Signature Assignment
Starbucks Coffee
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Problem statement
Starbucks is known for their great coffee drinks but compared other Café’s Starbucks is more expensive
The problem with Starbucks is the coffee being more expensive than other café’s
The menu covers an array of beverages from hot and cold coffee, latte, espresso, frappucinos, tea and various food items. The prices for each beverage is based on size, as any other café, but Starbucks is more expensive. The price of a Vente White Chocolate Mocha with a Dash Shot of Espresso went from $6.80 to $7.20 at a Starbucks in Beaumont, Texas.
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Starbucks raises coffee prices across the U.S.
Starbucks has raised the price of its brewed coffee 10 cents to 20 cents at most of its company-owned stores in the U.S.
In the past year, the coffee chain has raised prices 1% to 2%, which is on par with the industry practices and is in line with food-away-from-home inflation, which is 2.2% to 2.4%. Evaluating prices periodically allows Starbucks to balance the need to run the business profitably, while continuing to provide value to loyal customers and to attract new customers. (Meyer, 2018)
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Customers’ Need
Need Recognition
Information Search
Evaluation of Alternatives
Purchase
Post-Purchase
Loyalty
A need is a consumer’s desire for a product’s or service’s specific benefit, whether that be functional or emotional. The emotional benefit tends to be a stronger driver for consumers, as functional benefits can be easily copied by competitors. (Lumen, 2018) One of the great things about Starbucks' product is that it's habit-forming, so a consumer that really needs their daily, weekly, hourly fix will spend twenty cents or ten cents, and some won't even realize the price change.
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Customer Priority
Willingness to Pay
Severity of the Need or Want
Urgency of Need or Want
Traditionally, businesses have held all the power in the relationship with their customers. They were able to carefully curate and dictate the messages that went out to the public. Businesses controlled information on price, features, and where consumers could access their product or service. In addition to having access to all this information, consumers now have a powerful voice in the form of social networks and online review platforms like Google and Facebook. (Dato, 2017) Starbucks has created social media pages that are made accessible to the public.
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Customer Feedback
Which problems are your customers facing?
How can you eliminate these bottlenecks?
Collecting feedback on a product or landing page.
Activity-based feedback
Employing different types of feedback for triggers based on visitor behavior.
Applying short feedback cycles before building a product (also known as minimum viable product) is the key to creating a truly successful product. These cycles enable you to continually test out new models of products by getting feedback from customers (or other parties, such as buyers and partners) and using that feedback to make further improvements and enhance the product and its price. (Gilliam, 2018) Feedback is an important aspect of the company. Not listening to feedback could make Starbucks lose customers, with the company making changes, they can get some of the things that they have suggested.
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Manage customer care
Sales renewal rates
The number of queries or complaints about Starbucks products or services
The number of complaints about your employees
The number of damaged or faulty goods returned
Average order fulfillment times
The number of contacts with a customer each month
The volume of marketing material sent out and responses generated
Time taken from order to delivery
Customer care is a crucial element of business success. Every contact Starbucks customers have with the business is an opportunity for the company to improve its reputation with them and increase the likelihood of further sales. Customer care is more directly important in some roles than others. The customers and employees are useful sources of information about the Key Performance Indicators (KPIs) which best reflect key customer service areas in the business. Make sure the things measured are driven not by how the business currently runs, but by how the customers would like to see it run. (Info Entrepreneurs, 2018)
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Identified customers and their priorities
Technology Early Adopters
Socially Conscious
High Spenders /High Income
Starbucks has been able to capture a lot of their business through the technology generation. Technology has been on the rise with every business being able to market and strategize basically for free, now to focus on their product have a right technology section Starbucks can make life easier for people on the smart devices such as phones, tablets, and computers. Having the technology open has given Starbucks another ally to be reached by placing order, discounts and offering WIFI service. Starbucks has increased its commitment to protecting the planet which is why it has LEED-certification stores. The LEED stores are built supporting the green standards. The LEED standard is helping the farmers, opening stores in less affluent areas and showing more positivity change in the communities. (Bean-Mellinger,2018).
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Six Sigma efforts
Performance
Corporate Humanity
Workplace of Choice
Many businesses think that Lean is just about cutting process to make money. The diversity training is a lean process that can help Starbucks save a soft cost of specific demographic from shopping from their stores. With Starbucks wanting to build upon the communities showing that their employee has been and have an ongoing diversity training helps to avoid future issues or concerns with treatment. (Starbucks, 2018) Starbucks has also released there Inclusion diversity program which enhances the work culture and also brings in economic growth. Being a workplace of choice with a diverse employee culture inspire more people to bring new life to the company. Innovation only helps to make the business better from different perspectives. (Starbucks, 2018)
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Control phase
Move away from limited-time offer drinks
Focus on the international markets like China
Aim at meeting the $7 billion sale of global right
Get more ways of getting competitive advantage in the US
Here the company had to ensure that it gets a solid pricing system that would give it a permanent menu of items at prescribed prices. Also eh company had to ensure that its china market gains momentum as well as earn revenue from the sale of packaged tea and coffee to nestle. Also the company since the coffee market in the US was getting ore saturated, the company had to find ways to stay on top of its competitive advantage.
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Definition & measurement
Definition
Need to hit the company revenue target
Increase in prices of the coffee
Measurement
Increase in prices of the coffee
One cup of coffee priced $1.95
After price increase of between 10 and 20 cents
New price of coffee up to $2.15
The major issue of the Starbucks was to meet its projected to be more than that earned in FY 2017 of $6 billion. This required that the company may increase the prices per cup. This was attributed to the management policies of the company to review its prices of coffee by a margin of 1%, 2% or 3%.
On the performance measurement, the company had been selling a cup of its coffee at $1.95 and upon the increase the price went to $2.15 an additional 10 cents that would not be felt by the customers.
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Analysis & Improving
Analysis
The company believed in its products being addictive
There was need to change the management approach
Improving
The executive chairman, Howard Schultz stepped down
Company owned stores closed down
Introduction of new product brand
There was need to improve n revenues while reducing the costs. Thus the executive chairman aim the international market. However the company was confident that its products would not lose the value since customers would still buy. The best way was to also change the management
So as to improve the business approach, Kevin Johnson had to take over the CEO duties as the executive chairman steeped down. The company also closed its own stores as well as bringing more products for diversification.
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Problem statement and critical-to-quality characteristics
Hence, Starbucks faces stiff competition thus likely not to meet its revues
Critical-to-quality characteristics
Customers prefer a varying products as their needs are different and ever-changing
thus Starbucks has to ensure that more diversification of its products are met.
The US market is proving to become very competitive and the brand has to ensure that it remains viable both locally and also internationally. Thus the best thing is to look at what the customers prefer so that it may remain competitive at all times despite the increasing competition.
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Starbucks Execution
3 minutes to serve a drink x 60 minutes= 180 customers can be accommodated.
400 Average paying customers visiting per day.
$4.00 average drink price x 400 (average paying customers in some stores)= $1,600 earnings per day.
By applying the 2.4% increase to the beverages, you are most likely losing some customers. $4.20 price per beverage x 385 (suggested number od paying customers)= $1,617.
Even with losing some customers, because of the price increase, the 2.4% increase will help to cover for the loss of any casual customer that decides not to purchase because of the price change.
By utilizing the DMAIC the issue of rising the prices on beverages might seem like is could affect the business in a negative way. The truth is that a company such as Starbucks which is committed to customer satisfaction and is a product that is habitual to customers, can accommodate and mitigate the risks of the price difference. If applying the 2.4% increase (or 20 cents) per drink, the company might lose an average of 10 to 15 casual customers per day but the sales from their loyal customers would cover for the possible loss of transactions. The great benefit from Starbucks is that their product creates habitual customers and they ‘’need’’ the caffeine and with their brand name they secure that customers go back to their stores.
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References
Meyer, Z. (2018). USA Today, Java jolt! Starbucks raises coffee prices across the U.S. Retrieved from https://www.usatoday.com/story/money/2018/06/07/starbucks-raises-coffee-prices-10-20-cents/680313002/
Tyko, K. (2018). USA Today, Java jolt! Starbucks raises coffee prices across the U.S. Picture retrieved from https://www.usatoday.com/story/money/2018/06/07/starbucks-raises-coffee-prices-10-20-cents/680313002/
Gilliam, E. (2018). MOpinion. User Feedback: The Secret to Successful User On boarding. Retrieved from https://mopinion.com/user-feedback-the-secret-to-successful-user-onboarding/
Info Entrepreneurs. (2018). Manage Your Customer Care. Retrieved from http://www.infoentrepreneurs.org/en/guides/manage-your-customer-care/
O’Callagahan, L. (2016). Express, Man used THIS trick to get free Starbucks every day for a year - would you dare try it? Picture retrieved from https://www.express.co.uk/life-style/food/736763/free-starbucks-coffee-birthday-hack-revealed
Lumen. (2018). Introduction to Marketing. Retrieved from https://courses.lumenlearning.com/boundless-marketing/chapter/introduction-to-marketing/
references
B Dato, N. (2017). Business.com, The New Differentiator: Why Customer Experience Should Be Your Top Priority. Retrieved from https://www.business.com/articles/why-customer-experience-should-be-your-business-top-priority/
BHS Business. (2018). Lesson 20- Customer Wants and Needs. Picture retrieved from http://www.bhs-business.com/lesson-20---customers-wants-and-needs.html ean-Mellinger, Barbara. (2018, March 14). Who Is Starbucks' Target Audience? Small Business - Chron.com. Retrieved from http://smallbusiness.chron.com/starbucks-target-audience-10553.html
Digital Check Corp. (2018). Digital Check, The five phases of Six Sigma project management. Picture retrieved from https://www.digitalcheck.com/six-sigma-project-management/the-five-phases-of-six-sigma-project-management/
Starbucks. (2018). Inclusion at Starbucks. Retrieved from https://www.starbucks.com/responsibility/community/diversity-and-inclusion
Cox, I., Ramsey, P. J., Stephens, M. L., Gaudard, M. A., & Wright, L. (2013). Visual six sigma: Making data analysis lean. Hoboken, N.J: Wiley.
George, M. L. (2002). Lean Six Sigma: Combining Six Sigma quality with lean speed. New York: McGraw-Hill.
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references
Hessing, T. (2014) 6 Sigma Study Guide.Com, Control Phase (DMAIC). Picture retrieved from https://sixsigmastudyguide.com/control-phase/
How many customers does an average Starbucks serve per day?, (2015), Streak. Retrieved from: https://www.quora.com/How-many-customers-does-an-average-Starbucks-serve-per-day
Metz Culinary Management. (2018). Starbucks at the Banks Student Life Center. Picture retrieved from http://www.metzmu.com/starbucks.html
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