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In 1971, starbucks was opened by three fanatics named as Gerald Baldwin, Gordon
Bowker and Ziev Siegl. It was built on a dream to make it a third place for people after
work and home. It was intended to be a place to relax and enjoyment. By 1992,
Starbucks had 140 stores in northwest and Chicago. It was competing with brands such
as Gloria jeans coffee bean and Barnies Coffee & Tea. The sales were going up and up.
The successful thing about the Starbucks was the immense sales with no cent spent on
the advertising. The strategy that led to the success was the live coffee mantra. The
starbucks actually made the coffee in front of the customer. This strategy had three
components which made it a big success. The first component is coffee which was of
high quality imported from Africa, central, South America and Asia Pacific regions. The
green coffee beans went through a custom roasted process. The second component
was the service given to the customers. The aim was to create an uplifting experience
for each time you visited the Starbucks. The last component was the atmosphere.
People come for coffee but ambiance will make them stay. The environment of starbucks
was designed to create an inviting appeal for people who wanted to linger. The
environment was set on the sense of community and brought people together.
The Starbucks outlets were company operated in high traffic and visibility which
attracted large number of customers. This location of starbucks also played an important
part in the success of the starbucks. It was available where people needed coffee such
around universities, offices and etc. the major chunk of the profit came from the
beverages. To enhance its reach to customers, starbucks sold coffee through non
company operated outlets. These outlets were called as specialty stores. Moreover,
starbucks also sold coffee to restaurants, hotel, airlines and etc. few outreached areas
were catered by availability of coffee at retail stores. These all contributed to 45% of
sales of starbucks. The remaining 55% was made through international licensed
stores,grocery stores, warehouse clun, online and mail order sales. Starbucks also
made a joint venture with Pepsi to distribute bottled Frappuccino beverages in North
America. The partnership was done with dreyers Ice Cream to develop and distribute a
line of premium Ice creams. The companys broad distribution strategy was with the goal
to reach where ever their customer existed. They wanted people to try starbucks even
before they paid first visit to starbucks.
The next step which helped in success of the starbuck was its relationship with
employees. The employees at starbucks were called as partners. Starbucks believed
that employee satisfaction can lead to customer satisfaction. Employees were given
promotion within their ranks. The employees had to undergo two types of trainings. The
first type focused on hard skills and other on soft skills. The soft skills focused on
connecting with customer through conversations, eye contact, smile and try to remember
their names. The starbucks had a policy called just say yes which stressed upon
accommodating customers when they complain or spill coffee. They had to go any level
to retain customer even if starbucks had to give free coffee to customers. The least
option was to say no and loose a customer.
They are planning to invest $40 Million annually to 4500 stores of starbucks, want to
increase 20 hours of labor a week, idea behind is to improve speed of service and
increase customer satisfaction so that it could contribute to overall increase in profits.
Quantitative measures are given that a satisfied customer would visit 4.3 times per
month to starbucks, would spend $4.3 per visit on average and his life time value would
go for 4.4 years but for highly satisfied customer theses figure are very attractive and
company would try to convert satisfied customer to highly satisfied because it is
contributing more to generation of revenue, he visits 7.2 times a month and spends
$4.42 per visit on average and average lifetime value is 8.3 years.
Worth of customer for firm = lifetime value visit times per year spends $per day