Starbucks: Delivering
Customer Service
Group No: 14
Abhishek Kumar Bharti
2022MBA002
Lekhnarayan 2022MBA028
Mayank Diwan
2022MBA031
Saurabh Jha 2022MBA046
TABLE OF CONTENTS
01 02
Question 1 Question 2
Factors for Decline in Customer
Extraordinary Success Satisfaction
03 04
Question 3 Question 4
Ideal Customer For Should they invest in
Starbucks increasing labour
hours
CO ABOUT US
FF
EE
Starbucks Corporation is an American
multinational chain of coffeehouses and
roastery reserves headquartered in Seattle,
Washington.
Summary
• Starbucks, an American coffee company, was founded in 1971 in Seattle's Pike Place Market. It began as a
small coffee shop specializing in the sale of whole arabica beans to a niche market of coffee purists.
• Mr. Howard Schultz joined the marketing department in 1982 and later became chairman after the company's
founders agreed to sell him the business. This resulted in the rapid growth of a small coffee shop into a 140-
store chain by 1992. The company went public in the same year, which was unexpected for a company that
sold coffee. By 2002, Schultz had established Starbucks as the go-to specialty coffee brand in North America,
was serving 20 million unique customers in more than 5,000 stores worldwide, and was opening an average of
three new stores per day.
• With the company spending almost no money on advertising to achieve any of the aforementioned
accomplishments, Starbucks' most pressing problem was the rather unexpected results indicating that the
company was not meeting customer satisfaction expectations.
• Christine Day, the senior vice president of administration at Starbucks, expanded the implementation of a
strategy in response to this prominent concern. The plan was to invest an additional $40 million per year in the
company's 4,500 stores, allowing each location to add 20 hours of labor per week. This was intended to
increase customer satisfaction by enhancing the speed of service.
• Day anticipates that the above-mentioned strategy will be met with internal opposition from the CFO. She has
two days to make a final recommendation to Howard Schultz and Orin Smith on whether or not the company
should implement the $40 million plan, which would result in a decrease in EPS.
Question 1
What factors accounted for the
01
extraordinary success of Starbucks in the
early 1990s? What was so compelling
about the Starbucks value proposition?
What brand image Starbucks develop doing
this period?
Answer 1
There were various factors which contributed
to the extraordinary success of Starbucks:
● First Mover Advantage:
● Change the experience
● Third place
● Customer Service
● Ambience
● Coffee Quality
Question 2
Why have Starbucks customer satisfaction
02
scores declined? Has the company’s service
declined or is it measuring satisfaction the
wrong way?
Answer 2
• Customer Satisfaction to innovation
• Service gap
• Cannibalism
• Third place to money making
• “The snapshot is not a perfect
measurement tool, but we believe it does a
good measuring trends”
Question 3
Describe the ideal Starbucks customer from
03
a profitability standpoint. What would it
take to ensure that this customer is highly
satisfied? How valuable is a highly satisfied
customer to Starbucks?
Answer 3
● The client is shifting away from the established
high-wage representative, who has more
disposable income for premium coffee.
● From the conducted surveys we can conclude
that Speed-of-service is important factor for
customer satisfaction.
● On next slide we can conclude that customer
satisfaction is POD for Starbucks. Hence, it is
the most important factor for Starbucks to
compete with his competitors
Question 4
Should Starbucks make the $40 million
04
investment in labor in the stores? What is
the goal of this investment? Is it possible
for the mega brand to deliver customer
intimacy?
Answer 4
• Yes, we think that Starbucks should make the $40 million investment in labor in
the store.
• Part of Starbucks’ success was driven by its customer service. They are not the
only place that consumers can buy a cup of coffee, but they are one of the few
that can get away with charging 8 bucks for it.
• The goal of this investment is to reduce wait time for customer
• Increasing the labour would certainly give more room to serve more customers,
but the quality of service and the intimacy can only be developed when
employees make the required effort in making consumers feel not just welcome,
but uniquely valued.
Break Even Analysis
Annual Spending:
1. Highly satisfied customer = 7.2 times*12 months*$4.42 per time = $381.88
2. Satisfied customer = 4.3 times*12 months*$4.06 per time = $209.52
3. Unsatisfied customer = 3.9 times*12 months*$3.88 per time = $167.61
The changed Number of Customers:
The annual value of satisfied to highly satisfied = ($381.88 – $209.52) = $172.37.
• $40,000,000/$172.37 = 232,059 customers
The annual value of unsatisfied to satisfied = ($209.52 – $181.56) = $27.96.
• $40,000,000/$27.96 = 1,430,615 customers
Total number of customers = 2000 * 3494 = 6,988,000 customers
Thank You