Starbuck Bussines Model

PROBLEM STATEMENT

Starbucks has discovered that they are not always meeting their customers' expectations in the area of customer satisfaction. Starbucks has to come up with an action plan to address this issue, considering its significant correlation and impact to sales and profitability.

SITUATION ANALYSIS

Company

Starbucks is acclaimed for its superior value proposition in the early 1990's by creating an experience around the consumption of coffee, a 'third place'. The brand is positioned to offer the highest quality coffee, close customer intimacy, and warm atmosphere or ambience.

Customers

However, data from the market research team has shown that there is a shift on Starbucks' brand recognition in customers' perception, as indicated by the increase in the number of respondents who strongly agreed with the following statements (data 2000 and 2001 respectively):

'Starbucks cares primarily about making money' --> up from 53% to 61%

'Starbucks cares primarily about building more stores' --> up from 48% to 55%

'The Top Five Attributes Consumers Associate with Starbucks Brand', has further convinced the fact that being welcomed - only 39% respondents strongly agree - is the last attribute among the five.

Surveys and analysis have been carried out to gather data and understand more about the key attributes to increase customer satisfaction. Exhibit 4 points out that friendlier and faster service is highly expected as well as free cup and lower prices incentive programs. In addition, Exhibit 5 illustrates being 'treated as a valuable customer' and 'friendly staff' hold more value compare to 'fast service', while 'fast service' and 'appropriate prices' are perceived equally important.

Competitors

Starbucks faces competition from variety of small-scale specialty coffee chains, such as Caribou Coffee, Peet's Coffee and Tea, Dunkin Donuts, and thousands of independent specialty coffee shops. Each of them applies different strategies to differentiate itself from Starbucks; some of them deliver highly personalized service.

Complements

Starbucks has introduced stored-value card (SVC), which is one of its successful service innovation to its customers. This prepaid and swipe-able smart card was positively accepted, resulting in sales of 6 million cards and $160 million in revenues in the first year it was launched. Starbucks has learned that cardholders tend to visit Starbucks twice as often and experience reduced transaction times. This SVC also proves to bring new customers to Starbucks' brand.

ALTERNATIVES

After carefully analyzing the situation, the best plans are to improve customer satisfaction through improving both quality and speed of service and providing incentive programs. A few considered alternative solutions are as follows:

Reduce product variations

Pros : - Decrease transaction times

- Increase the integrity of Starbucks' brand for coffee purists

Cons : - Deter potential customers who want to customize their drinks

Invest more machines to automate processes

Pros : - Speed up baristas efficiency

Cons : - Big investment

- Limitation of machine flexibility compare to humans

- Machine down time and maintenance requirement create additional issues

Provide