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Starbucks Presentation
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  • 1. At the Outset • A market research report indicates – not meeting customer expectations in terms of service • To increase customer satisfaction, company plans to increase labour force in stores thus increasing speed of service • However, this cost ($40m) could hit the bottom lineWhere it all began… • • • • •3 coffee fanatics – Gerald Baldwin, Gordon Bowker & Ziev Siegel Specialized in selling „arabica‟ beans Create the 3rd home – Home, Office & Starbucks Coffee Shop By 1992, 140 stores In 1992, decided to go public & raised $25m
  • 2. Benefits of going public • By 2002, sales climbed at CAGR of 40% • Since IPO, net earnings risen at CAGR of 50% • Now serving 20 million unique customers • 5000 stores around the globe • On an average, it opening 3 new stores a day • Spent almost nothing on advertising: – Focused on point-of-sale branding – Local-store marketing
  • 3. Store Statistics FY 1998 Total North America (Stores) Company Operated (%) Licensed Stores (%) Total International (Stores) Company Operated (%) Licensed Stores (%)FY 1999FY 2000FY 2001FY 20021755221729763780457492.42 7.5891.93 8.0782.19 17.8178.60 21.4076.43 23.57131 50.38 49.62281 34.52 65.48525 32.95 67.05929 31.75 68.251312 29.27 70.73# Total North America: Steady rise in number of Licensed stores # Total International: Steady rise in number of Licensed storesNorth America Company Operated Stores (FY2002) Details Average Average hourly rate with shift supervisors & hourly 9 partners Total Labour hours per week, average store 360 Avg. weekly store volume 15400 Avg. Ticket 3.85 Average daily customer count, per store 570Unit $ Hours $ $ People
  • 4. Starbucks Value Proposition • Creating an „experience‟ • An experience that could weave into the fabric of their daily life • Their ‘Experiential Branding Strategy’ – Part 1: The Coffee (The Product) – Part 2: Service (Customer Intimacy) – Part 3: The Atmosphere (Ambience)
  • 5. Channels of distribution • Philosophy – To reach customers where they work, travel, shop & dine • Channels – Starbucks Coffee Shops – Specialty Operations (Retail channels) Product Mix, North America Company-Operated Stores FY2002 Retail Product Mix Coffee Beverages Food Items Whole-Bean Coffees Equipment & Accessories% of Sales 77 13 6 4
  • 6. Starbucks Partners • • • •Employees called „Partners‟ Hourly-wage employees called „Baristas‟ 60,000 partners worldwide Partner satisfaction leads to customer satisfaction • Lowest employee turnover rates • Company encourages promotion within its own ranks
  • 7. Delivering on Service • Partners had 2 types of training – Soft Skills • Welcome customer to store, to smile, remember their names etc.– Hard Skills • Use Cash Register, Mix drinks etc.„Just Say Yes‟ Policy • Empowered partners to provide best service possible, even if it meant going beyond company rules • E.g. Customer spills drink & asks for a refill, we give it! • E.g. Customer doesn‟t have cash & wants to pay by check, then we give drink as a free sample • Don‟t want to win argument & lose customer
  • 8. Delivering on Service • Train Baristas – The complexity of the drink required them to be trained to make it in a given time – But if a customer walks in & asks for customization then the barista must be able to finish it soon without hampering other customer orders• Challenging Role of partners – In early days, easy to strike a conversation with customer & keep them engaged – But today long queues of customers at the door gives less time for a customer interaction
  • 9. Measuring Service Performance • “Customer Snapshot” – A Mystery Shopper program done 3 times a quarter – Speed of Service • How long did the customer have to wait? (Goal was to serve in 3 minutes from back of line to drink in hand)– Product Quality • Was the order filled accurately? • Was the temperature of the drink within the range? • Was the beverage properly presented?– Cleanliness • Was the store clean? The counters, the tables, the restrooms?– Service • Did the partner verbally greet the customer • Did they make eye contact & say thank you?
  • 10. Customer Snapshot Scores Service 94.5 94 93.5 93 92.5 92 91.5 91 90.5 90Cleanliness 93 949493.592.59391.6 91.29192.190.890.591.590 89.589.889.989 01-Q3 01-Q4 02-Q1 02-Q2 02-Q3 02-Q4 03-Q1Product QualityAvg. Wait Time (in minutes.seconds)92.5 929291.591.891.5 91.291909291.592.501-Q3 01-Q4 02-Q1 02-Q2 02-Q3 02-Q4 03-Q190.592.49290.490.6 90.201-Q3 01-Q4 02-Q1 02-Q2 02-Q3 02-Q4 03-Q13.35 3.3 3.25 3.2 3.15 3.1 3.05 3 2.953.3 3.25 3.2 3.15 01-Q4 02-Q1 02-Q2 02-Q3 02-Q4 03-Q1
  • 11. Measuring Service Performance • Parameters of Legendary Service – Initiating conversation with customer – Partners recognizing customer by name or by drink order – Partners being responsive to service problems• “Legendary Service” – A behaviour that created a memorable experience for the customer – That inspired the customer to return – That made the customer tell a friend
  • 12. Legendary Service Scores 100 90 80 70 60 5*504* 3*401 or 2 * 30 20 10 0 01-Q402-Q102-Q202-Q302-Q403-Q1
  • 13. Competition Store Name CaribouNo. of StoresNo. of States2009Differentiation Aspects Core Environment Look & feel of an Alaskan Lodge Fire Places & Soft SeatingPeet's Coffee & Tea705Freshest coffee in the market Roasting to order (Hand roasting small batches of coffee)Dunkin Donuts370038Flavoured coffee, Non coffee alternatives Dunkaccino (A coffee & chocolate combo)
  • 14. CAFFEINATING THE WORLD Two biggest drivers of company growth
  • 15. Retail Expansion Optimistic Growth Plan because: • Coffee consumption was on the rise in US • Specialty coffee, one-third coffee consumption outside of the home • 8 states in US without Starbucks • Scope for growth in existing markets
  • 16. Retail Expansion Strategy • Opening stores in new geographical area while clustering stores in existing areas. • Resulted in cannibalization but overall sales increased • Demographics, Competition , real estate • Company‟s goal to have 15000 international stores- UK, Australia, Asia, Japan
  • 17. Product Innovation • Introduced at least one new hot beverage every holiday season • R & D team: Product formulations, focus groups, in-store experiments, market tests • Drink fit into the ergonomic flow of operations • Importantly- partner acceptance • Most successful innovation- coffee and noncoffee-based line of Frappuccino beverages
  • 18. Service Innovation • Store-value card(SVC)-launched Nov 2001 • Prepaid, swipeable smart card- used to pay for transactions in any starbucks store • Cardholders- visit Starbucks twice as often • Card given as gifts introduced
  • 20. Starbucks‟ Brand Meaning • Little image differrentiation b/w Starbucks and smaller coffee chains • Starbucks focused primarly on making money and expansionBrand Meaning: • Everywhere- the trend • Good coffee on the run • Place to meet and move on • On the way to work • Accessible
  • 21. Changing customer • New customers- Younger, less educated, lower income • Less frequent and had different perception of Starbucks brand compared to established customers • Historical customer profile had expanded e.g. large Hispanic customers in California
  • 22. Driving customer satisfaction • Direct link b/w customer satisfaction and customer loyalty • Customer satisfaction gap due to service gap b/w scores on key attributes and customer expectations • Poll results showed that Starbucks needs to have friendly staff, faster service and better offers for loyal customers etc.
  • 23. Rediscovering The Starbucks Customers • Relaxing labor-hour controls, add additional 20 hours of labor, per week, per store. • Need to bring service time down to three-minute level • Increase customer satisfaction and build stronger long-term relationships • Improve customer throughput • Starbucks- establish connection between satisfying customers and growing the business
  • 24. Latte Experience “We Listen to the customer, Acknowledge their complaint, Take action by solving the problem, Thank them, and Explain why the problem occurred”
  • 25. Creating a difference • Microinteraction • App
  • 26. THANK YOU
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