What Does Starbucks’ Sell?

What does Starbucks’ sell?

In a literal sense Starbucks sells coffee, however the true value proposition Starbucks seeks to deliver to its customers are 1) a high quality product - 'highest quality coffee in the world", 2) superior customer service - referred to as "customer intimacy" which broadly translated to providing an uplifting experience to every customer that walked through the door 3) finally Starbucks offered a unique atmosphere and a unique ambience that encouraged those that visited its outlets to stay.

How do they justify such a premium price?

The premium pricing is to a large extent justified by the effective delivery on the various components of the value proposition. The unique combination of quality, service and atmosphere Starbucks offered warranted a premium price.

What is the profile of their customer(s)? Can you foresee any conflict?

The customer profile has evolved. Starbucks newer customers tend to be younger, less educated and in a lower income bracket. These customers view the Starbucks brand differently to established loyal customers. More importantly they have not developed the level of "brand loyalty" as typically they are outside of the Starbucks targeted segment of white collar workers who are willing to pay a premium price for a "high quality" product as evidenced by Exhibit 8.

I don't know if I see a conflict, rather I see an opportunity. Starbucks appears to have attracted these customers without any real focused effort the challenge now is to understand what it takes to convert this demographic to loyal customers who are evangelists for the brand without sacrificing its core identity. The key to achieving this in my mind to raise awareness of the value proposition and Starbucks determination to deliver in this area as this is the only way Starbuck can justify its premium price - currently only 8% believe that Starbucks is worth paying more for. Across the board there is a significant disparity between new and established customers "attitude towards Starbucks"; the challenge and opportunity is to narrow this gap.

What are the main challenges they are facing?

• General decline in customer satisfaction

• As mentioned previously a changing customer profile that may warrant review of the value proposition

• Perception of the brand and organisational ethos - view that Starbucks is more interested in expanding and making money than providing quality customer service.

• Lack of product differentiation