Name: Zoha Kamal

ERP: 18481

Starbucks: Delivering Customer Service

Summary:
Senior vice president of Starbucks has come up with the plan to invest $40 million in the improvement of
services for customer satisfaction and has to make a final recommendation to the CEOs regarding this
investment. In 1971, Gerald Baldwin, Gordon Bowker and Ziev Siegl opened a small shop in Seattle’s Pike
Place Market that was specialized in selling whole arabica beans to a niche market of coffee purists. In
1982, Schultz joined Starbucks, shortly after joining Schultz travelled to Italy and there, he was inspired
by Milan’s coffee culture. Upon his return, he convinced the company to set up an expresso bar.

After a few years the founders sold the company to Schultz. As soon as he took over, he started opening
new stores, and decided to take the company public in the same year. By the year 2002, Starbuck’s sales
and net earnings had climb at a compounded annual growth rate (CAGR) of 40% and 50% respectively.
Around 20 million customers were being served in almost 5000 stores around the Globe. Starbucks’ brand
strategy reflected the importance of keeping the national coffee culture alive. The three main components
to the experiential brand strategy were - 1. The coffee itself 2. Services 3. Atmosphere. Almost all of
Starbucks’ stores were in high-traffic, high-visibility settings areas like office buildings and university
campuses etc. Starbucks sold coffee through company operated stores as well as non-company operated
retail channels called “Specialty Operations, it generated around 15% of company’s net profit. Starbucks
also had joint ventures with different companies.

All the employees of Starbucks were called “partners”, which mostly compressed of hourly-wage
employees called baristas. Schultz believed that partner satisfaction leads to customer satisfaction. The
partners had to go through many trainings in order to provide best service to the customers. Furthermore,
the company had several policies for valuing their partners, which in turn gave high partner satisfaction
and low employee turnover. Automated machines were added to decrease workload and increase
efficiency and consistency. Starbucks tracked store’s services performance using various methods, the
most prominent was the “Customer Snapshot”, to rate the store on four “Basic Service Criteria” - 1.
Service 2. Cleanliness 3. Product Quality 4. Speed of Service. Starbucks competed against several coffee
chains but still managed to stand out in the market.

The company’s overall objective was to establish Starbucks as the most respected and recognized brand
in the world. Company’s growth relied mainly on the Retail expansion and Product and service innovation.
Even though Starbucks was considered one of the world’s most effective marketing organizations, it
lacked a proper strategic marketing group and a chief marketing officer. On conducting a research, the
results showed that there was very little image or product differentiation between Starbucks and the
smaller coffee chains, and that the Company’s brand image had rough edges. The percentage of
customers believing that Starbucks only cares about monetary benefits and expanding the business, was
increasing yearly. Customers were evolving and Starbucks did not meet customer satisfaction despite high
“Customer Snapshot” score, so it was decided to provide the best customer service to the customer
especially by increasing the Speed of Service. And that it was worth adding $40 million for customer
satisfaction.