels for those specific segments. Starbucks of 1992 was still in the beginning stages of founding themselves as a prestigious company. However by 1992, Starbucks had a fleet of 140 stores and were competing with other coffee brands. Starbucks customers where white collar business people who always were on the go and did not have time for anything. Business was booming for Starbucks, at this time people just wanted coffee and not the Starbucks experience that we expect today. The Starbucks of 2002 became trendy, everyone had a Starbucks cup. If you had a Starbucks cup you were that trendy individual. By that time the company had become a publicly traded company. By this time the company had over 5,000 stores serving millions of people all over the world. Starbucks saw an increase of 40 percent of the compound annual growth rate and net profits of 50 percent. Starbucks was also opening more stores each day. The ideal Starbuck’s customer would be the customer that visits a Starbuck’s at least eight times a month based on the Harvard Business Case “Starbucks Delivering Customer Service”.
Research shows though that customers in this bracket visit much more than eight times a month, with the number of visits per month averaging eighteen. Meaning this customer comes in Starbucks almost every work day, most likely buying coffee for more than themselves. We all see it, one person in the office says that they’re about to make a “Starbucks run” and everyone places an order. These customers make up 62% of all Starbuck’s transactions. If the number of customers who visited this often increased, sales for Starbucks would increase massively. To satisfy this customer, Starbucks could keep their product exactly the same they would have to change their overall experience. Time is very important to these individuals so saving them time is imperative. They should adapt ordering mechanicals like “Chipotle” does.
Have you ever done a group order with a bunch of your coworkers and then you get your order and it is all crapped up. Chipotle ordering system allows every person in the office to order their own item by just providing their email address. Each customer on the emailing list gets an email and they order what they want, they can also pay separately on the same order and one person can go and pick the already made order up. This a time saver, if Starbucks adapted this they could further satisfy this customer base. A highly satisfied customer is very important to Starbucks, because their money is very important to them. Creating customer loyalty is the main reason why Starbucks is so successful, creating loyal customers is fueled by customer satisfaction. Therefore, having a satisfied customer is very valuable to Starbucks.
Starbucks should invest 40million dollars into labor. There are already enough people working at each store, this will not boost customer satisfaction. Who wants to go into Starbucks and see 7 people working behind the counter making their Frappuccino? They should take that money and reinvest it into the company and come up with a better ordering meconium, people like things that are automatic and technology driven. Starbucks will soon be beet out by companies like WaWa where their ordering is automatic for almost everything, you hardly have any interaction with the person who is making your order. The goal of this investment is to boost customer satisfaction, if Starbucks invested that money into technology and not labor they would satisfy the customer more.
Mega brands can deliver customer intimacy, it’s actually not that hard. As a customer all we ask for is not to be treated like everyone else, everyone should have their own experience. Starbucks does a great job at this by simply placing the customer’s name on their product. In 2002 Starbucks had 4,500 stores, their total investment would 40M so this would be an investment of 8.88M for each store annually. Every customer that interred a Starbucks would have to be satisfied for the company to make that transformation worth wile.
Youngme, M., & Quelch, J. (2003). Starbucks: Delivering customer service. Boston, MA: Harvard Business School Pub. Stall in very high traffic area – Starbucks. (n.d.). Retrieved January 31, 2015, from http://www.tripadvisor.com/ShowUserReviews-g46712-d4111409-r243675143-Starbucks-Paramus_New_Jersey.html