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Lokesh Sharma
12382
Background
VALUE PROPOSITION
TARGET MARKET
Serious Coffee lovers-white collar, affluent, well
-educated, often female, age between 25-44
Ready to pay premium price for premium coffee
experience
Strategic Positioning
Brand Perceptions
-Place for best coffee in market
-Upscale, sophisticated &
classy place
-Third place to escape real
world
- Place to get social
reinforcement if
Baristas knew you by
your name
Consumption Pattern
-Tendency to linger in
coffeehouse & soak up the
ambience while drinking coffee
-Development of rituals around
coffee consumption
-Tendency to seek out
Starbucks when looking for a
sanctuary to escape real world
-Tendency to chat with Baristas
Satisfied partners
Target Customer
Starbucks (1992)
Starbucks (2002)
Declined
Customer
Satisfaction
Unsatisfied
Satisfied
Highly satisfied
Loyal
Visits/month
3.9
4.3
7.2
18
Visits/year
46.8
51.6
86.4
216
Ticket size
/transaction
$3.88
$4.06
$4.42
$4.42
Revs/year
$182
$210
$382
$955
Avg. life
1.1
4.4
8.3
8.3
Revs/life
$200
$922
$3170
$7924
Assuming a high probability of correlation b/w number of visits and satisfaction level,
it is safe to call a loyal customer also a highly satisfied customer. So we can use
company data for loyal customer also.
Strengths
Opportunities
-Global expansion
-Regional market
expansion
-Better customer
satisfaction
-Strategy marketing
group establishment
Weakness
-Price
-Slow service
-Less friendlier staff
Threats
-Competitors from
same industries
-Competitors with
substitute products
Problem
Decline in customer satisfaction
Should they invest $40 million in 4500 stores focusing on improving the speed of customer service
Solution
Break Even Analysis
Investment to be made for labor in stores- $40million
Total no. of stores- 4500
Investment on each store- $8888
Difference b/w revenue/year from highly satisfied to satisfied customer- $172
No. of customers that needs to be converted from satisfied to highly satisfied by each store to break even for this investment- 52
Av. Daily customer count per store- 570
Nearly 9% increase in no. of highly satisfied customers needs to be made by each store to break even
AssumptionsSpeed of service is no. 1 drive for customer satisfaction
Additional labor will provide the increase of speed of service
All stores are equal in size, no. of people they serve, location & price
Additional investment is done equally in all stores
Satisfaction is correlated with loyalty