Starbuck's Customer Satisfaction Case Essay

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November 7, 2002 To: Howard Shultz and Orin Smith, CEO, Starbucks From: John Smith, Marketing Manager Subject: Customer satisfaction improvement Introduction In our recent market research we have discovered that there is a downward trend in customer satisfaction. It appears that over the past decade our practices have taken a turn and no longer reflect our customer-focused company values. Considering that we claim to be a customer-focused company, this does not bode well for our image. According to our research, last year 61% of respondents strongly agreed with the statement, “Starbucks cares primarily about making money”. This number is up from 53% the year before. We must rediscover our customers because growth in our firm will come from them. The purpose of this memo is to discuss the potential benefits of investing $40 million more per year in our “partners”. With this investment, we can add an additional 20 hours of labor per week, per store. By adding labor hours we will increase our profits due to more highly satisfied customers. In this memo I will supply you with a recommendation and related suggestions for your approval. Our Changing Customers In the past, our customer base has consisted primarily of older white-collar educated people. They considered Starbucks a trustworthy and high quality brand. Therefore, they were more willing to pay a premium price. Among our newer customers, who first visited within the past year, this willingness to pay has been diminishing. We can explain this trend by looking at the difference in demographics of our newer customers compared with our previous customers. Not only are they younger, but also they are less educated and fall into a lower income level. Our studies show that their satisfaction and trust in us have dropped, and thus are unwilling to pay our premium prices. Although we

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