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Starbucks: Delivering Customer Service

All companies largely satisfy their customers, but few succeed in going beyond meeting customer expectations to building brand loyalty. Loyalty, therefore, includes not only customer satisfaction but also the overall brand experience its customers encounter and the relationships they form with the company and its employees. Presented with market research results showing a higher-than-expected number of customers not being satisfied with its services, Starbucks is considering making an annual investment of $40 million in additional labor hours (which translate to approximately 20 hours of additional weekly labor per store) to improve service speed and thereby increase customer satisfaction.

Our analysis of the available market research results shows that customers attribute a variety of factors to creating customer satisfaction, of which speed constitutes only one part, and that Starbucks customers desire improvements to the overall services such as friendlier services and more personal treatment, not just faster services. While we have no doubt that the investment would improve service speed and consequently increase customer satisfaction, we believe that investing $40 million in additional labor to improve service speed will incompletely satisfy Starbucks customers.

Therefore, we recommend Starbucks to refrain from making this investment and instead spending the amount in other programs such as employee

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trainings and a customer retention tracking system to improve non-speed aspects of the Starbucks services in order to better meet customer expectations, form personal relationships, and build brand loyalty. An Anatomy of Customer Satisfaction Based on the 2002 Starbucks’s market research survey entitled “Important Rankings of Key Attributes in Creating Customer Satisfaction,” Starbucks customers consider the following factors as highly important in creating customer satisfaction: clean store (83% of Starbucks customers), convenience (77%), treatment as a valuable customer (75%), friendly staff (73%), product taste and flavor (72%), product quality (67%), and service speed (65%).

We see that these key attributes can be classified into category points of parity (POPs) that represent hygiene factors of specialty coffeehouse market in which Starbucks competes and points of difference (PODs) that distinguish Starbucks from its rivals. In this case, category POPs include clean store (#1), convenience (#2), product taste and flavor (#5), and product quality (#6). Based on Consumer Snapshot Scores conducted by mystery shoppers over seven quarters, Starbucks has been given consistently high scores on these factors, especially cleanliness. Furthermore, the 2002 survey on factors driving “valued customer” perceptions further shows that none of the customers asked for the cleanliness to be improved. Thus, Starbucks has already excelled in these attributes and need no further actions to improve these aspects.

PODs include treatment as a valuable customer (#3), friendly staff (#4), service speed (#7), atmosphere (#11), and knowledgeable staff (#12). Apart from atmosphere, all of these high-ranking attributes to customer satisfaction are considered services attributes which act as the differentiating points. To meet customer expectations, Starbucks must excel on these differentiating attributes. Services as Key to Customer Satisfaction Starbucks’s differentiating attributes per its market survey can be classified into two main categories: atmosphere and services. Because atmosphere and store ambience are beyond the scope of this report, we will focus solely on highly important factors that create customer satisfaction, which include treatment as a valuable customer, friendly staff, service speed, and knowledgeable employees.

Evidently, services encompass more than speed. This also corresponds with the 2002 survey on factors driving “valued customer” perceptions in which 34% of Starbucks consumers desire friendlier and more attentive staff, more personal treatment, and more knowledgeable staff in addition to faster and more efficient service. Improving the speed alone may not be the solution to the problem Starbucks was facing; other service-related attributes should be tackled as well.

Improving services increase customer satisfaction by not only keeping them satisfied but also exceeding their expectations with exemplar services that Starbucks called “legendary services.” This helps the firm to build and maintain good relationships with its customers and create memorable experience for its customers. We believe that it is these factors that make customers loyal to the company and thereby increase repeat purchases.

Therefore, Starbucks must consider all aspects of the services if it wishes to invest in order to improve customer satisfaction. The Pitfall of Making the $40-Million Investment in Additional Labor Hours  Because customer satisfaction involves more than meeting expectations in terms of service speed, making the $40-million investment in additional labor hours (which translate to 20 hours of additional weekly labor per store) is insufficient to increase the overall customer satisfaction and to build loyalty. Although such an investment will increase the availability of baristas and employees to service the customers and thus reduce service speed to perhaps under three minutes per patron, it would not improve other aspects of services. In other words, this investment does not directly make employees act friendlier or give customers more personal treatments.

In addition, Starbucks’s current service speed is not problematic. A Starbucks store takes approximately 3.05 to 3.20 minutes to serve one customer, which is already considered close to the corporate goal of serving customers within three minutes. While we have no doubts that additional store employment would reduce this customer’s wait time to less than three minutes, we doubt that customers would notice a fraction of a minute in reduced waiting time. Moreover, due to Starbucks’s aggressive expansion strategy, the 2002 investment of $40 million is unlikely to be maintained in the future. Keeping up with the multiplying number of stores, we anticipate a doubling or tripling of the investment within the next few years to maintain the 20 hours of additional weekly labor that this investment plans to create.

Furthermore, in most stores the counter areas including coffee machines and beverage making equipments tend to occupy limited physical space. If an additional employee is to be positioned at the front counter, this may present obstacles to the staff movement and operation. In summary, we believe that it is in Starbucks’s best interest to refrain from investing $40 million to only improve its service speed if it wishes to increase its overall customer satisfaction.

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