HBS - Starbuck Marketing Case

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Starbucks Statement of the Problem In late 2002, Starbucks finds themselves at a crossroads. The current challenges consist of how to improve customer service, no cohesive strategic marketing department, a widening customer demographic, and an unclear brand perception. Recommended Course of Action One of their major problems, improving customer service, can be resolved by increasing their labor hours by 20 hours per week at a cost of $40M annually. Secondly, Starbucks should form a centralized strategic marketing department in order to more effectively create brand equity. Thirdly, to resolve the issues of a widening customer demographic and unclear brand perception, Starbucks could engage in a promotion to encourage their most loyal customers as well as new business through promotions such as a free cup after “X” visits or a “club card” that encourages repeat business. For all three of these solutions, Starbucks would want to enact these solutions as quickly as possible due to the threat of eroding their brand perception. See Appendix C for rejected alternatives. Rationale for the Recommendation Adding labor hours is our first recommendation. Interestingly, Starbucks faces a unique problem since they are actually improving their service yet the customers are still not necessarily recognizing the progress. As we can see in Exhibit 7, Service, Cleanliness, and Average Wait Time are all improving. Product Quality is the only measurement that suffers over the measured quarters. In addition, on Page 5, we can see that there is tension between product quality and customization of regular customer drinks. This slowed down service but by adding additional staff, this maintains the customization while increasing throughput. Yet in Exhibit 11, it is evident that customers still desire a higher level of service, mainly through friendlier staff and faster, more

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