Starbucks Harvard Case

Starbucks – Delivering Customer Service

1. What factors accounted for the extraordinary success of Starbucks in the early 1990s? What was so compelling about the Starbucks value proposition? What brand image did Starbucks develop during this period?

2. Why have Starbucks’ customer satisfaction scores declined? Has the company’s service declined, or is it simply measuring satisfaction the wrong way?

3. How does the Starbucks of 2002 differ from the Starbucks of 1992?

The Starbucks of 1992 marked the beginning of the establishment of the brand. In 1992, right when the company became public, Starbucks had 140 stores located in the Northwest and Chicago. Ten years later, in 2002, Starbucks had over 4500 stores scattered throughout the U.S and internationally. During those ten years, Starbucks established itself as the “number one” coffee store in the U.S by following an expansion strategy. Starbucks had locations in 42 of the 50 states and was continuing this expansion strategy in order to capture new markets and cluster existing markets. Starbucks retail expansion strategy consisted of the company selecting locations based on whether the demographics of an area matched the profile of a typical Starbucks drinker, the level of coffee consumption and the nature and intensity of competition. An important component of this strategy was that Starbucks did not mind cannibalizing the sales of its stores as long as the incremental sales resulting from the opening of a new store were higher than before. The retail expansion has led the Starbucks customers to view it as more corporate and caring about making money. The establishment of smaller coffee stores without lounging areas had also taken away the “atmosphere” component of the value proposition that the Starbucks of 1992 had built on.

The Starbucks of 2002 was also more complex than the Starbucks of 1992. In 1992, about half of the company’s sales came from sales of whole‐bean coffees whereas in 2002 about 77%...