Starbucks - Delivering Customer Value

STARBUCKS: DELIVERING CUSTOMER VALUE

Introduction: The extraordinary success of Starbucks in the early 1990s can be attributed to the most important factor which was Schultz’s (Founder) long term vision of the Starbucks as a brand which would make the customer the center of its success and would change their coffee drinking experience by creating a “third place” in addition to home and work where people could go and relax or be by themselves. The most compelling characteristic of the Starbuck’s value proposition was the level of care and service that it provided to its customers. The proposition was centered and focused on the “experience of enjoying coffee” and not on just “buying coffee”. 

Brand Imaging Strategy Components:  First component was the highest quality product i.e. coffee itself. Second component was customer service referred to as “customer intimacy” an interesting “Starbucks Experience”, which encompassed excellent, fast and personal customer service that highlighted company’s commitment to their customers. Third component was “atmosphere” which encompassed clean, well maintained and inviting stores that made the customer who came to buy just coffee to stay and linger on in the store. This level of commitment on company’s part builds a long term customer loyalty with almost a cult following. This proposition could be further underlined by the following additional points:

• Unique Experience: As it is clearly stated in the case the ‘Starbucks’ concept was to create a ‘third place’. This was to have people gather, relax, socialize and enjoy being at the place.
• Store Ambience and Atmosphere: The atmosphere was created in a way that changed the whole idea of just “buying coffee” to “enjoying coffee”.
• Product Quality /Selection:  Starbucks primary focus was on quality and selection, thus making their customers have the best product.
• Supply Chain: Monitoring on supply chain to ensure consistency and quality of their products.
• Avoiding Franchising: The stores were directly operated to maintain high quality standards.
• Excellent Service: The employees called ‘Partners’ were the most important factor in the provision of excellent customer service or customer intimacy.
• Training Excellence: The employees were thoroughly trained on both “hard” and “soft” skills which made the customer experience pleasant and unique. This reflected in the company’s “Just Say Yes” policy. The company’s mantra was “Not to lose a customer by winning an argument”.
• Employee (Partner) Care, Growth and Satisfaction: The Company believed that happy employees led to happy and satisfied customers. This led the company to take good care of its employees offering them one of the highest hourly pay, stock options, health benefits, excellent training and the opportunities of promotion to higher ranks within the company.
• Target Customers: The Company’s major effort was targeted towards upscale, coffee purists, affluent, well‐educated, white‐collar people between the ages of 25 and 44. The company’s success in attracting such category of customers and serving them by providing excellent, personal service, generated loyal customer base and created a cult following.
• New Market Proposition/Idea: At early stage, Starbucks did not have a credible competition  and

their concept of creating a social experience was new in the market which caught the imagination

  of the customers creating a path to success for Starbucks.

Lack of Satisfaction: In the case there are some indicators which show that customers feel the lack of satisfaction but it cannot clearly attributed towards the lack of service or the service is not up to the standard. Moreover, the decline in customer satisfaction scores could be attributed to the first time customers (Refer Exhibit 8), as opposed to  those who have been customers for more than 5 years and have a better overall satisfaction with Starbucks. This leads to a fair assessment that customer service provided by Starbucks has not necessarily changed. It could be the result of the difference in the expectations of the new customers. Another reason could be the inability of the Starbucks to consistently meet the extremely high standards set initially through value proposition. The standards were met in the beginning but it seems the rapid expansion of the company and very high choice in product selection and customization had a negative effect on the consistent provision of value proposition affecting all the components e.g. coffee quality, service, and atmosphere which may have resulted in the decline of customer satisfaction. The product or drink customization, which offered so many choices, affected the speed of service as shown in the customer survey thereby affecting the scores. This could have led to the aspect of affecting customer intimacy because the partners probably were not able to provide the kind of service as prescribed in value proposition.