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Starbucks’ Duetto Visa Essay

For this assignment, students are asked to select the case Starbucks Duetto Visa from the site http://highered.mcgraw-hill.com/sites/dl/free/0073373702/855246/Starbucks_duetto_Visa.pdf and answer the questions at the end of the case. Like many other merchants, Starbucks the leading retailer, roaster and brand of specialty coffee in the world, offered its customers a pre-paid stored-value card known as the Starbuck’s Card. This came as a direct off-shoot from their customer focused/customer satisfaction aspect of their business model.

This card was a tremendous success. In their quest to build on that success they sought to expand the functionality of the card by creating a product that would marry the functionality of the store card with that of a major credit card. The new product was established and solidified through four primary research projects together with a number of other secondary ones. The primary researches were undertaken to achieve the following; 1. Finding and Assessing the Right Card and Bank Partners;

2. Testing the Concept – a determination of how much the customers could understand the value of the dual functionality of the new card; 3. Measuring the early intent of their customers to participate in using the new card; 4. Measuring Return on the Market Investment

Question 1: What type of research was done at each stage? Discuss the strength of each different type given the stage of the project. Finding and Assessing the Right Card and Bank Partner: Starbucks was cognizant that they must find the right partners that shared their vision and was willing to make a commitment to top-quality customer service that their customers had come to expect. The Methodology Used – Starbucks approached card service companies Visa, MasterCard and American Express; they conducted interviews with bank executives, visited call centers and even listened in on phone calls to learn, firsthand, how they dealt with their customers’ credit problems.

They were thus accessing the data they needed through interviews from which they were able to understand and interpret the emphasis that prospective partners placed on customer satisfaction. Interviews were done individually and in small groups and this indicated that the type of research conducted in this stage was Qualitative Research.

Concept Testing: there were concerns shared among all the partners in this alliance that the dual functionality of the new product might be confusing to customers and so they wanted to establish whether customers would understand the value to them of the dual functionality. Methodology Used – They conducted interviews with four (4) focused groups using the service of an independent moderator. The groups comprised a mix of Starbucks card holders as well as non-card holders. Collecting relevant data using focus groups and a trained moderator is one method of conducting a qualitative research project. Hence, this stage of the program was done through a Qualitative Research exercise.

The outcome from the focus group interviews in this stage set the stage for a number of secondary quantitative studies that examined Brand fit, Benefits, Product functionality and Product Optimization. The latter two were done through online surveys. Measuring Early Intent: At this stage of the process press release was made via Business Wire, announcing the partnership of Starbucks, Visa and Bank One. That release directed people to Starbuck’s website for further information. On the website they (visitors) were given the opportunity to comment on the new product and to sign up to receive email notification about the launch of the card.

The response was far beyond expectation as tens of thousands signed-up for the notification and thousands indicated that they would embrace the new card. By tracking the number of visitors to the website and the comments, Starbucks engaged in a Quantitative Research process in this stage. Recall that the sample size is quite large and the information (data) gathered was homogeneous, Measuring Return on the Market Investment: This was a two part process.

The first part was to measure brand enhancement and was done through data gathered from in-store usage of the card and from customers’ comments. It sought to measure customers’ in-store experience, satisfaction and feelings of appreciation through the use of the new card. Customer’s had the choice of using either the pre-paid option or the charge option.

Compilation of this data, a quantitative process, would serve to establish customers’ satisfaction and feelings of appreciation at their use of the new product. The second part was the research conducted by Bank One to measure the Return on Market Investment for the new product. Through a brand tracking study for the new product Bank One, by evaluating numerical data on number of accounts booked, cost per account, spend per month in each of these accounts, they were able to measure the ROMI for the new card. This was also a quantitative research process.

The Strength of the Type of Research used for the Particular Stages In the first stage Starbucks had a vision and needed to find a way to make it a reality. This meant choosing the right partners from all the possible ones that would present themselves. They (Starbucks) needed at this stage to develop an understanding, through detailed study, of each of the prospective partners to establish their offerings and to determine which offer would best fit their own vision of the partner that they sought to move forward with.

The Qualitative approach is the best process to achieve this. In the second stage, Starbucks and their partners had concerns about the understanding that their customers would have regarding the functionality of the card and to investigate how confusing it might be for them. In other words, they wanted to get a deeper understanding of what the customers’ reaction might be to this card. They wanted to test the validity of this concern and to determine what actions managers may take to mitigate it. Recall that the customers are worldwide and as such that posed a difficulty to extract the data quickly.

Quite apart from that, however, they also wanted in this stage to generate their own impressions and perceptions of the new brand and product idea. Hence the use of Focus groups, comprising of both Starbucks card users and non-card users was the best way of accomplishing that. In the third and fourth stages, they wanted to make precise measurements of consumer’s behavior. In stage three they wanted to measure the customers’ behavior – attitudes and opinions – regarding their early intent to use the new product.

The research had to measure how many customers were prepared to move into using the new card at the outset. The Quantitative approach is the best method of achieving this. In the fourth stage Bank One tracked the card usage to measure the return on the investments in the market to establish the new product. Card usage is tracked electronically from the very large sample space and consumers’ behavior regarding card usage can be measured. Here again, quantitative approach is most appropriate.

Question 2: Build the Management Research-Question Hierarchy for this Project. The Management Research-Question Hierarchy refers to the process of sequential question formulation that leads a manager or a researcher from the Management Dilemma to investigative questions. For the Starbucks’ research, the hierarchy could follow the formulation laid out below; Management Dilemma: The tremendous success of the Starbucks’ prepaid stored-value card together with the company’s constant quest for enhanced customer satisfaction, gave the management of Starbucks the idea of creating a new payment product.

This product would marry the functionality of the existing card with the functionality of a credit card. In order to guarantee success, the problem lie in finding the right bank and card service to partner with who both shared Starbucks’ vision and commitment to offering top-quality customer service that Starbucks’ customers had become accustomed to. The Management Question: How should Starbucks approach the issue of finding the right Bank and Card Service providers to partner with in a venture that would build on the success of the current card and yet provide the quality customer service experience that its customers had grown accustomed to? The Research Questions:

1. How do Starbucks approach the task of finding the right partners for this new product? 2. Would a dual card be acceptable to its existing customer base? 3. Would a dual card serve to increase its existing customer base? 4. Would Starbucks’ existing customers understand the value proposition of the dual functionality or would this lead to confusion? 5. In order to establish brand fit, how would Starbucks determine whether negative connotations associated with past credit card experiences have a negative impact on the Starbucks brand that they had put so much into developing?

6. Would customers value the instant rewards features of the Duetto Card? 7. How many of our existing customers would embrace the new product immediately upon its launch or shortly thereafter? This list of research questions is in no way exhaustive as it does not take into account the other research questions that Bank One and Visa might want to answer as a consequence of the establishment of the partnership.

Question 3: Discuss the choice of an on-line survey to assess Starbucks’ three objectives of functionality, brand fit and benefits. What are the pros and cons of choosing this survey method? Starbucks is the leading retailer, roaster and brand of specialty coffee in the world. They have established more than 7,500 retail locations from North America to Latin America, as well as in Europe, the Middle East and the Pacific countries.

Their locations, and hence their customers, are located in diverse places across the world. The administration of any survey that should include samples of their customers from all the regions in which they operate is foreseeable very expensive if they were to proceed by sending data collectors into the field. The survey process that was established to assess the objectives of functionality, brand fit and benefits were quantitative processes.

Hence they needed to get a feedback from as large a sample of their customers as possible who were scattered in these diverse locations. The quickest method of achieving that was by conducting these surveys online. Let us examine some of the pros and cons of online survey methods; Pros:

1. There is great speed of data collection via this method. Once the instrument is designed and placed online it reaches its destination in an instant. Participants now have the option of completing the data at their earliest convenience. 2. There is great versatility in the method as the instrument can be adapted to use various types of measurement scales. 3. It is flexible.

The instrument can have verbal as well as graphic, photographic, video or digital elements. 4. It can reach the global participants in an instant. Recall that Starbucks’ customers are dispersed globally. Online surveys provided the avenue for cheaper data collection from the very large and widely dispersed sample of participants. Cons: There are a few negatives associated with online surveys that are typical to internet use. Some of these that I can easily recall are; 1. It is quite easy for qualified participants who, having received the survey instrument may pass it off as junk mail 2. There is no control over response rate. Hence response rate may be low.

This is contra to the face-to-face administration of a data collection process. 3. Online surveys are impersonal. This would also help to explain the low response rate mentioned above. 4. There are known privacy issues associated with the use of the internet. This would also contribute to a low response rate. For this survey, Starbucks had not much choice but to ignore the negative attributes of the online survey methods and embrace the positive ones in their effort to collect the required data for testing. The population of Starbucks’ customers is quite large and so they should get a good representative sample of participants worldwide.

Question 4: The Duetto Card team turned to Greenfield Online to recruit a panel for one of its online surveys. How might you build a sample frame of appropriate participants for future online or phone surveys?

Greenfield Online is an organization that specializes in assisting research firms or companies doing research by providing online samples that fulfill a variety of characteristics. They have developed the expertise, over the years, to provide varied assistance or to actually formulate and conduct surveys for such organizations. The types of survey that they take on are wide and varied. In order to build a sample frame of appropriate participants for future online or phone survey, one first has to decide on what these surveys should reveal and the type of survey to be done along with the distribution of the population from which the sample is to be drawn.

Greenfield Online could then be requested to provide the necessary assistance to build the sample frame of appropriate participants. Once the framework of participants has been built, the survey can actually be conducted by the researcher themselves (Research Company or manager(s) from the company that needs to get information) or they could just ask Greenfield Online to do the actual data gathering for them.

Question 5: What measurement questions would you use to assess the effectiveness of the Starbucks’ Duetto Visa in a future Customer survey? In order to test the effectiveness of the Starbucks’ Duetto Visa card I would investigate the usage of the card periodically. Such investigations would be conducted probably quarterly or semi-annually especially in the early years after the launch of the card. Some of the measurement questions that I would use in a customer survey are; 1. Are you satisfied with the new product?

2. If you are satisfied have you recommended friends and associates to sign up for the new card? 3. Are the features of this new card superior to those of the pre-paid card? 4. Do you believe that the benefits offered by this card are superior to those offered by the previous pre-paid card? 5. Have you accessed any of the benefits offered through the use of this card?

6. Has this new card enhanced the impact of the Starbucks’ brand over the previous card? 7. Do you have a full (or better) understanding of the dual functions of the new card? 8. Is your use of the card limited to purchases at Starbucks’ stores only or do you use it at other stores to purchase goods and services? 9. Do you use both functions offered by the card?

10. Would you recommend the card to friends and associates? The answer option for most of these questions is simply yes/no. Some may be modified to extract responses on a scale, maybe ranging from 1-5. Note also that the questions, as set out above are not necessarily in chronological order to encourage a thought flow as it would be in an actual survey.

Cooper, D., & Schneider, P. (2011). Business Research Methods. New York, N.Y.: McGraw-Hill / Irwin. Starbucks’ Duetto Visa. (n.d.). Retrieved from http://highered.mcgraw-hill.com/sites/dl/free/0073373702/855246/Starbucks_duetto_Visa.pdf

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