1. What factors accounted for the extraordinary success of Starbucks in the early 1990s? What was so compelling about Starbucks value proposition? What brand image did Starbucks develop during this period? According to the case study, the three factors that accounted for the extraordinary success of Starbucks in the early 1990 are as follows: a. The first factor was “the coffee itself “– Starbucks believed that they offered their consumers with the highest quality coffee which was sourced from Africa, Central and South America, and Asia-Pacific regions.
Starbucks tactic was to corner the market by controlling as much of the supply chain as possible and also controlling the distribution of retail stores around the world. Starbucks worked with different regions to purchase its coffee. b. The second factor was “service” – this was also known by the company as “customer intimacy”. Starbucks had many loyal and frequent customers which made it easy for the employees to learn how to make the perfect cup of coffee must the way they like it.
This provided their customers with a good experience every time they walked into a coffee shop.
c. The third factor was atmosphere – Starbucks theory was to provide their customers with a cozy atmosphere inside their coffee shops. Their setup consisted of comfortable fashionable lounge areas which attracted all types of crowds. Starbucks coffee shops were scattered throughout all of North America and quickly started to expand their products by offering their customers more than just whole-bean coffee such as pastries, sandwiches, juices and sodas. Their strategy was to attract customers at grocery stores, where they work, dine and shop.
Their image was to get out there and be in the leading each of provide the best tasking whole-bean coffee while catering to their customers. 2. Why have Starbucks’ customers satisfaction scores declined? Has the company’s service declined, or is it simply a measuring satisfaction the wrong way? Starbucks marketing research team discovered that the Starbucks image had some rough edges and observed the following: a. There was very little product differentiation between Starbucks and smaller coffee chains. b.
During a survey, the number of respondents mostly felt that Starbucks was more about making money and building new stores than customer satisfaction. Their market research team discovered that Starbucks needed to start communicating their value and values to their customers and not focus so much on their grown plan. Based on a customer frequency analysis, Starbucks realized that their customer satisfaction and loyalty had both decreased. Their survey result with regards to improving customer service was to improve their speed of service. 3. How does the Starbucks of 2002 differ from the Starbucks of 1992?
In 1992 Starbucks had already expanded 140 stores Northwest and Chicago areas and was successfully competing with smaller coffee chains such as Gloria Jeans Coffee Bean and Barnie’s Coffee & Tea. During that same year, Starbucks decided to go public despite of the skeptics who thought that paying so much for coffee was ridiculous when they could purchase a copy of coffee for have the price at a local coffee shop. Going public was an excellent decision which helped raise $25 million which allowed Starbuck to continue expanding by opening more stores nation wide.
From 1992 to 2002 sales went up 40% since the company had gone public. In 2002 the company was servicing an average of 20 million customers in over 5,000 stores around the world and was opening on average 3 stores a day. Starbucks was so successful that it did not have to spend any money in advertising. 4. Describe the ideal Starbucks from a profitability standpoint. What would it take to ensure that this customer is this customer is highly satisfied? How valuable is a highly satisfied customer to Starbucks?
Starbucks like any other corporation out there has been dealing with major economic turmoil. We all know that because of the economic situation many have had to cutbacks on those non-essential expenditures. Nonetheless, Starbucks is big enough that they have created an oligopoly. But like any other company they face the increasingly large task of not only serve their clientele, but be able to still make a profit. In order to stay competitive and still be profitable they need to reconsider their current business plan and focus on the demand for the quality instead of the quantity.
The basis of this rationale would be to modify its business plan in order to respond to the needs of it clientele and be able to deliver on their wants. There is no such thing as an ideal profitability methodology, but if the product keeps its value and it is able to withhold its product differentiation as well as brand identification, the profit margin and its ROI would speak for itself. Starbucks has been a brand that consumers have been able to identify with for quiet some time.
By doing so, Starbucks would be able to ensure that their clientele is satisfied and forget about the barriers in which the company has had to face but still manage to continuously expand in the marketplace. With that being said, all customers are valuable, but those customers that meet specific criteria within an organization; such as, placing large orders and or buying products that are at a high profit margin, these are the customers that are not only profitable but are also the ones that are the highly satisfied with the product and its brand recognition.
If Starbucks continues to offer clean stores, high quality, fresh coffee, competitive pricing, friendly and speedy service among other attributes, they will definitely ensure for its clientele to be highly satisfied and continue to patronage the organization. A highly satisfied customer would be a returning customer that will create the revenue per customer that any organization seeks. 5. Should Starbucks make the $40 million investment in labor in the stores? What’s the goal of this investment? Is it possible for a mega-brand to deliver customer intimacy? Yes, Starbucks should invest.
This investment would allow for an atmosphere within the organization that would enable a more relaxed work force. This investment would also motivate its employees to provide a much highly customer based orientation and would motivate those to be more productive and to maintain the brand recognition that Starbucks has worked so hard to maintain. Subsequently, this would be seeing as an investment instead of an expense that would eventually create a much larger clientele based. Therefore, with that in mind that goal for this highly investment would be improve customer satisfaction.
To make available servers that can provide the customer service that it has been known from Starbucks. This would allow for a much shorter wait time and to be able to focus on what drives the organization-profit. These will eventually heighten the sales and the profits that will allow Starbucks to maintain its market share and its profitability regardless of the economic turmoil. Now, by outlining this investment and the goal of such, we can clearly state that this brand can deliver customer intimacy by focusing on its business plan and taking into action.
By means of brand recognition and by analyzing its structure this can improve the customer satisfaction which in turn would allow for the utilization of its employees more effectively. Creating intimacy involves more than meets the eyes, but if Starbucks creates a customer based feedback process in which the customers are provided with new products and they provide feedback in regards to this products this creates customer intimacy, customer retention and most importantly it allows for profitability driven and based solely on customer behavior. 6.
Bring the case up-to-date. Is Starbucks recession proof? What three or more recommendations would you make to improve on Starbuck’s current plan to complete in the current market? No organization is recession proof. Customers move our economy but with what our country is facing nowadays, no one can guarantee anyone else’s sustainability. For much time, Starbucks was considered to be a luxury that would never be harmed, but as we all have seen it, them as well as every other company out there has been hit hard and have had to deprive themselves from certain luxuries.
Starbucks isn’t the only company that has been faced with an unexpected downturn. Because of this unexpected occurrence, the consumer has had to be more cash minded and show more constrains as far as their expenditures are concerned. Therefore, in order for Starbucks to come afloat from the current economic downturn, they must first look at their Marketing Plan and how it can be modified to target a whole new consumer. Some of the recommendations that could be taken into consideration would be simple and effortless.
Strategies to consider: -Incentive /reward plans to its customers -Incentive to employees when they up sell merchandise -Tier the clientele ( Differentiate between regular clientele and those that visit the location sporadically -Provide free samples to the customers Michael Potter structured his competitive advantage work based on certain strategies that are beneficial for the overall interest of any organization and he based this on three simple strategies: cost leadership, differentiation and focus.