mkt 3000 | Starbucks | Delivering Customer Satisfaction Case Analysis | | Nathan Hood | 9/30/2013 |
1. What explains the Starbucks success story?
The success Starbucks saw in the early 1990’s is a result of Howard Schultz’s vision for the company. Schultz’s goal was not primarily about the coffee itself; it was about creating an experience around drinking coffee in a Starbucks store. He wanted to create a “third-place” for those whose lives were centered on home and work. In creating this experience, Schultz focused much of his attention and resources on customer satisfaction, which lead to Starbucks’ quick success. There were a few key elements of the Starbuck’s value proposition that led to its success; coffee
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Profitability of a customer is also determined by the number of times they return. With that being said, according to Figure 8, the customers who are more satisfied with the current state of Starbucks are thee established customers (those who first visited 5+ years ago). If Starbucks wants increase profitability they should focus more attention on these customers. Based on my calculations a satisfied customer visits Starbucks 4.3 times a month and spend approx. $4.06 per visit with an average customer life of 4.4 years, resulting in about $921 in revenue for Starbucks. A highly satisfied customer, however, visits 7.2 times a month, spending $4.42, for 8.3 years resulting in over $3,100 in revenues. As you can see a highly satisfied customer is much more valuable to Starbucks than a satisfied one. One of Starbucks major problems came as a result of its expansion strategy. In 1992 Starbucks had 140 stores. In 2002, it established itself as the number one coffee store in the world with over 4500 stores worldwide. During these years of expansion Starbucks image began to change. In the process of opening so many new stores, the values once placed in the company began to dissolve quickly. They began to care more about how much money could be made by opening new stores than the money being lost in the stores already open. The retail