Starbucks: Delivering Customer Service
In late 2002, Christine Day, Starbucks’ senior vice president of administration in North America, discovered that the company was not meeting customer expectations and that there was a decline in customer satisfaction. Day attributed the decline in customer satisfaction to a service gap, particularly service speed. Day must decide whether she will proceed with her plan to invest an annual $40 million across its 4,500 company stores. The investment would allow each store an additional 20 hours of labor per week. The objective is to improve service speeds and in turn increase customer satisfaction.
We recommend that Starbucks proceed with the ...view middle of the document...
In addition to training new employees on “hard skills,” it trained each on “soft skills.” This training focused on enthusiastically greeting each customer making them feel welcome. They encouraged baristas to engage with customers on a personal level and eventually remember their names and orders if they were regular customers. Starbucks also had a “Just Say Yes” policy that encouraged partners to go beyond company procedure to ensure customer satisfaction. Howard Schultz was confident that satisfied partners translated to satisfied customers. For this reason, Starbucks partners were well-paid hourly workers with benefits and stock options. As a result, Starbucks had one of the lowest employee turnover rates in the industry, only 70% compared to other fast-food retailers at 300%. Low turnover and the company’s practice to promote from within allowed partners to stay in the organization longer allowing them become more experienced in treating customers while providing faster service.
The final component of the value proposition was atmosphere. This was a result of Shultz’s objective to make Starbucks America’s “third place.” His goal was to create a place where people could go for the coffee and stay for the ambiance. He wanted to recreate the Italian coffee culture, which embraced the experience of enjoying coffee. The idea to attract customers to stay and enjoy a sense of community also helped to lead to secondary sales.
The Starbucks Customer and Brand
When Starbucks went public in 1992, it had only 140 stores in the Northwest and Chicago. Ten years later, Starbucks had exponentially grown to over 4,500 stores in North America. Its expansion strategy focused on selecting locations based on the profile of the typical Starbucks drinker, coffee consumption levels, and the intensity of competition. With this growth, came changes to the customer base and an evolving customer profile.
In 1992, the customer base consisted of affluent, mid-to-upper class professionals who were well-educated, skewed female, and were between the ages of 25 and 44. Customers in the early 1990’s went to Starbucks to enjoy their coffee and its culture. They identified Starbucks as being a trendy place where they could get high-quality coffee and partake in the coffee drinking experience that Schultz had visualized. The customer base in 2002 had changed to a younger, less well-educated customer in a lower income bracket. By 2002, the retail expansion had changed the norm from ‘customers going to Starbucks’ to ‘Starbucks going to the customers.’ This customer base liked the convenience of having a Starbucks on the way to work or their next meeting place. This group wanted to get-in-and-get-out.
Another consequence of their rapid growth strategy is how it affected their public image. A market research team discovered that the number of respondents who strongly agreed with the statement “Starbucks cares primarily about making money” went up from 53% in 2000...