Starbucks: Delivering Customer Service

Starbucks: Delivering Customer Service
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http://businesstrueormyth.files.wordpress.com/2009/05/m512_starbucks_alkismarangos.pdfStarbucks’ extraordinary growth over the past decade has led to many changes in the way the company operates. Starbucks Senior Vice President, Christine Day, believes that one consequence of this growth is a reduction in customer service. One of the three components of Starbucks’ original branding strategy was to provide extraordinary service. However, Day believes that Starbucks has “lostthe connection between satisfying [their] customers and growing the business.” In attempt to address this problem, Day came up with a plan to invest 20 addtional hours of labor into each existing store. The plan, which will cost $40 million annually, aims to “improve speed-of-service and thereby increase customer satisfaction.” While the company does need to make changes to address the manyconsequences of their growth, Day’s expensive plan is a not an effective solution to Starbucks’ problems.

One of the main consequences of Starbucks’ expansion has been a change in their product. When Starbucks first opened their stores about half of its sales came from whole-bean coffees. Ten years later, in 2002, whole-bean coffee sales only account for 6% of store sales, while coffee beveragesnow account for 77%. Starbucks also began offering food, coffee-related equipment, and many other accessories. Additionally, Starbucks products can now be found on grocery store shelves in bottled beverage form and as well as in a flavor of ice cream. The large increase in Starbucks’ store beverage sales can be attributed to one of the most significant factors in store growth: product innovation.New products are regularly added to the menu. While these new beverages inspired growth and helped change the product of Starbucks, they also helped change Starbucks’ identity.

Part of Starbucks CEO Howard Schultz’s strategy was to establish an environment for people to enjoy and relax with their coffee. This inviting atmosphere would create an ambience that helps Starbucks retain theirexisting customers. While this strategy initially helped differentiate Starbucks from other coffee chains, that separation no longer exists. When Starbucks conducted interviews with specialty-coffeehouse customers, they found that, “there was very little image or product differentiation between Starbucks and the smaller coffee chains.” In fact, the only difference between Starbucks and othercoffee chains was its massive presence. The Starbucks marketing team found that the chain’s omnipresence created an undesirable corporate image. Research showed an increase in customers who believe that Starbucks cared “primarily about making money” and “building more stores”. It is reasonable to believe that Starbucks’ expansion has caused a change in their public image. However, their growthhas also led to some good things.

Another consequence of Starbucks’ expansion is a change in their target market. Their initial target market, which is described as “affluent, well-educated, white collar patrons (skewed female) between the ages of 25-44,” is more specific than Starbucks’ influx of new customers, which happen to be “younger, less well-educated, and in a lower income bracket.”Furthermore, Starbucks found that their new stores in southern California serve a large number of Hispanic customers, and their Florida stores are even having success with the Cuban-American market. Starbucks’ growth has helped them by increasing their customer base.

Day’s plan to increase the speed of service for Starbucks’ stores has good intentions. It is tough to dispute Day’s claim that...