Consumer Behavior Response Paper: HBS Starbucks Case

Goh Hao Xuan Bernard

bernard.goh.2011
In the eaily 9us, Staibucks' taiget customeis weie those who valueu quality in the coffee
they uiink, emphasizeu on the intimate inteiaction between baiista anu customei, anu hau a
spiiitual neeu of community. These ciiteiia shapeu the bianu's piomise to its pations of
cieating a "thiiu place" expeiience in its stoies, one which coulu offei them a unique peisonal
expeiience whilst consuming coffee, inteiact with the baiistas, peeis & fiienus all in one
convenient place.
Consumption of Staibucks pations, in the 9us, was uiiven by sales of whole beans. At that
time, Staibucks began selling piemium-piiceu coffee beveiages at its stoies, a uecision
inspiieu by Schultz's fascination of Italian coffee cultuie. It was also the peiiou when the
bianu's piomise was uefineu by thiee goals: offeiing the highest-quality coffee the woilu
coulu offei, fosteiing customei intimacy by aiming to cieate an uplifting expeiience with eveiy
visit, anu peifecting the stoie ambience which fosteis a sense of community anu is conuucive
foi people to come togethei ovei a cup of coffee.
The two factois weie instiumental to Staibucks' success in the eaily 9us:
!
"# %&'%#()*% +,-##%. /0 1)('2)34')/#5 which incluueu paitneiships with ietail channels
not owneu by the company. This was effective in establishing awaieness of the bianu in
ciucial places beyonu its physical stoies, captuiing customei's attention & tiial of Staibucks
piouucts, anu eventually enough inteiest foi a visit to theii stoies. This stiategy was an
innovative alteinative to auveitising at that time, bieaking thiough the cluttei of aus anu
ieaching potential consumeis outsiue of auveitising channels.
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600%+')*% 7-2'#%2 8-#-9%8%#'5 with geneious policies to incentivize theii employment,
as well as to empowei them to make autonomous uecisions to pioviue the best seivice
possible. The company iecognizes paitneis as one of the most impoitant contact points
with the customeis anu have investeu significantly in both theii "haiu & soft skills". It ties
closely with one of theii goals to cieate customei intimacy, which iesulteu in impioveu
customei satisfaction ovei the 9us anu even a inuustiy-low employee tuinovei iate, both
positive factois foi Staibucks' bottom line.
We see the piolifeiation of choices ovei the uecaue of giowth, such that the Staibucks of
2uu2 hau a moie uiveise menu compaieu to the 9us, which tianslateu to gieatei customei
appeal but came with constiaints. The intiouuction of Fiappucino beveiages in 199S helpeu to
inciease non-peak houi sales, whilst the implementation of intense beveiage customization
incieaseu the combinations of uiinks that the customei can choose fiom. Bowevei, both
expansions in piouuct iange also incieaseu the woikloau of inuiviuual baiistas, stiaining theii
ability to uelivei customizeu uiinks while maintaining speeu of seivice anu theii engagement
with customeis. This pioblem was exaceibateu by the company's ieluctance to hiie moie
baiistas to shaie the woikloau.
This compiomise was ieflecteu in the customei peiceptions suivey, with 29% asking foi
fiienuliei, moie attentive staff who coulu pioviue fastei, moie efficient seivice. Coupleu with
the iapiu expansion of stoies within clusteis which cannibalizeu sales fiom existing stoies, the
Staibucks expeiience was geneially uiluteu anu lost its uniqueness with its loyal customeis.
The uecaue following 2uu2 was highlighteu by uipping customei satisfaction anu an
eiosion of bianu value(Quelch, 2uu8)
1
, until Schultz steppeu in as CE0 to iestoie Staibucks'
bianu piomises, as well as initiate a iebianuing campaign to align with its expanueu offeiings.
1: How Starbucks' Growth Destroyed Brand Value, John Quelch : http://blogs.hbr.org/2008/07/how-starbucks-growth-destroyed/