Starbucks Case Analysis

Starbucks Case Analysis

Starbucks Case Analysis Background Starbucks has always taken exceptional care in keeping its brand value. In fact, Starbucks prides itself in its brand, particularly the power it has to keep its customer base strong. Before analyzing this loyal customer base it is best to consider the particular characteristics of the brand that has led to Starbucks having such devoted patrons. First, Starbucks believes that the quality of its coffee products always needs to be perfect. Starbucks took quality control to a new level.

When the freshness of coffee bean shipments is in question, Starbucks donates those beans to charity by the thousands of pounds. In addition to this measure of excellence, Starbucks helped incorporate a new coffeehouse vocabulary throughout the United States found in no other establishment. Customers received whatever they ordered, from “dupio” to extra foam with “legs. ” Second, Starbucks began to offer an atmosphere inspired by what many would consider the Mecca of coffee: The Italian coffeehouse.

Starbucks believed that its customers should feel comfortable beginning their day at their shop, and end it in the evening socializing with friends there too. The atmosphere was specific to individual neighborhoods with either bar stools for the fast pace urban environment or more comfortable seating for those looking to relax and socialize. Starbucks’ Customer Base Starbucks’ unique brand-growing strategy has led to a sharp increase in its number of customers, revenues, and customer loyalty. According to O’Farrell (2011) Starbucks, “Holds around 33 percent of the market share for coffee (para. ). ” Specifically, this translates into sales of $10. 7 billion and a net income of $945 million in 2010 (Daily Finance, 2011). Moreover, Trevis (2010) projects, “An increase in daily customers per store from 468 in 2010 to 575 in 2016 (Para. 4). ” Starbucks’ brand value, its coffee quality, and the stores’ warm atmosphere have attracted a strong customer base, dominated by “49 percent men and women between 25 and 40, and 40 percent young adults aged 18-24 (O’Farrell, 2011). Where Starbucks’ adult customers prefer the “hip, contemporary [store] design, its younger adults are drawn to the cool mage cultivated by Starbucks’ marketing campaigns by way of ‘technology and social networking sites’ (O’Farrell, 2001). ” Adults value Starbucks’ ambience as a status symbol while younger adults appreciate the store’s smart combination of social and academic environments (O’Farrell, 2011). Clearly, a 33 percent market share for a price-elastic product (coffee) in today’s economic environment requires a strong marketing strategy, constant product innovation and product redevelopment to attract and retain customers.

Since it is difficult to measure customer loyalty effectively, Starbucks developed internal metrics, which partially capture customer loyalty. According to the Associated Press (2006), “96 million Starbucks cards have been activated since November 2001 [and these users have] reloaded their cards about 38. 6 million times (para. 7). As Starbucks’ customers sip their Grande Frappucinos and surf the Internet courtesy of Starbucks’ free Wi-Fi network, the seeds of loyalty spread quickly around the world. Product Issue

When Dorosin purchased the Estro 410 espresso machine inside a damaged box, the staff should have checked whether the machine was sellable and functional (see Exhibit 1). The staff’s behavior and excuses were unacceptable. Even though some damaged packages with functioning machines could be delivered from Europe, it was unacceptable to sell the machine in a damaged box to Mr. Dorosin. Negligence issues on the part of the store’s staff could be present as a result. There must be an inventory control issue and quality issue at Starbucks because the machine was rusty, had missing parts and was missing an instruction manual.

The store manager displayed a distinct lack of inventory and management skills. However, it could be that Starbucks had a lax inventory control system and quality management system. Even though the employees and manager have a partial responsibility for delivery of a malfunctioning espresso machine, Dorosin’s request was unreasonable. Replacing his malfunctioning Vapore machine with a much higher quality machine seems like a stretch. The higher quality machine, which Dorosin requested, costs $495 retail. Instead, Starbucks should offer Mr. Dorosin the price difference in a gift card.

With a gift card for the price difference between his Vapore machine and the higher quality machine, Starbucks is displaying goodwill toward Mr. Dorosin while hopefully maintaining him as a customer. Recommendations Starbucks’ regional manager should send a signed, written apology to Jeremy Dorosin on company letterhead (see Exhibit 1). An apology letter will not only comply with Mr. Dorosin’s request but it shows Starbucks’ culpability in what occurred. Since the employee involved in Mr. Dorosin’s negative experience was not displaying the traits of a model Starbucks barista (see Exhibit 3), the employee should be retrained.

The other employees and the manager of the store involved should also be required to go through retraining courses in order to not only show why what they did was wrong but how to behave in the future. One facet of the retraining should involve role playing (see Exhibit 4) in order to better understand real-life situations. In following these recommendations along with the gift card and machine repairs, Starbucks should be able to save face for its storied brand as well as maintain Mr. Dorosin as a loyal customer. References Associated Press. (2006). Starbucks cashes in on loyalty. Retrieved from, http://www. snbc. msn. com/id/16026540/ns/business-holiday_retail/t/starbucks-cashes-loyalty-card/#. TpdxPa65ra4 Daily Finance. (2011). Starbucks. Retrieved from, http://www. dailyfinance. com/quote/nasdaq/starbucks/sbux O’Farrell, R. (2011). Who is Starbuck’s target audience. Retrieved from, http://smallbusiness. chron. com/starbucks-target-audience-10553. html Trevis. (2010). Higher daily visits at Starbucks expected. Retrieved from, http://seekingalpha. com/article/232170-higher-daily-customer-visits-at-starbucks-xpected Exhibit 1: Letter of Apology October 19, 2011 To: Jeremy Dorosin From: John Rodgers

Re: Letter of Apology Dear Mr. Dorosin, I am writing to you in regards to our recent phone conversation. First, let me apologize for the customer service you received in our store. Care for customers has always been Starbucks’ standard of behavior, and we firmly believe “Only perfection will do”. Second, we are more than happy to do the following: * Replace the Estro 410 you purchased as a wedding gift * Replace your Vapore machine * Send you a loner Estro 410 while your Vapore is being repaired * Send you one pound of complimentary Komodo Dragon coffee * Send you a $120 gift card redeemable at any Starbucks We will cover the shipping costs associated with sending us the two defective machines. Please send me the receipts of your associated shipping costs and Starbucks will send you a check for the shipping cost value Again, please accept my sincere apologies for how you were treated. Your business is greatly appreciated! Do not hesitate to contact me directly regarding any issues you have regarding our offer. Thank you for your consideration. Sincerely, John Rodgers Regional Manager Starbucks Exhibit 2: Timeline Description| Issue| Jeremy Dorosin| Staff| Manager| | Purchase Estro Vapore Espresso machine ($ 298)| | | |

Request Estro Vapore repair| Repair request is acceptedGive Dorosin coffee machine on loan| | | Purchase Estro 410 model ($ 169) with damaged box for a wedding couple| Assure that there is nothing wrong with it| | Inventory ControlLack of Inventory function checking process| Find and complain that there are missing parts and no manual| Decline the free half-pound of coffee rudely| Promise the free half-pound of coffee| MiscommunicationEmployee’s service attitudeEmployee training| Repaired Estro Vapore is broken again| | | Quality control| Request the second repair of Estro Vapore| | | |

Request replacement with an upgraded machine ($ 495)| | Offer refund ($ 169)| | Request formal apology letter| | | | Exhibit 3: Barista Key Responsibilities* * Acts with integrity, honesty and knowledge that promote the culture, values and mission of Starbucks. * Maintains a calm demeanor during periods of high volume or unusual events to keep store operating to standard and to set a positive example for the shift team. * Anticipates customer and store needs by constantly evaluating environment and customers for cues. Communicates information to manager so that the team can respond as necessary to create the Third Place environment during each shift. * Assists with new partner training by positively reinforcing successful performance and giving respectful and encouraging coaching as needed. * Contributes to positive team environment by recognizing alarms or changes in partner morale and performance and communicating them to the store manager. * Delivers legendary customer service to all customers by acting with a customer-comes-first attitude and connecting with the customer.

Discovers and responds to customer needs. * Follows Starbucks operational policies and procedures, including those for cash handling and safety and security, to ensure the safety of all partners during each shift. Maintains a clean and organized workspace so that partners can locate resources and product as needed. * Maintains regular and consistent attendance and punctuality. * Provides quality beverages, whole bean, and food products consistently for all customers by adhering to all recipe and presentation standards. Follows health, safety and sanitation guidelines for all products. Recognizes and reinforces individual and team accomplishments by using existing organizational methods. * From the Starbucks website: https://wfa. kronostm. com/index. jsp? LOCATION_ID=3059208328&locale=en_US&applicationName=StarbucksNonReqExt&SEQ=postingLocationDetails&POSTING_ID=667441924 Exhibit 4: Role Playing Activity Scenario 1: Manager {acts as upset customer approaches cashier} – “My latte is cold. This is gross. ” Cashier – “I am sorry about that. Let me check the machine and we will gladly remake you a new one. ”

Manager {upset customer begins to calm down} – “Okay, thank you. Will you make sure to fill the milk to the top? ” Cashier – “Of course. We’ll get that to you right away. ” Scenario 2: Manager {acts as upset customer approaches cashier} – “I got home yesterday with this French press and it doesn’t have instructions. It is very inconvenient to have to make another trip here. ” Cashier – “That is odd. I’m so sorry about the inconvenience. Let me check one of our other French presses and see if I can retrieve a manual for you. ” Manager {waits for cashier to return}

Cashier – “Here you go Ma’am. I was able to find a manual for you. Again I am very sorry about that. Let me make you a drink on the house. What can I get you? ” Manager – “Thank you. That’s very sweet. I’ll have a tall skinny vanilla latte. ” Scenario 3: Manager {as customer Dorosin approaches} – “I really want this espresso machine, but the packaging appears to be dog-eared. Do you have another one in the back? ” Cashier – “Unfortunately, this is my last one. I’d be glad to check another store for you. ” Manager – “I really want to buy the machine today.

What if I get home and it doesn’t work? ” Cashier – “Definitely save your receipt. If for some reason it does not work, bring your receipt and the machine in its original box back here. We will exchange it here in the store for you. ” Manager – “Okay, I’ll go ahead and buy it. I’d like Komodo Dragon as my complimentary coffee. ” Cashier – “Good choice. I’ll be right back with that for you. ” Cashier {hands over the coffee and completes the transaction} – “Here’s your Komodo Dragon coffee. Enjoy your new machine and have a great day! ”