Starbucks' decision to increase staffing and customer satisfaction

Starbucks: Delivering Customer Service

Starbucks, the American giant of coffee shops, is one of the classic success stories in an economy where service-based organizations like Starbucks hold the best potential for the establishment of highly lucrative market niches (Kline, 2005). That is not to say that Starbucks has not seen its share of challenges or has not been faced with having to make decisions which could be highly risky. Because of the success of Starbucks, dozens of imitators have tried to imitate, and topple the coffee giant, and because of this constant need to protect market share, Starbucks, at the time of this case study, is faced with the decision of whether or not to move with a plan to invest an additional $40 million annually in the company's 4, 500 stores, allowing each store to add the equivalent of 20 hours of labor weekly. This plan was driven by declining customer satisfaction.

In this marketing case study, the validity of the decision lying before Starbucks will be analyzed through the use of several effective marketing analytical tools; ultimately, recommendations based on this analysis will be presented.

Overview of Key Facts of the Case

To begin, an overview of the key facts, as made available in the data provided for the Starbucks case is presented; as was stated in the Introduction to the study, Starbucks is faced with a pivotal, multi-million dollar decision to increase staffing in their many nationwide locations. The reason for this course of action is based upon declining customer satisfaction, which the management of the firm has identified as the key element which is causing Starbucks to lose market share. Key metrics have been captured by Starbucks in an effort to quantify customer satisfaction, or the lack of it. By utilizing the metrics collected, it is possible to harness the data into accurate marketing analysis, which is shown and discussed in the subsequent sections of this case study.

Gap Analyses

To begin a more in-depth analysis of Starbucks and its possible decisions, we begin with Marketing Gap Analyses, compiled from actual Starbucks customer satisfaction surveys conducted in 2002, as follows:

GAP ANALYSIS 1- TANGIBLES

Tangible Criterion Being Evaluated

Measured Customer Expectations

Management Perception

Clean Stores/Better Atmosphere

92% feel expectations met

Management agrees

Coffee Taste/Product Quality

91% feel expectations met

Management agrees

Product Selection

92% feel expectations met

Management agrees

Fair, Competitive Pricing

89% feel prices are fair

Pricing is acceptable

When these Tangibles are presented in terms of the gap between what the customer has actually expressed when surveyed, there are some broad conclusions that can be drawn: overall, the data indicates that Starbucks' customers are overwhelmingly satisfied with the cleanliness of the stores and the range of products offered as well as the quality of the products that are offered. Pricing is seen to be acceptable by the majority of the customers, which can be interpreted in a variety of ways: as a discretionary product, Starbucks Coffee is not positioned as a low priced alternative to other offerings, nor is it priced for the mass market as a more utilitarian item. Therefore, the pricing should be somewhat competitive with the other companies offering the same or similar products, but price is not the main factor which drives loyalty to Starbucks, according to other sources (Brown, 2004).

In a business like that in which Starbucks in engaged, the Intangibles are just as important as were the afore discussed Tangibles; therefore, a Gap Analysis for Intangibles was performed:

GAP ANALYSIS 1- INTANGIBLES

Intangible Criterion Evaluated

Measured Customer Expectations

Management Perception

Treatment as a "valued customer"

81% felt "valued"

Management recognizes need to improve customer service; currently evaluating ways to do so Faster, more efficient service

90% felt service was fast and efficient

Management currently feels that additional staff will remedy this deficiency

Free products/promotions

31% expressed an interest

Management should take closer look at this metric

The examination of the Intangibles is more telling from several points-of-view; first, customers saw more room for improvement in these areas, showing that it is not the physical Starbucks location, its products or prices that are the key issues for customers; rather, customers would like to see improvements in the treatment that they receive by staff, rapidity of service when they visit the location, and an overall "better experience" when visiting Starbucks. In these perceptions, management agrees, which is why the huge investment in human resources is on the table at the time of the case study.

Moving forward from the closer look into the marketing surveys that were conducted with Starbucks' customers, it is equally important to gain more insight into the behaviors, expectations and perceptions of customers. By observing these factors, and attempting to draw informed conclusions about them, a more effective decision will be able to happen on the part of Starbucks' management.

Customer Expectations-Perceptions-Behavior

The following analysis was performed in an effort to gain more customer insight:

CUSTOMER BEHAVIOR-EXPECTATIONS-PERCEPTIONS

Customer Expectations

Customer Perception

Customer Behavior

Fast service

Many feel service is too slow

Could go elsewhere

Special" treatment

Many would like better treatment

Dissatisfaction-could leave

Quality and variety

Customers satisfied with product

Would not leave based on this Fair, Competitive Pricing

Most feel prices are fair

Service Recovery

Now knowing that Starbucks is in need of Service Recovery efforts if its downward trends are to be reversed, the strategies that will be used in order to facilitate proper Service Recovery are essential. In no particular order, the Service Recovery strategies that need to take place are as such:

FASTER CUSTOMER SERVICE- Research has indicated that Starbucks customers are looking to be served faster when they visit the stores; because of this, the need for recovery in the area of speed of service is confirmed.

FRENDLIER CUSTOMER SERVICE- Along with speed, the customers would like to have service which is more friendly; the customer service element adds to the customer experience (Roney, 2004), and the treatment by servers is as important an ingredient as anything that they drink from their coffee cups.

PRICING- While a minor issue in comparison to the former and latter, perhaps the pricing needs to be revisited, although not immediately, since the other two Service Recovery priorities are much more pressing.

Conclusions and Recommendations

The analysis of the case study presented, as well as additional research has led, in conclusion, to some major recommendations; first, as an observation, there is a definite link between customer satisfaction and the bottom line in this situation, as it is likely that customers will, and can easily, go elsewhere as opposed to Starbucks; therefore, the expenditure in the area of personnel is warranted. However, simply hiring more people is only a part of the solution; in addition, these new employees, as well as current employees need additional training in order to allow them to serve customers more rapidly and in a more friendly manner. These goals should be tied to a compensation/bonus program for employees if the levels of customer satisfaction in the areas of improvement are enhanced. By doing so, the needs of the firm, its customers and employees are all met, thereby fulfilling the role of an effective business entity.