STARBUCKS: DELIVERING CUSTOMER SERVICE
A Case Study
Starbucks is a dominant brand name in North America as the provider of gourmet coffee beans, coffee-based drinks, and non-caffeinated beverages. It is also becoming a well known brand in many countries around the globe. Starbucks' value proposition is to create an "experience" around the consumption of coffee that its consumers could weave into the fabric of their everyday lives.
The company currently serves over 20 million customers in over 5000 company-operated and licensed stores throughout the world. Another interesting fact is that Starbucks has achieved this level of success without much advertising.
Recent market research has shown that Starbucks is not meeting its customers' expectations in terms of customer satisfaction.
KEY DECISION ISSUE
The main issue is whether the company should invest $40 million to add an equivalent of 20 labour-hours per week to its 4500 company-operated stores.
The proposal is based on the assumption that increasing labour hours at stores will result in faster service, which will improve customer satisfaction.
Since studies have shown that there is a direct relationship between customer satisfaction and customer behavior, this increase in customer satisfaction is expected to result in higher sales growth and profitability. Exhibit 1 illustrates this relationship, showing that greater customer satisfaction directly results in higher potential sales.
Given that there is a strong, positive relationship between customer satisfaction and future potential sales, achieving high customer satisfaction is a key factor to Starbucks' sales growth. In fact, it can be shown that by transforming dissatisfied customers to satisfied and highly satisfied, revenues can be increased by 361% and 1478%, respectively. Exhibit 2 shows how these results were obtained.
Once it has been established that customer satisfaction is the key underlying issue in question, a quick glance at...