Customer Satisfaction Issues That Starbucks Is Facing - Coursework Example

?Starbucks Table of Contents Introduction 3 A. The Case Highlights Satisfaction Issues That Starbucks Is Facing. Should Starbucks Worry About Customer Satisfaction? Why? 3 Customer Satisfaction Issues 3 Should Starbucks Worry about Customer Satisfaction 5 B. Should Starbucks Make The $40 Million Investment? Why? 7 C. Irrespective Of Your Answer To The Previous Question Now Assumes That Starbucks Has Decided To Go Ahead With The $40 Million Investment. How Would You Go About Evaluating Whether This Investment Was Worth Making? 10 Evaluation of the Effectiveness of the Investment 10 Conclusion 12 References 13 Bibliography 15 Introduction In 1971, Jerry Baldwin, Gordon Bowker and Zev Siegal start up a coffee store in Washington in the heart of Seattle’s Pike marketplace. During 1987, Mr. Schultz purchased the store and started expansion of the business outside the Pacific Northwest and Chicago. In 1993 Starbucks registered under company rules and started selling share to expand its business world-wide (Starbucks Corporation, 2013; Lee, 2009). Starbucks wanted to establish itself as the premier seller of the most favourable coffees globally. The company was committed towards ensuring and incorporating exceptional business principles, ethics, corporate social responsibility as well as unique product and services. The mission as well as vision of the company duly focused upon the motto "inspire the human spirit." During the year, 2002, Starbucks conducted qualitative research wherein it was discovered that the brand image of the company was deteriorating. As a result, Starbucks has been extensively concerned about its eroding customer base and reducing level of customer satisfaction. The company was duly committed towards mitigating the problem of reducing customer base in order to return to the mainstream of growth and expansion in the global market (Moon & Quelch, 2006). A. The Case Highlights Customer Satisfaction Issues That Starbucks Is Facing. Should Starbucks Worry About Customer Satisfaction? Why? Customer Satisfaction Issues The research team of Starbucks discovered that there persists a radical gap between the level of customer expectations in terms of product and services and company’s offering. Contextually, the Starbucks discovered several customer satisfaction issues which were hampering the overall competitiveness of the company in its global operation. This ultimately led the company to place due consideration to resolve these issues in order to remain viable at the marketplace and to gain greater competitive advantage over its rivals. Few important issues considered by the company are revealed below. . Consumer Frequency as well as Loyalty Issue The scores of customer satisfaction obtained from the qualitative research was taken into due consideration by the organisation because this factor was directly related with the customer loyalty and its overall performance. To ascertain the degree of customer loyalty, the researchers were concerns about analysing the data of customers’ frequency of visit in the Starbucks coffee stores. According to the research, it was found that 21% of its total customer visits the company’s stores more than 8 times per month while 37% of customers visit 3 to 7 times per month. At the same time it was ascertained that 42 % of customers visits just 1 to 2 times per month at the Starbucks stores. Source: (Moon & Quelch, 2006) This research data revealed the negative impact on the organisation in terms of customer loyalty as well as level of customer satisfaction (Moon & Quelch, 2006; Hurth, 2006). Starbucks Brand Image The organisation also concerns about few more important attributes which were associated with the Starbucks brand image. Firstly, the researchers were concerns regarding the customers’ awareness about the speciality of Starbucks gourmet coffee. Through this analytical study the researchers discovered that 54%of customers were fully agreed about the Starbucks speciality coffee and they were aware about this product. Secondly, in relation to preference of customer ton visit in the Starbucks stores, 39% of customers strongly agreed in favour of the company. These analytical data undoubtedly revealed that the brand image of the company had declined due to reducing level of consumer satisfaction couple with reduction in the sale of its core product (Moon & Quelch, 2006; Maguire, 2007). Changing Trends It has been widely observed that the expectations of the global customers were changing radically over the years. Owing to the changing customer expectation, Starbucks was imposed with fierce competition at the marketplace. Contextually, every organisation in the industry was committed towards attaining increased competitive advantage through effective understanding of the changing customer needs and requirements. In relation to understanding the anticipated consumers’ perception especially related with the young generation, the organisation was lacking behind in terms of innovative managers and leaders as well. . As a result, a severe decline was noticed in the organisation regarding innovativeness in terms of product mix and services (Moon & Quelch, 2006; Bosch & Lehndorff, 2004). Should Starbucks Worry about Customer Satisfaction In relation to customer satisfaction and loyalty, Starbucks should place due concern regarding its brand image, product mix, services, employee satisfaction and innovativeness among others in order to attract and meet the needs of discriminating customers spread globally. The primary reason behind this can be associated with profitability of the organisation which is predominately interwoven with the customer loyalty and the frequency of the customers’ visit to the company’s stores. The customer loyalty and frequency value can be measured successfully through the following formula, i.e. Value from customer= Number of visit/month*customer life (Number of year * 12)*average expenses. The application of this formula and the result obtained thereon firmly reveals that the profitability, expansion and sustainability of an organisation is largely attributed with the increasing the customer frequency and loyalty. Besides, the customer satisfaction and sustainability of the organisation also predominately depends upon product quality, service innovativeness and price (Marangos, 2009). Therefore, to enhance the aforesaid factors, the organisation should concentrate on developing and consolidating supply chain for building direct relationship with the farmers. This method would be helpful for the organisation to obtain quality coffee bean with least price. It is highly required for the organisation to reduce the product cost and improving the quality. Secondly, the company should focus on innovative methods as well as training and development of the employees for attracting the young generation and enhancing the customer satisfaction and loyalty (Marangos, 2009). On the other hand, the critics often have argued on the authenticity of research findings. They denied that it is extremely hard to determine the level of customer loyalty and satisfaction based on the research data. According to them, the quality of customer services were not declined, but it should be rightly explain that the satisfaction level of the consumers were increasing owing to the presence of large number of competitors. Nonetheless, other external factors such as economical, social, and cultural among others were also responsible for increasing the level of customer satisfaction. Therefore, the actual problem for the company was not related with the customer satisfaction measures instead the company was imposed with radical threat from its competitors. Contextually, the organisation should be more cautious about investment to increase the competitiveness and further it should strive towards providing the unique experience to the consumers through improved products and service quality (Marangos, 2009). B. Should Starbucks Make The $40 Million Investment? Why? The investment of money for any particular object in the organisation initially requires analysing the requirements and prospects of return from the investment intended to execute. In this context, if Starbucks make invest $40 million annually for enhancing the services in the 4500 coffee stores, the investment will be divided around $8889 for each store. The main problem with the organisation was primarily related with the reducing level of customer satisfaction and brand image. Nonetheless, the key objective associated with the investment was predominately concerned with enhancing the service speed equal to additional 20 additional hours of labour per week in the existing stores. It was observed that the average customer count per store was approx 575 per day. Therefore, the investment in this context would be around 8% of their average revenue earning. Contextually, the researchers found that only 10% customers were not satisfied fully with the services offered by the company’s stores. Besides, the speed of services is not related with the customer satisfaction, so undoubtedly this investment objective is not the appropriate solution for solving the Starbucks problems. Contextually, the organisation should focus to invest money for enhancing the service speed only where it is required and not in all the stores. Therefore, Starbucks should set an organisational standard to serve the number of customers by per employees and as per standard can recruit employees in the required stores. Besides, the customer satisfaction does not only depend over quickness of service, it is strongly related with the several parameters (Moon & Quelch, 2006). Therefore, the organisation should also concern on several parameters to enhance the customer satisfaction and organisational competitiveness. One of the most important factors of Starbucks’ success was its product quality and innovativeness. It was observed that when Starbucks started their business, around half of its came from whole bean coffees. But after a decade it reached to only 6% of the total sales. Therefore, the organisation can concentrate regarding the promotion of coffee bean to increase the awareness among customers about its specialities. Besides it was also observed that in 2002 the company’s 77% of the total sales were driven from selling food and beverage. Thus, the company should formulate strategies and policies capable of attracting young population towards its beverage and food products. . Consequently, the investment for introducing new beverages can facilitate to change the identity of the Starbucks towards withstanding the fierce competition (Harvard, 2013; Moon & Quelch, 2006). In relation to enhancing the level of customer satisfaction, the organisation can invest to change the environment of the stores where customers can enjoy and relax with their coffee. The attractiveness of ambience would be helpful for the Starbucks to retain the existing customers and attracting the new customers to a large extent. The reason behind to invest in this context can be attributed with the research findings which revealed that 83% of customers provided their feedback regarding the importance of store decorum and cleanliness (Harvard, 2013; Moon & Quelch, 2006). Source: (Moon & Quelch, 2006) Starbucks can also invest this amount for changing the target market, because the target market of Starbucks is more specific which consists of educated, affluent as well as white colour patrons between the ages of 25-44. Therefore, the organisation is required to emphasise on increasing the customer base through product variances, marketing mix for increasing the profitability and ensuring sustainable growth (Weinstein, 2004; Moon & Quelch, 2006). The organisation has another vital deficiency in terms of inefficient marketing team. For this reason, the organisation should invest to build an effective marketing team, because it would be helpful for the organisation to take strategic decision and thereby enhancing the organisational efficiency (Weinstein, 2004). C. Irrespective Of Your Answer To The Previous Question Now Assumes That Starbucks Has Decided To Go Ahead With The $40 Million Investment. How Would You Go About Evaluating Whether This Investment Was Worth Making? Evaluation of the Effectiveness of the Investment It has been noted from the provided case study that the management of Starbucks have come up with the idea of investing $40 millions in their current operations in order to ensure effective and speedy services. The company with this investment intends to attain maximum customer satisfaction. Assuming that the company has implemented the idea of investing $40 million in order to add effectiveness to the current operational speed and the level of satisfaction of its customers, an evaluation will be required to draw the worthiness of the investment. As mentioned above the company had come up with this idea in order to enhance the service speed of the workforce in its thousands of stores situated all over the globe. In this context, after implementing the idea of $40 million investment the company will need to make a comparative analysis in order to ascertain the effectiveness of the investment made. This will require the company to make comparative analysis of the performance after the investment made and the prior performance. It has been noted from various analyses that the company was unable to meet the expectations of the customers in the recent years which forced to come up with the idea of investing a bulk amount towards the development of its workforce and service team to for enhancing its service quality in order to seek higher level of customer satisfaction (Marangos, n.d.). The first aspect that should be look upon in order to illustrate the worthiness of the investment made would be to identify the changes in the performance of the workforce. Since the company is investing the amount largely to improve the quality of services deliver to the customers, this aspect will be vital to be considered. In order to depict the changes in performance of the work, close supervision will be needed. However, with the large number of stores of the company spread all over the world, it will be quite complex to track each and every aspect of the thousands of its employees. So in this regard, the overall performance of its stores will need to be taken into concern. The performance of the workforce will need to be evaluated on the basis of certain criteria which will include comparison between the current and the past performance in terms of its stores atmosphere, quality of coffee provided to the customers, efficiency and speed of the services as well as the financial performance of those stores among others. It would be worth mentioning that the aforesaid aspects are the prime ingredients in the success of the company over the years. The qualities of coffee provided by the company to the customers along with dedicated and efficient services are among the major reasons that ensured satisfaction of the customers over the years. Moreover, the company always strived to maintain an atmosphere where customers can enjoy their social interactions along with the coffee served. Evaluating the effectiveness of all these aspects in the stores of the company after the investment will certainly provide an understanding about the worthiness of the investment. Additionally, financial performance of the various stores of the company will also be a factor to be evaluated as it is directly related with the satisfaction and loyalty of the customers. An increase in financial performance of the stores of the company will depict that the investment of $40 million has yielded positive results and can be considered to be worth. Furthermore, feedback of the customers after each and every visit will also be an effective means of evaluating the worthiness of the invested amount. As mentioned above, the main intention of the investment was to ensure maximum customer satisfaction through improvement in the services. Consequently, the feedback of the customers will provide the ultimate result regarding their perceptions towards the services and products of the company to a great extent. In this regard, a feedback form can be used where factors such as quality of coffee served, time taken to serve the coffee (i.e. service speed), the atmosphere provided by the stores and overall efficiency of the services should be mentioned. The views of the customers can be taken through certain answerable criteria comprising of “improved, similar and diminished” in terms of performance level concerning with above mentioned aspects. This feedback of the customers will reveal the considerable understanding regarding the satisfaction level of the customers and further depict the worthiness of the investment of the company. Hence, it can be stated that the company can implement the mentioned steps in their approaches in order to effectively evaluate the worthiness of its investment (Schermerhorn, 2011; Grigoroudis & Siskos, 2010). Conclusion From the overall analysis, it can be summarised that the performance level of Starbucks is showing decreasing trends in the recent years which is argued to largely owing to the aspect that the company was become unable to meet the expectations of the customers through the quality of product and services it provides. In order deal with this aspect, the company come up with plans to invest a bulk of amount to improve it quality and speed of services which is expected to further enhance customer satisfaction. However, the plan of the company to invest a bulk of amount is primarily intended towards enhancing its service quality which might not be a positive idea as customers satisfaction also depends on other factors such as the quality of coffee served, the atmosphere provided and other crucial aspects. The paper also entailed various approaches through which the company can evaluate the effectiveness of its strategy of investment in the long run. In this regard, continuous supervision of the performance of the workforce in various aspects and feedback of the customers will be among the primary tools of evaluation. Hence, it can be concluded that the performance of the company is directly related to the satisfaction and loyalty of the customers and all the improvement strategies of the company should be made in accordance to that. References Bosch, G. & Lehndorff, S., 2004. Working in the Service Sector: A Tale from Different Worlds. Routledge. Grigoroudis, E. & Siskos, Y., 2010. Customer Satisfaction Evaluation: Methods for Measuring and Implementing Service Quality. Springer. Harvard, 2013. Marketing of Services E-6020. Assignment: Starbucks. [Online] Available at: http://isites.harvard.edu/fs/docs/icb.topic730337.files/Starbucks/Starbucks%20Case%20Analysis%201.pdf [Accessed July 18, 2013]. Hurth, E., 2006. Customer Loyalty. GRIN Verlag. Lee, K., 2009. Case Study: Starbucks Coffee. It’s Me Kathleen Lee. [Online] Available at: http://www.itsmekathleen.com/pdf/starbucks.pdf [Accessed July 18, 2013]. Maguire, M., 2007. Brand Marketing: Image - The Key to Success. GRIN Verlag. Marangos, A., No Date. Starbucks: Delivering Customer Service. Home. [Online] Available at: http://businesstrueormyth.files.wordpress.com/2009/05/m512_starbucks_alkismarangos.pdf [Accessed 18 July, 2013]. Moon, Y. & Quelch, J., 2006. Starbucks: Delivering Customer Services. Harvard Business School, pp. 1-20. Schermerhorn, J. R., 2011. Introduction to Management. John Wiley & Sons. Starbucks Corporation, 2013. Our Starbucks Mission Statement. Home. [Online] Available at: http://www.starbucks.com/about-us/company-information/mission-statement [Accessed July 18, 2013]. Weinstein, A., 2004. Handbook of Market Segmentation: Strategic Targeting For Business and Technology Firms. Haworth Press. Bibliography Hayes, B. E., 2008. Measuring Customer Satisfaction and Loyalty: Survey Design, Use, and Statistical Analysis Methods. ASQ Quality Press. Stanyer, P., 2010. Guide To Investment Strategy: 2nd Edition. Profile Books. Starbucks Corporation, 2013. About Us. Home. [Online] Available at: http://www.starbucks.in/about-us [Accessed 18 July, 2013]. Ukers, W. H., 1930. Coffee Merchandising: A Handbook to the Coffee Business Giving Elementary and Essential Facts Pertaining to the History, Cultivation, Preparation, and Making of Coffee. Tea and Coffee Trade Journal Co. Read More