Starbucks: Delivering Customer Service XXXXXXXXXX R E V : O C T O B E R 5 , XXXXXXXXXX Professors Youngme Moon and John Quelch prepared this case. It was reviewed and approved before publication by a...

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Starbucks: Delivering Customer Service 9-504-016 R E V : O C T O B E R 5 , 2 0 1 8 Professors Youngme Moon and John Quelch prepared this case. It was reviewed and approved before publication by a company designate. Funding for the development of this case was provided by Harvard Business School and not by the company. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. Copyright © 2003, 2018 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545- 7685, write Harvard Business School Publishing, Boston, MA 02163, or go to www.hbsp.harvard.edu. This publication may not be digitized, photocopied, or otherwise reproduced, posted, or transmitted, without the permission of Harvard Business School. Y O U N G M E M O O N J O H N Q U E L C H Starbucks: Delivering Customer Service In late 2002, Christine Day, Starbucks’ senior vice president of administration in North America, sat in the seventh-floor conference room of Starbucks’ Seattle headquarters and reached for her second cup of toffee-nut latte. The handcrafted beverage—a buttery, toffee-nut flavored espresso concoction topped with whipped cream and toffee sprinkles—had become a regular afternoon indulgence for Day ever since its introduction earlier that year. As she waited for her colleagues to join her, Day reflected on the company’s recent performance. While other retailers were still reeling from the post-9/11 recession, Starbucks was enjoying its 11th consecutive year of 5% or higher comparable store sales growth, prompting its founder and chairman, Howard Schultz, to declare: “I think we’ve demonstrated that we are close to a recession-proof product.”1 Day, however, was not feeling nearly as sanguine, in part because Starbucks’ most recent market research had revealed some unexpected findings. “We’ve always taken great pride in our retail service,” said Day, “but according to the data, we’re not always meeting our customers’ expectations in the area of customer satisfaction.” As a result of these concerns, Day and her associates had come up with a plan to invest an additional $40 million annually in the company’s 4,500 stores, which would allow each store to add the equivalent of 20 hours of labor a week. “The idea is to improve speed-of-service and thereby increase customer satisfaction,” said Day. In two days, Day was due to make a final recommendation to both Schultz and Orin Smith, Starbucks’ CEO, about whether the company should move forward with the plan. “The investment is the EPS [earnings per share] equivalent of almost seven cents a share,” said Day. In preparation for her meeting with Schultz and Smith, Day had asked one of her associates to help her think through the implications of the plan. Day noted, “The real question is, do we believe what our customers are telling 1 Jake Batsell, “A Grande Decade for Starbucks,” The Seattle Times, June 26, 2002. For the exclusive use of R. Grandhe, 2021. This document is authorized for use only by Ram Grandhe in GSMPR 625 (SU21) Portland taught by Jameson Watts, Willamette University from May 2021 to Oct 2021. 504-016 Starbucks: Delivering Customer Service 2 us about what constitutes ‘excellent’ customer service? And if we deliver it, what will the impact be on our sales and profitability?” Company Background The story of how Howard Schultz managed to transform a commodity into an upscale cultural phenomenon has become the stuff of legends. In 1971, three coffee fanatics—Gerald Baldwin, Gordon Bowker, and Ziev Siegl—opened a small coffee shop in Seattle’s Pike Place Market. The shop specialized in selling whole arabica beans to a niche market of coffee purists. In 1982, Schultz joined the Starbucks marketing team; shortly thereafter, he traveled to Italy, where he became fascinated with Milan’s coffee culture, in particular, the role the neighborhood espresso bars played in Italians’ everyday social lives. Upon his return, the inspired Schultz convinced the company to set up an espresso bar in the corner of its only downtown Seattle shop. As Schultz explained, the bar became the prototype for his long-term vision: The idea was to create a chain of coffeehouses that would become America’s “third place.” At the time, most Americans had two places in their lives—home and work. But I believed that people needed another place, a place where they could go to relax and enjoy others, or just be by themselves. I envisioned a place that would be separate from home or work, a place that would mean different things to different people. A few years later, Schultz got his chance when Starbucks’ founders agreed to sell him the company. As soon as Schultz took over, he immediately began opening new stores. The stores sold whole beans and premium-priced coffee beverages by the cup and catered primarily to affluent, well-educated, white-collar patrons (skewed female) between the ages of 25 and 44. By 1992, the company had 140 such stores in the Northwest and Chicago and was successfully competing against other small-scale coffee chains such as Gloria Jean’s Coffee Bean and Barnie’s Coffee & Tea. That same year, Schultz decided to take the company public. As he recalled, many Wall Street types were dubious about the idea: “They’d say, ‘You mean, you’re going to sell coffee for a dollar in a paper cup, with Italian names that no one in America can say? At a time in America when no one’s drinking coffee? And I can get coffee at the local coffee shop or doughnut shop for 50 cents? Are you kidding me?’”2 Ignoring the skeptics, Schultz forged ahead with the public offering, raising $25 million in the process. The proceeds allowed Starbucks to open more stores across the nation. By 2002, Schultz had unequivocally established Starbucks as the dominant specialty-coffee brand in North America. Sales had climbed at a compound annual growth rate (CAGR) of 40% since the company had gone public, and net earnings had risen at a CAGR of 50%. The company was now serving 20 million unique customers in well over 5,000 stores around the globe and was opening on average three new stores a day. (See Exhibits 1–3 for company financials and store growth over time.) What made Starbucks’ success even more impressive was that the company had spent almost nothing on advertising to achieve it. North American marketing primarily consisted of point-of-sale 2 Batsell. For the exclusive use of R. Grandhe, 2021. This document is authorized for use only by Ram Grandhe in GSMPR 625 (SU21) Portland taught by Jameson Watts, Willamette University from May 2021 to Oct 2021. Starbucks: Delivering Customer Service 504-016 3 materials and local-store marketing and was far less than the industry average. (Most fast-food chains had marketing budgets in the 3%–6% range.) For his part, Schultz remained as chairman and chief global strategist in control of the company, handing over day-to-day operations in 2002 to CEO Orin Smith, a Harvard MBA (1967) who had joined the company in 1990. The Starbucks Value Proposition Starbucks’ brand strategy was best captured by its “live coffee” mantra, a phrase that reflected the importance the company attached to keeping the national coffee culture alive. From a retail perspective, this meant creating an “experience” around the consumption of coffee, an experience that people could weave into the fabric of their everyday lives. There were three components to this experiential branding strategy. The first component was the coffee itself. Starbucks prided itself on offering what it believed to be the highest-quality coffee in the world, sourced from the Africa, Central and South America, and Asia-Pacific regions. To enforce its exacting coffee standards, Starbucks controlled as much of the supply chain as possible—it worked directly with growers in various countries of origin to purchase green coffee beans, it oversaw the custom-roasting process for the company’s various blends and single-origin coffees, and it controlled distribution to retail stores around the world. The second brand component was service, or what the company sometimes referred to as “customer intimacy.” “Our goal is to create an uplifting experience every time you walk through our door,” explained Jim Alling, Starbucks’ senior vice president of North American retail. “Our most loyal customers visit us as often as 18 times a month, so it could be something as simple as recognizing you and knowing your drink or customizing your drink just the way you like it.” The third brand component was atmosphere. “People come for the coffee,” explained Day, “but the ambience is what makes them want to stay.” For that reason, most Starbucks had seating areas to encourage lounging and layouts that were designed to provide an upscale yet inviting environment for those who wanted to linger. “What we have built has universal appeal,” remarked Schultz. “It’s based on the human spirit, it’s based on a sense of community, the need for people to come together.”3 Channels of Distribution Almost all of Starbucks’ locations in North America were company-operated stores located in high- traffic, high-visibility settings such as retail centers, office buildings, and university campuses.4 In addition to selling whole-bean coffees,
Answered Same DayJul 07, 2021

Answer To: Starbucks: Delivering Customer Service XXXXXXXXXX R E V : O C T O B E R 5 , XXXXXXXXXX Professors...

Bidusha answered on Jul 07 2021
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STARBUCKS
Table of Contents
Starbucks case study    3
Starbucks case study
Starbucks bombed in accomplish
ing consumer loyalty as they were neglecting to meet the terms and needs of the client. The primary most dubious endeavor they took to restore this consumer loyalty circumstance was to add an extra 20 hours of work for each store and each week to procure a benefit of 40 million dollar in a year. The second arrangement they had as a top priority was to expand the deal to $20,000 levels on a weekly basis. They are additionally endeavoring to further develop their advertising procedures to improve their business since they began losing client face because of the value ascent of their items.
Starbucks required a high-level driving model that can be comparably arranged. The association discovered techniques to join the brand inside the way, researching different ways utilizing bi-way, live video correspondence to mechanized insistence papers. The driving outcomes were passionate to such an extent that a couple of years prior, Starbucks permitted...
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