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Starbucks: Delivering Customer Service

Q1. Schultz owned Starbucks in 1982 after the brand realized great progress with Schultz as the marketing team member. With the idea of developing a coffeehouse chain, fresh stores were introduced by Schultz. The brand used a premium price strategy to market its products such as coffee, drinks, and other beverages. The brand covered customers within the age group of 25 to 44 years with cultured and white-collar consumers. The brand successfully launched 140 stores in Chicago and Northwest till the year 1992. By 2002, the company enjoyed compound annual growth rate of about 40 per cent and presently operates 5000 stores serving over 20 million customers across the globe (Moon & Quelch, 2003).

According to the market research report, considering the area of evolving customer base of the Starbucks, the issues Christine Day faced had arisen due to the incapability of meeting and satisfying customer requirements, requests, and expectations (Hill & Brierley, 2017). Although the company was recession-proof but it still lacked the potential to meet the customer demands satisfactorily. As a result, Christine with her team planned to invest $ 40 million every year for their 4500 stores to serve equal labour time of 20 hours per week in every store (Moon & Quelch, 2003). The purpose of this approach was to enhance the speed of the service so as to contribute more to the area of customer satisfaction. 

Q2. In order to enhance the performance of Starbucks, maintaining low turnover rate of employees is more important and effective than investing on the new ones (Employee recruitment). This is because of the reason that satisfied employees and the store managers lead the business towards achieving greater productivity and enhanced performance or progress level. Moreover, the same strategy contributes in retaining the customer base and attaining the customer satisfaction within the business (Mone & London, 2018). Manager and employees are the cores of the business that identifies potential and loyal customers of the business strategically by offering personalized services to them (Nariya, 2018). The brand needs to focus more on the service delivery rather than recruiting new employees. They need to conduct more training sessions involving cash register utilization, training or mixing the drinks, etc. for the existing employees. Apart from the same, they need to focus more on enhancing employee soft skills to connect and bring other companies into the deal. These soft skills including smiling, maintaining eye contact with customers and the like enable employees to interact efficiently, effectively, and harmoniously with the customers. Other factors that the brand needs to focus more while planning to elevate the brand’s performance include maintaining store hygiene, cleanliness, and product quality, provide speedy delivery or service, and thereby enhance service performance (Tomic, Tesic, Kuzmanovic & Tomic, 2018). The brand may gain competitive advantages through innovating products, updating according to the evolving customer preferences, launching new stores in the areas where required, focusing on product sales, and modifying the expansion strategies.  

Q3. The explanation for the investment of $ 40 million per year on increasing the employee hours at stores and calculation of break-even analysis:

It has been observed that the company has transformed unsatisfied customers to satisfied ones by reaching profits up to the level of $ 28 per year which is followed by $ 172 gain through the transition of satisfied ones to extremely satisfied customers. At the same time, COGS is observed to be 41 per cent of the business revenue. It has also been evaluated that 34 per cent of the customers use services at a sore point. Furthermore, it has been analyzed that 34 per cent of the clients in each category will shift towards the next higher group. Following mentioned table shows an average number of client migrations required to complete breakeven investment of $ 40:

By analyzing the same, it has been observed that average hourly rate is $9 and average employee hours are 360 per week, therefore, the average cost will be $ 3240. This implies about 577 customer count will be required to increase on a daily basis in order to make the potential investment valuable. 

Q.4 Starbucks considers customer service as an integral part of their business. In order to improve and enhance the business performance, speeding up customer services and deliveries is the best criteria they may work on (Tomic, Tesic, Kuzmanovic & Tomic, 2018). Thus, Starbucks must progress on the same parameter. Customers demanding high-speed services demonstrate the gap between the customer’s expectations and the company's target. With the purpose to fill the same gap, Christine Day plans to invest $ 40 million per year so as to increase the employee working hours to deal with maximum customers. Moreover, the company needs to achieve the break-even point by gaining the daily customer counts by 577 or enhancing the average ticket size up to $ 3.9. However, 74 extremely satisfying customers are required at each store to expect great sales and customer retention within the business (Moon & Quelch, 2003). 

Q5. Starbucks operates in two major segments including existing customers and the new customers. The existing ones like to get customized and personalized service attention while new customer segment always demand for fast service delivery. Existing customer segment being more loyal to the brand puts more pressure on the company as compared to the new ones. However, the company needs to increase more labour to satisfy both the segments simultaneously. For the fresh client segment, they must undergo recruiting more employees who can strategically convince and deal with the customers to gain customer trust and satisfaction by serving them with the speedy services (Moon & Quelch, 2003). The brand must collect feedbacks from the served customers using client snapshot scores to measure the level of satisfaction they were able to provide to the customers as compared to the previous year. This will help them to address the client issues as well as connect the link between the satisfaction level and the customer trust (Kauppinen, 2018). The service gap between the main attributes of Starbucks and customer experience being the major issue faced by Starbucks hinders entertaining clients as they expect. So, the company must ask customers to participate in polling sessions which would carry questions related to the brand’s price, quality, value, speed, service, store location, etc.   This will help the brand to identify and resolve the issues raised by the customers in the polling sessions while they avail services provided within the business. Considering the customer opinions and feedbacks will ensure more products innovation and help business grow rapidly (Kauppinen, 2018).      

Q6. The company’s main purpose is to launch Starbucks as the most renowned and appreciated brand across the globe. In order to achieve the same, the company has carried out three factors including retail expansion, service innovation, and product innovation. Throughout its operations across 400 stores and plan to open 10000 more, has enabled the company to set up and implement its retail expansion strategy. On the other hand, product innovation is the biggest factor concerning the growth of the Starbucks.  The brand launches new product every holiday season to encourage product innovation within the organisation (Moon & Quelch, 2003). Although the service innovation was being launched in the year of 2001 which allowed prepaid and swipe-able smart cards for customer transactions, the company still faces issues like service gap between them and the customer section. While at the same time, evolving customer preferences and customers with young age groups receiving low pay have restricted the brand lacking competitive pricing strategy to ensure high sales to the business. Even though the brand is considered to be the most effective organisation but its absence in the strategic marketing processes results in various issues disturbing the business growth and revenues of the brand. Thus, organisation must have a chief marketing officer to report him the marketing issues and ideas. Also, all the three departments must interact to communicate all the information and updates important to the business (Olson, Slater, Hult & Olson, 2018). 

Q7. Starbucks implementing the brand extension strategy would help serving both the target customer segments strategically and satisfactorily. The brand expansion is used to launch the new product into the company (Park & Kim, 2018). The brand extension strategy enables the organisation to expand their services and increase the market share which enables the company to serve almost all important customers through operating various stores at a time. This strategy helps supply the original product in a new way. The product extension being the part of the brand extension is the version of the same product as it helps to increase the potential customer’s base and target market base (Park & Kim, 2018). According to the market research survey, consumers like purchasing new products with popular brand names. However, both the customer segments receive something different or new products from a particular brand they trust. The brand extension strategy applied within the organization helps to retain and acquire existing as well as new customers. Therefore, this only strategy may help the Starbucks to develop new product and innovate which would enable the brand to launch coffee and non-coffee product line. The same product line will help convincing and attracting both the customer segments to the brand (Park & Kim, 2018).

References

Hill, N., & Brierley, J. (2017). How to measure customer satisfaction. Routledge. doi: https://doi.org/10.4324/9781315253107

Kauppinen, M. (2018). A customer satisfaction survey: a case study of Company X. doi: http://urn.fi/URN:NBN:fi:amk-2018053111401

Mone, E. M., & London, M. (2018). Employee engagement through effective performance management: A practical guide for managers. Routledge. doi: https://doi.org/10.4324/9781315626529

Moon, Y., & Quelch, J. A. (2003). Starbucks: delivering customer service. Harvard Business School. Retrieved from https://s3.amazonaws.com/academia.edu.documents/44207169/C_Starbucks_Delivering_Cust.pdf?response-content-disposition=inline%3B%20filename%3DStarbucks_Delivering_Customer_Service.pdf&X-Amz-Algorithm=AWS4-HMAC-SHA256&X-Amz-Credential=AKIAIWOWYYGZ2Y53UL3A%2F20190707%2Fus-east-1%2Fs3%2Faws4_request&X-Amz-Date=20190707T110444Z&X-Amz-Expires=3600&X-Amz-SignedHeaders=host&X-Amz-Signature=e6f8e64f259ba62edff3b94e9256ad0220f4ef130b908e2fe154166907306842

Nariya, U. (2018). Employee engagement at work with reference to self-motivation. Retrieved from http://library.atmiya.net:8080/dspace/bitstream/handle/123456789/3673/177030592077%20-%20Uttam%20Nariya.pdf?sequence=1

Olson, E. M., Slater, S. F., Hult, G. T. M., & Olson, K. M. (2018). The application of human resource management policies within the marketing organization: The impact on business and marketing strategy implementation. Industrial Marketing Management, 69, 62-73. doi: https://doi.org/10.1016/j.indmarman.2018.01.029

Park, J. H., & Kim, S. I. (2018). Brand extension strategies for efficient utilization on office space-A study on brand extension of Starbucks. Journal of Digital Convergence, 16(2), 299-304. doi: https://doi.org/10.14400/JDC.2018.16.2.299

Tomic, I., Tesic, Z., Kuzmanovic, B., & Tomic, M. (2018). An empirical study of employee loyalty, service quality, cost reduction and company performance. Economic research-Ekonomska istraživanja, 31(1), 827-846. doi: https://doi.org/10.1080/1331677X.2018.1456346

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