A project on

Customer Relationship
Management (CRM) in
Starbucks

What is Customer Relationship Management (CRM)?

Customer Relationship Management refers to the methodologies and tools that
help businesses manage customer relationships in an organized way.
Customer relationship management is a broadly recognized, widelyimplemented strategy for managing a companys interactions with customers,
clients and sales prospects. It involves using technology to organize, automate,
and synchronize business processesprincipally sales activities, but also those
for marketing, customer service, and technical support.

Definition of CRM-

Customer relationship management (CRM) is a term that refers to practices,

strategies and technologies that companies use to manage and analyze customer
interactions and data throughout the customer lifecycle, with the goal of
improving business relationships with customers, assisting in customer retention
and driving sales growth. CRM systems are designed to compile information on
customers across different channels -- or points of contact between the customer
and the company -- which could include the company's website, telephone, live
chat, direct mail, marketing materials and social media. CRM systems can also
give customer-facing staff detailed information on customers' personal
information, purchase history, buying preferences and concerns.

PurposeThe idea of CRM is that it helps businesses use technology and human
resources to gain insight into the behavior of customers and the value of those
customers. With an effective CRM strategy, a business can increase revenues
by:
providing services and products that are exactly what your customers
want
offering better customer service
cross selling products more effectively
helping sales staff close deals faster
retaining existing customers and discovering new ones
make call centers more efficient
simplify marketing and sales processes.
For small businesses, customer relationship management includes:
CRM processes that help identify and target their best customers,
generate quality sales leads, and plan and implement marketing
campaigns with clear goals and objectives.
CRM processes that help form individualized relationships with
customers (to improve customer satisfaction) and provide the highest
level of customer service to the most profitable customers.
CRM processes that provide employees with the information they need to
know their customers' wants and needs, and build relationships between
the company and its customers.
Customer relationship management tools include software and browserbased applications that collect and organize information about customers.
For instance, as part of their CRM strategy, a business might use a
database of customer information to help construct a customer
satisfaction survey, or decide which new product their customers might
be interested in.

Key Elements of CRMCRM can be broken down into a number of different components which many
software vendors have developed packages for. For the most part, there are three
areas which are core to successful customer relationship management :
1.
2.
3.
4.

Customer Service
Sales Force Automation
Campaign Management .
Customer Service

Customer serviceThe customer service function in your company represents the front office
functions that interact with your customers. These are the business processes
that allow your company to sell products and services to your customers,
communicate with your customers with regards marketing and dealing with the
after sales service requirements of your customers. Each interaction with the
customer is recorded and stored within the CRM software where it can be
retrieved by other employees if needed.

Sales Force AutomationYour companys sales department is constantly looking for sales opportunities
with existing and new customers. The sales force automation functionality of
CRM software allows the sales teams to record each contact with customers, the
details of the contact and if follow up is required. This can provide a sales force
with greater efficiencies as there is little chance for duplication of effort. The
ability for employees outside of the sales team to have access to this data
ensures that they have the most recent contact information with customers. This
is important when customers contact employees outside of the sales team so that
customers are given the best level of customer service.

Campaign Management-

The sales team approach prospective customers in the hope of winning new
business. The approach taken by the sales team is often focused in a campaign,
where a group of specific customers are targeted based on a set of criteria.
These customers will receive targeted marketing materials and often special
pricing or terms are offered as an inducement. CRM software is used to record
the campaign details, customer responses and analysis performed as part of the
campaign.
In today's fast-paced, competitive business environment it's more important than
ever to create and maintain long-lasting business relationships.
Today, CRM manages business processes spanning sales, support, and
marketing creating effective customer interactions. Given the purpose of CRM,
the functionality is straightforward, and the benefits of successful deployments
clearly generate value and profitability for any company. Great CRM solutions
need to encourage users to interact with the application as well as be in-tune
with the business and IT cost-saving needs.

For the up to date CRM to be world class it needs to be revolutionary in market

incursion and evolutionary in technological up gradation.

Today the major business focus is towards endowing value addition to the sales
cycle, and customer retention rather than constructing a new customer base
which is costlier and also an uncertain chase from business perspective. The
basic philosophy behind CRM is that a company's relationship with the
customer would be the biggest asset in the long run.

Customer Relationship Management

Before implementing any Customer Relationship Management solution in the

organization there are many Question's which need a comprehensive
explanation from the users' point of view
What is the added value preposition of the CRM to the organization?

What would be the environment under which the implementation would be

done?
How would the synergies be reflecting in the processes of the company?
These are mere stencils of the holistic scenario prevalent right now, and are to a
great extent a factor which harms the opportunities of long term survival for any
CRM vendor.

Profile of Starbucks Largest coffeehouse company in the world.

16,635 stores in 49 countries.
Enviable customer loyalty.
Increasing sales and market share.
Starbucks Company ProfileStarbucks Mission Statement
Our mission:

to inspire and nurture the human spirit one person, one cup and one
neighbourhood at a time.
Here are the principles of how we live that every day:

Our Coffee
It has always been, and will always be, about quality. Were passionate about
ethically sourcing the finest coffee beans, roasting them with great care and
improving the lives of people who grow them. We care deeply about all of this;
our work is never done.

Our Partners
Were called partners, because its not just a job, its our passion. Together, we
embrace diversity to create a place where each of us can be ourselves. We
always treat each other with respect and dignity. And we hold each other to that
standard.

Our Customers
When we are fully engaged, we connect with, laugh with and uplift the lives of
our customers even if just for a few moments. Sure, it starts with the promise
of a perfectly made beverage, but our work goes far beyond that. Its really
about human connection.

Our Stores
When our customers feel this sense of belonging, our stores become a haven, a
break from the worries outside, a place where you can meet with friends. Its
about enjoyment at the speed of life sometimes slow and savoured, sometimes
faster. Always full of humanity.

Our Neighbourhood
Every store is part of a community, and we take our responsibility to be good
neighbours seriously. We want to be invited in wherever we do business. We can
be a force for positive action bringing together our partners, customers and the
community to contribute every day. Now we see that our responsibility and
our potential for good is even larger. The world is looking to Starbucks to set
the new standard, yet again. We will lead.

Our Shareholders
We know that as we deliver in each of these areas, we enjoy the kind of success
that rewards our shareholders. We are fully accountable to get each of these
elements right so that Starbucks and everyone it touches can endure and
thrive.

Environmental Mission Statement

Starbucks is committed to a role of environmental leadership in all facets of our
business.

We fulfil this mission by a commitment to

Understanding of environmental issues and sharing information with our
partners.
Developing innovative and flexible solutions to bring about change.
Striving to buy, sell and use environmentally friendly products.
Recognising that financial responsibility is essential to our environmental
future.
Instilling environmental responsibility as a corporate value.

 Measuring and monitoring our progress for each project.

Encouraging all partners to share in our mission.

Starbucks Coffees Vision Statement-

Starbucks Coffee does not readily present its vision statement. However, a
careful reading of the companys website reveals that its vision statement is to
establish Starbucks as the premier purveyor of the finest coffee in the world
while maintaining our uncompromising principles while we grow. This vision
statement has the following components relevant to Starbucks:

Premier purveyance
Finest coffee in the world
Uncompromising principles
Growth

Being a premier purveyor means that Starbucks Coffee wants to achieve

leadership in providing its products, especially coffee of the best quality.
Starbucks has already achieved the premier purveyance component of its vision
statement because it is now the largest coffee and coffeehouse company in the
world. However, it is not yet clear if Starbucks effectively addresses the finest
coffee in the world component of its vision statement. Analysts and critics point
out that coffee from McDonalds or Dunkin Donuts may be better than
Starbucks coffee in some aspects. Nonetheless, Starbucks Coffee addresses the
uncompromising principles component of its vision statement. These principles
include ethical conduct and a warm culture. Starbucks maintains these
principles, especially after Howard Schultz resumed his role as CEO in 2008.
Also, the firm satisfies the growth component of its vision statement, as
manifested in the continuing global expansion of the business through new
Starbucks cafs. Starbucks Coffee now has more than 22,500 locations around
the world. Thus, the firm effectively addresses its vision statement.

Our Products Coffee: More than 30 blends and singleorigin premium arabica
coffees.
Handcrafted Beverages: Freshbrewed coffee, hot and iced
espresso beverages, coffee and noncoffee blended beverages,
Vivanno smoothies andTazo teas.
Merchandise: Coffee and teabrewing equipment, mugs and
accessories, packaged goods, music, books and gift items.
Fresh Food: Baked pastries, sandwiches, salads, oatmeal, yogurt
parfaits and fruit cups.
Consumer Products: Products in 13 countries (Austria, Canada,
China, Denmark, Germany, Ireland, Japan, Korea, Mexico,
Norway, Spain, UK and U.S.) in three categories:
1. Coffee and Tea: Whole bean and ground (Starbucks and
Seattles Best Coffee brands), Starbucks VIA Ready Brew,
Tazo
2. tea filterbags and tea latte concentrates.
ReadytoDrink (RTD): Starbucks bottled Frappuccino coffee
drinks, Starbucks Discoveries chilled cup coffees,
Starbucks Doubleshot espresso drinks, Starbucks Doubleshot
Energy+Coffee drinks; Seattles Best Coffee Iced Lattes,
Tazo bottled iced and juiced teas.
Starbucks Ice Cream: Superpremium coffee and coffeefree
flavors.

Brand PortfolioStarbucks Coffee, Seattles Best Coffee, Tazo Tea, and Torrefazione
Italia Coffee.
Investor Information Starbucks went public on June 26, 1992 at a
price of $17 per share (or $0.53 per share, adjusted for subsequent
stock splits) and closed trading that first day at $21.50 per share.
Starbucks was incorporated under the laws of the State of
Washington, in Olympia, Washington, on Nov. 4, 1985.
Starbucks Corporation's common stock is listed on NASDAQ, under
the trading symbol SBUX.

Being a Responsible CompanyWe are committed to doing business responsibly and conducting
ourselves in ways that earn the trust and respect of our
customers, partners and neighbours. We call this Starbucks Shared
Planet our commitment to doing business responsibly.
Ethical Sourcing: Weve developed strong, longterm
relationships with farmers all over the world that help ensure we
are ableto buy the highquality coffee our customers expect
from us. It's our goal that by 2015, all of our coffee will be
grown usingethical trading and responsible growing practices.

Environmental Stewardship: We share our customers'

commitment to the environment. And we believe in the
importance of caring for our planet and encouraging others to do
the same. It is our goal that by 2015, 100% of our cups will be

reusable or recyclable. We will also work to significantly reduce

our environmental footprint through energy and water
conservation, recycling and green construction.

Community Involvement: From the neighbourhoods where our

stores are located to the ones where our coffee is grown we
believe in being involved in the communities were a part of.
Bringing people together, inspiring change and making a
difference in peoples lives its all part of being a good
neighbour. By 2015, we plan to contribute one million volunteer
hours each year to our communities.

Websitewww.starbucks.com

Current CRM situation Starbucks Rewards Card

Mystarbucksidea.com is operated by Salesforce.com
Consona
3rd party websites
2D mobile barcode system by Codilink
In store feedback form

 1-800-23-LATTE

Starbucks reward cardKeep the Free Drinks Coming :-

Collect 25 Stars within 12 months and you step up to the Gold level
for one year. At Gold level you get:
A free tall drink in your birthday month
Two free beverage customizations
A free tall drink on purchase of 250g whole bean coffee
Free size upgrades on featured beverages during the first 2
weeks of its launch
A free tall drink reward every 10 Stars
A personalized Gold Card
Special OffersOnce you're at the Gold level, it takes another 25 Stars to maintain
Gold level for another 12 months.

If you don't qualify for the Gold level again by your anniversary date
(i.e. the date you qualified for the Gold level), you'll revert to the
Green level and lose all your Stars. Don't let that happen!

If it does though, don't worry if you earn a total of 25 Stars again

within 12 months, you'll move from Green level right back to Gold
level. We won't give up on you.

Mobile paymentA great way for small companies to jumpstart their businesses is by using cloudbased Customer Relationship Management (CRM) application which enables
companies to stay in contact with each other and their clientele regardless of
proximity and time zones.
Last year, Starbucks took a step further towards improving its services by
introducing the Starbucks Mobile Card Payment System to its thousands of
advocates across America. This application, which is currently available for
download from any iPhone, iPod Touch, iPad, and Android devices,
was designed to address Starbucks customers demand for mobility, which is
very important in todays fast-paced and time-constrained environment.

The Starbucks Card Mobile payment application was conceptualized and

established to cut customer ordering and waiting time, giving them more time to
relax and enjoy their cups of joy. In addition, this is also Starbucks way of
promoting environmental awareness and contributing to the green movement.
Through the scan-and-go mobile pay system, customers are able to pay for
purchases the fast and easy way without the hassle. Since everything is
electronic, it reduces the use of plastic gift cards, promote a more efficient
ordering process whilst providing more advantages to customers.

The application is jam-packed with great, intuitive features where users can
check out their balances and transactions, reload or top-up using any major
credit card, and track loyalty program points earned through the My Starbucks
Rewards program. And if customers are uncertain about what to order, they can
view the menu options available through the Starbucks app for iPhone where a
comprehensive view and description of coffee and drinks are available for
everyones convenience and reference. Nutrition information are also provided
under each entry of whole bean coffee, tea, and other drinks. Whats even better
is that the mobile payment application works on any Starbucks drive-thru and
retail counters which meant that anyone can now have fresh, hot, coffee
delivered to their door!

Launching this mobile application is a milestone for Starbucks and its 7,000
company-operated stores, including more than a thousand Target outlets and
nearly a thousand Safeway branches. But contrary to what many think, this is
not the first time Starbucks piloted such a venture. In fact, the program was
rolled out to select Starbucks stores way back September 2009 to test how the
market would react. It was proven to be a worthy initiative because after
extensive testing, Starbucks has captured the interest and loyalty of 3 million
people in the US alone within that year.

Starbucks Chairman and CEO Howard Schultz, in his speech during last years
Starbucks Annual Meeting of Shareholders at Marion Oliver McCaw Hall in
Seattle, mentioned that mobile payments is just one element of a much broader
and larger social digital media strategy Starbucks has been hiding under its
sleeves. This mobile payment system helps facilitate brand identity to crossover
with consumer-packaged goods (CPG).
As proof of their crossover strategy success, Starbucks generated $194M in
sales upon launching its instant coffee, VIA, in its first year. Thanks to to
Starbucks Card Mobile application, the numbers continue to rise. While retail
and CPG were initially perceived to be rivals, Schultz foresees that through the
mobile payment system, they wont soon be. The application is expected to
ultimately connect consumer-packaged goods and retail, incorporating both
segments as one cohesive entity through the loyalty programs activated via the
use of application. Such success is evident as the Starbucks brand topped
Facebooks list with 29M fans, and is equally popular in Twitter and
Foursquare.

The application proved to be a breakthrough for which Starbucks achieved

tremendous growth the best-performing financial quarter of its 40-year history
where 22% transactions are attributed to this application. Starbucks now
offers the nations largest mobile payment network, says Vice President of
Starbucks Brady Brewer.

Starbucks Mobile Card Payment system is incredibly easy to use and is socially
relevant too! Users can share their locations as well as their drinks of choice

through Facebook and Twitter. And if users have no clue where to go, the
application simply points them to the nearest Starbucks store, which also allows
them to search amenities offered on each one.

By keeping abreast of the latest mobile technology, companies can double or

triple their chances at success. Investing in such applications have been proven
to be of great significance especially in terms of customer service and referrals,
which directly translates to a boost in business volume in the short and long
term basis.

3rd party website

Web AccessibilityStarbucks is committed to diversity, inclusion and accessibility in

everything we do. These core values are fundamental to the way we
do business and come through in the experiences we design for people
both in our coffeehouses and on the web.

With this in mind, we are continuously taking steps to improve

Starbucks.com and ensure it complies with the best practices and
standards defined by Section 508 of the U.S. Rehabilitation Act and
the Web Content Accessibility Guidelines of the World Wide Web
Consortium.

Our website is monitored and tested periodically by internal and thirdparty accessibility consultants. These people help us identify usability
issues and discover new solutions to further improve the accessibility
of our site.

Our Current Accessibility Features-

Alternative text detail for appropriate images and other non-text

elements.
Title attributes for additional information about links and
indication of new browser windows.
Structural markup to indicate headings and lists to aid in page
comprehension.
Association of forms with labels.
Association of all data cells in a data table with their headers.
JavaScript and style sheets to enhance the appearance and
functionality of the site. If these technologies are not available,
alternative content is provided where necessary to ensure a
usable experience.
Further accessibility efforts are under way. As we continue to improve
our website, we will reflect any changes here within our accessibility
statement. That way youll know about the progress were making.

2D barcode systemNo single competency is enabling us to elevate the Starbucks SBUX +0.00%
brand more than our global leadership in mobile, digital, and loyalty. Starbucks
is a clear leader in mobile payments and we are encouraged by how consumers
have embraced mobile apps as a way to pay.- Howard Schultz, 2013

I think Howard says it all:

Mobile Payments Convenience

Automatic Loyalty Rewards
Over Four Million Mobile Wallet Payments Per Week

While most of the world was getting ready for Halloween celebrations in late
October 2013, Starbuck announced that now 11% of sales volume comes
through its own mobile wallet [1]. This is just a staggering amount of
transactions for a single retailer, about four million mobile payments per week,
and eight million consumers are using mobile apps to pay. Howard had some of
the most strongest words I have heard supporting mobile payments by a retailer.

The Courage To Innovate With Simple Technology

On a nice spring day early in 2009, Starbucks launched its mobile card app in
16 stores. It was so successful it rapidly expanded the program nationwide by
allowing consumers to pay by letting patrons display a barcode to be scanned at

the point of sale. This was the genius work of Benjamin Vigier and his team.
Benjamin now heads up retail payments for Apple AAPL -0.91% and we will
likely see the results of his 3+ years of work at Apple very soon.

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Benjamin took the very simple 2D barcode and inverted the use case that most
companies were using. By allowing the register to scan the 2D barcode rather
then the user scan a 2D barcode. This was a maverick move at the time as most
technologists were laughing at the 2D barcode and the way it was used.

Benjamin built this systems years before there was a Square wallet, Clinkle,
PayPal Wallet or just about any other system. It is successful for so many
reasons that would take a book to cover.

It took great courage for Starbucks to take a trail blazing roll to innovate. The
company did not, and still does not primarily use the services of an outside
company and there is a huge lesson to be learned here. Read on for some clues.

Brilliantly Simple

Benjamin shifted the technology stack on the side of the POS system and a 2D
barcode reader. This allowed for the technology of the Starbucks wallet to only
need to faithfully display a custom 2D barcode. It was brilliantly simple and
elegant. At the time, many startups wanted to reinvent the wheel and require all
aspects of the technology a business is using to change. Benjamin made the new
program fit existing POS found at every Starbucks.

One Loyalty Size Fits All?

Starbucks had one of the most successful retail loyalty programs in the US.
This did not take place overnight. The company worked diligently for decades
to perfect this program. There were countless empirical tests and studies that
crafted the program. Although it looks very simple the exact same system could
not work at a vast majority of retailers. And this is the problem with most
generic punch card loyalty systems and even advanced points based loyalty
systems. They are sold as a one size fits all program, and they do not.

Said To Me By A Payment Startup Founder: I have a punch card for a coffee

place in my sock drawer at home

It has always been fascinating to me to observe some of the most brilliant

payment startups construct a loyalty program based on just a guess of what
retailers are looking for. I have worked with hundreds of startups over the last 8
years and 99% of the time the people building loyalty programs have either not
used any program before or have an old punch card in the sock drawer at home.
The point they thought they were making was how inefficient loyalty cards are.
This is the start of the flawed thinking of why these programs fail. It is just very
hard to get used to seeing fellow technologists build things based on completely
flawed reasoning.

The builders of the Starbucks wallet used loyalty cards, perhaps for decades, but
they also empirically studied these systems in live retail environments. This
aspect is overlooked by some of the most informed experts.

This Secret Has To Be Told-

Starbucks also was a very early user of gift cards. The original reason Starbucks
deployed these cards was to allow consumers to purchase the gift cards as, well
gifts to friends. It turned out that empirical research showed that within the first
year 75% of the cards were being used by the original purchaser. This very large
by still rather secret fact informed the logical development of a mobile wallet.
This was not a technological dream but a progression from empirical, Practical
and Pragmatic research. I credit this to one of the foundational reasons for the
spectacular success.

Thus the success of the Starbucks wallet can be expressed in this manner:
Existing successful loyalty program +
Existing success gift card program +
Simple 2D barcode on consumer device +
Sophisticated 2D barcode scanner on POS +
Perfect cloud merchant integration +
Simple to use consumer app +

The success of Starbucks Social CRMStarbucks is one of the enterprises adapted social media to the companys CRM
strategy. Having 3.6 Million followers in Twitter, 34 Million Facebook users
like the page, 6.6 Million Views on Youtube. As weve learned from

marketing course, Starbucks doesnt spent much money on marketing. Words

of mouth is the primary brand awareness and acceptances by the customers.

What I am amazed most is Starbucks integrates, mixes and combines multichannel functionalities and elements together. Each channels has different focus
but also unified managing conversation across all channels. Starbucks engages
and communicates customers through twitter, promote products and answer
questions. Youtube is the channel for commercials (regular or seasonal) and
informational (e.g. how to make an expreso). The Starbucks histories youtube
videos made many customers feel intimate and related to the brand. Customers
around the world could also upload their videos to Starbucks Youtube. I like the
Facebook Starbucks most. Their contents and pictures are welcoming, warm
and full of coffee experience even through the internet. My Starbucks Idea,
where customers and partners could share, vote and discuss their own ideas.

Overall, I think the success of Starbucks Social Media Strategy is the matter of
map business objective and specific social activities designed to meet the
objectives; consistent branding strategy, execution and integration across all
media channel conversation and constant measurement system to keep testing,
listening and improving company social behaviour.

What can other companies learn from Starbuck?

It doesn't cost a lot to select the right people and give them a vision of how they
can do more than just sell a product. It takes inspired leaders who can explain to
this well-selected staff that they have an opportunity to make a difference in
people's lives, and these are the kinds of leaders Starbucks has. The company is
also constantly thinking about where their customer is, and who he is. They've
understood that customers might want to enjoy their coffee while they're, for
example, camping on a mountaintop. So they created VIA, which enables
people to warm up water over a campfire and have quality coffee, even if
they're nowhere near a coffee house or even a coffee machine.

How is Starbucks embracing social media, mobile, and other new

channels to reach its customers effectively?

Starbucks is, no doubt, a leader in mobile pay. They have a very robust app,
which features targeted messaging for its loyalty members as well as various
rewards programs for its most loyal customers, like Starbucks Gold Card
holders. Starbucks is also now allowing customers to use the app to pay for
purchases with their phones, meaning they're able to track what people
purchase, and then send targeted messages or offers. They know their customers
and how connected they are, and have used this to not only make life easier for
their patrons, but to their own advantage as well.

Starbucks: Loyalty Program MisfireStarbucks' success rests on a simple goal: to inspire and nurture the human spirit
one person, one cup, and one neighborhood at a time. To that end, the people
behind Starbucks, from coffee servers to CEO Howard Schultz, strive to make
authentic, uplifting human connections while delivering a high-quality,
innovative, and delicious product, all without overlooking where the product
comes from and how it is sourced.
Starbucks is a firm with brilliant marketing they have built an amazing global
brand. They understand sensory branding, and have tailored their store aroma
for maximum benefit. Their rewards program, which features an elite level,
the Starbucks Gold Card, goes far beyond the typical coffee shop punch card.
Instead of merely handing out free coffee in return for a set number of cups,
they add an element of prestige and layer on extra benefits for their best
customers. Why, then, does Starbucks continue to maintain one aspect of its
rewards program that is sure to disappoint some of its customers?

Like the airline loyalty programs it resembles, the Starbucks Gold Card program
has to deal with customers whose consumption habits change. When one flies
less, or drinks coffee less frequently, one is no longer as attractive a customer.
When this happens, it may be necessary to curtail the benefits for individual
customers. How one does this is critical ideally, you want to encourage your
customer to return to higher consumption levels. And, if you must cut benefits,
youd like to do it in the most sensitive way possible. This is where Starbucks
misfires.
A Starbucks Gold Card member I know was surprised to get an email from
Starbucks with the innocuous title, Your My Starbucks Rewards level has
changed. The body of the message, though, lets the recipient know that her
elite status has been revoked with a big graphic.
The text strikes a breezy tone, starting off with a little oops message:
You got your shiny My Starbucks Rewards Gold Card by earning 30 Stars in
one year. To stay Gold for another year you needed 30 more Stars. Looks like
time flew before you got all 30
Thats a fairly gentle letdown, since its so easy to get your status back. But
the email continues with, So youre back to Green for now, and your Star count
has been reset.

So, not only are you demoted, you have to start all over. This produced a highly
negative reaction, since my friend had no idea that the deadline was
approaching or that she hadnt met the threshold for staying golden. Even more
galling: she had just reloaded her gold card from her credit card, and was so
infuriated that was trying to figure out if she could unload it and get her money
back.

Loyalty, Real and Artificial-

True loyalty is based on emotion. A brand with truly loyal customers doesnt
need to bribe them with mathematically predictable freebies. But, that doesnt
mean programs that reward loyalty are ineffective. Despite my many bad

experiences with United Airlines, I continue to use them to build my Premier

status and take advantage of the benefits it confers. (Yes, I can be bribed into
pseudo-loyalty.)

Implemented properly, a rewards program can indeed foster true loyalty. If the
product is consistently great and the service exceptional, the rewards program
can encourage use and build customer habits. Ultimately, the customers
affection for the brand becomes more important than the rewards.

Im sure Starbucks does develop loyal customers this way. The problem is how
they deal with demoted members. Instead of motivating them to get back in
the fold, they communicate in a way that will anger many. Lest you think it was
only my friend who felt rejected, heres a sampling of tweets from unhappy exgold members:

A Friendlier Approach-

Clearly, there are times when a company has to curtail rewards benefits due to
low usage. But, it should be done in a way that minimizes customer outrage.
Here are two thoughts on how Starbucks could defuse some of the benefit
expiration time bombs:

Warn customers well in advance that their benefits are in peril. This could be
done by email and at the register. At best, if a customer is close to staying
gold, coffee consumption will increase. At worst, the customer wont be
surprised by an out-of-the-blue youve been demoted notice.
Dont drop all accumulated stars. Clearly, these customers arent high-volume
coffee consumers, and setting them back to zero with a new target of 30 coffees
will be a major demotivator. Perhaps the points earned in the last few months
could be retained? Or, simply use a rolling 12-month count If a customer
meets the goal in any 12-month period, give them their status.
Encourage mobile app use. A major flaw in the physical Gold Card program is
that progress toward a free item isnt visible on the card, nor is it even printed
on the receipt. The Starbucks mobile app remedies this flaw, and would let
laggards know their gold status might expire. It could even be programmed to
alert them of an upcoming status change.

Putting the Goal Gradient Hypothesis to Work-

The closer we get to a goal, the harder we work to achieve it. This has been
demonstrated by experiments with rats, but, more importantly for Starbucks,
with coffee rewards cards (see Loyalty Programs: Of Rats and Men, and its
called the goal gradient hypothesis.

Even artificial progress toward a goal can be motivating. An experiment with

coffee punch cards that gave the holder a free coffee after ten punches showed

faster consumption on a card with twelve spots and two pre-punched compared
to an empty ten-spot card. The cards were mathematically identical, but the
illusion of progress kicked consumption up a notch.

Ideally, Starbucks would make it easy for all card holders, even those in no
danger of losing their gold status, how they are progressing toward their next
free item. Sales would increase. And, for demoted members, adding a few
free stars might be enough to bring them into the store again.

What we can Learn from Starbucks?

Focus on the experience. Starbucks is masterful at wrapping its product in a
deeply-textured gestalt. The choice of furniture and fixtures, the names of its
drinks, the messages on the cups, the graphics, it's all been studiously crafted.
My local Starbucks in New York City even has a little tray at the register with
the business cards of the manager and the assistant manager. Very clever. Makes
them feel good, and it lets customers know that someone is in charge and
accountable no less -- an increasingly rare commodity in today's retail
environment.
In short, there are no throwaways at Starbucks, and there shouldn't be at your
company, either. Indeed, every business -- no matter how narrow the niche -creates one experience or another around its customer interaction, its unique
ecosystem. Think of your business in those terms, because attention to the small
things sends a big message. It says that you really value your customers, that
you credit them with the sensitivity to recognize the proliferation of quality and
discipline. And -- importantly -- that you don't take them for granted.
Pay attention to your "brand consciousness." F. Scott Fitzgerald -- on the first
page of The Great Gatsby -- defined personality as an "unbroken string of
successful gestures." Starbucks has got this down to a science; it's what's behind
the experience I talk about earlier. The brand has a distinct and recognizable
voice, and through that syntax it radiates a clear and alluring identity, as well as
a smart understanding of its customers--their values, their lifestyles, their needs.
Why else, in heaven's name, would someone care what music "we're listening
to" -- as they put it? Would you value the musical tastes of GM
Of Hewlett-Packard? Or of Dunkin' Donuts, for that matter?

I don't think so. But we respect Starbucks' opinion because when it says "we," it
means something to us. Starbucks has earned it, through a shared sensibility. Is
that true of your business? What would it take to make it true? Imagine if you
could become a valued partner outside the narrow niche you compete in,
because your judgment and taste and continued ability to surprise and please
were trusted implicitly. That's marketing power.
Don't try to squeeze every last cent out of a customer. Imagine the radical
illogic: you can sit for five hours with a single cup of coffee. An MBA culture
would never allow this -- it would be busy calculating the pathetic ROI on this
customer loitering, analyzing the time value of the real estate, dividing it by the
marginal cost of the coffee, and soon recommending that Starbucks charge by
the hour, like a parking garage.
The truth is, though, that the comfortable chairs and couches have turned out to
be a counterintuitive economic asset. They create loyalty. They drive business
that might otherwise go elsewhere. They contribute to multiple customers
gathering -- and spending.
Are you too wrapped up in "monetizing" your customers, instead of creating a
business environment where they don't feel like a spending gun is always being
held to their heads? Remarkable things will happen when you demonstrate some
patience and confidence; confidence that if treated well, your customers will
come back even if you're not the cheapest cup of coffee in town.
Don't accept conventional price ceilings. Industry experts (and consumer
research) would have killed the idea before it started. I can hear the objections
now: No one would ever pay $1.75 for a cup of coffee they can buy for 85 cents
-- not to mention a $3 specialty drink. The concept is too sophisticated for
Americans. People are in too much of a hurry to stay and linger. They'll try it
once and never come back.
In today's hyper price-sensitive world, where all of us are faced with driving
down costs every day, it's easy to forget that markets -- if developed properly -have more upward elasticity than many give them credit for. Of course,
commanding this higher price demands relentless attention to the brand delivery
system I've been talking about.
Pastiche is powerful. Starbucks is a master at recombinant cultural marketing.
There's a bit of America: The name, for one, is out of Moby Dick, a

quintessentially American novel. The multiplicity of beverage choices -- and

endless customization potential -- is also an acknowledgement of our uniquely
empowered (and opinionated) consumer. Of course, there's a savvy bit of Italy:
the barista, the faux Italian drink names, the entire caf gestalt.
Finally, there's a global, New Age-y feel to the entire experience: the
environmental sensibility, the focus on "fair trade," the conscious availability of
soy milk, even the way Starbucks markets the company as a progressive
employer (health insurance for part-timers).
But if you're not in the coffee shop business, how relevant is this to you? Very.
We're an increasingly diverse culture level: conceptually, product-wise,
graphically, from a personnel perspective.
The other thing, of course, is that Starbucks venerates its product. And that's
contagious. So next time you're facing a business dilemma, leave your desk, get
in your car -- or take a walk -- to the nearest Starbucks. You could learn
something.

Alternatives & Evaluations1. Redefine their marketing strategies starting with a proper research and
evaluation of what the customer wants. Starbucks has lost track of the customer
when their determination of what is served to the customer is determined by
what makes the barista happy.
2. Analyze the customers, and potential customers through their specialty sales
to see the impact upon current or potential retail sales in stores. Out of store
sales is obviously helping drive Starbucks retail sales. 40% of the new
customers have tried Starbucks products prior to coming into the store the first
time. How do we increase these sales? Is it because of the coffee purchased at
the grocery stores? Did they find what they expected when they tried the
Starbucks retail store?
3. Research customers who do not frequent Starbucks, or who have never been
inside a Starbucks store to determine why. What is their perception of
Starbucks? Do they drink coffee or specialty coffee? What would get them to
try it for the first time?

4. Create a centralized marketing department which can attempt to coordinate

all marketing efforts. There appears to be a lack of harmony between collecting
data and the proper evaluation of the data. The snapshot methodology they used
may not reflect a universal measure of customer satisfaction.
5. Analyze the innovative sales to determine the effect on labor costs to
determine if the sales support the costs and the potential decrease in the time
available to quickly serve the customer. Case research indicates that innovative
products are not as important to the customer as quick and pleasant sales. Are
these sales actually impeding the object of quick and pleasant sales without
providing important income? Their marketing product mix may be
inappropriate.
6. Concentrate new store openings in areas that would not cannibalize existing
sales. There are many areas that Starbucks is not in. Why cannibalize?
7. Advertise more to establish the branding of Starbucks. Why is Starbucks
different? While Starbucks may think they know what distinguishes Starbucks
from others, they should do more research and develop a real strategy prior to
initiating any major advertising campaign. They have developed over time, and
their customers are different than before.
8. Quick term fix to add more employee hours to reduce wait time, although this
should be allocated according to an established need per store. The quick,
convenient, and friendly service are obviously important based on customer
satisfaction surveys. For the short term this obviously should be addressed and
fixed. At some point, the product mix should be addressed to help reduced wait
time.
9. Separate serving customers with customized orders from those which will
require less time, such as the customer just wanting coffee. Use the more
experienced baristas to handle the more complicated orders. The layout of the
new stores that are opened could more utilize this concept.
10. Extend the utility of the cards by embedding RFID tags to identify the
customer and the orders to add to a database.
11. Introduce more customer operated machines to reduce wait time.
12. Use additional advertising for sales of coffee in grocery stores. Their 4% of
home specialty coffee sales appears very small. Nestle exited specialty coffee in

grocery stores during this time frame. There was a large void of specialty coffee
in grocery stores. A concentrated effort in this type of distribution could have
established more sales and some brand loyalty for coffee. Peets is a competitor
chain in the California area. They see no difference between grocery store sales
and their retail store sales per an interview with Patrick ODea. They have
achieved considerable brand loyalty for a limited number of coffee lines, and
charge a higher per unit sale price than Starbucks. Peets does not see innovative
sales as a big option.

Starbucks Options1. Investment of $40 million annually to increase speed of service

(impact =
2. Alter the product mix
Determine change depending on store size and location
3. Process of Measuring Service performance
Categories: Service, Cleanliness, Product Quality, Speed of Service
4. Retail Expansion
New stores in new markets
Geographically cluster stores in existing markets
5. Product innovation
Priority of Mgmt given that the prices were stable in recent years
6. Service Innovation
Starbucks store Value Card
7. Effort to identify and demonstrate in very concrete terms on how to
determine Market Research Data

SolutionsStarbucks should pursue all of these alternatives

Starbucks appears to consider competition as minimal, and that they are
somewhat insulated. Probably, entertaining either idea is a strategic mistake.

Starbucks Forte
11th consecutive year of consistent sales of 5% or greater
Company spent close to nothing to achieve this goal
Sales climbed at an annual compound growth rate of 40% and net earnings to
50% since Starbucks went public
Good strategic alliances with Pepsi-Cola and Kraft foods to distribute some
of their products
Lowest employee turnover rates in the industry
(just 70% as compared to 300% the average of the fast food industry)
Implemented good policies to insure competitive advantage
Just say Yes policy
Measuring service performance
Expect business projections to rise and be steady and consistent.

Plan of ActionPlan based Starbucks strengths relative to the presented issues :

1. Proceed with investing the $40 million annually in the 4,500 stores to
increase service efficiency (impacting customer satisfaction. Goal ~ customer
retention in the competitive coffee house market)

2. While the investment enables additional labor hours, research efforts to

increase efficiency through set-up and equipment (e.g. automated espresso
machine, specialized work stations)
3. Use secondary market research data to identify, analyze, and alter product
differentiation strategies, with respect to smaller chains and Starbucks
obliquities
4. Alter the product mix depending on the store size and location of the outlet
(demographics)
i. Sample to find out what customers mainly look for
ii. Sample data results would narrow the customization and train baristas with
those special concoctions
5. Marketing Research showing that existing markets are far from saturation
i. Analyze this particular area with specific concrete terms targeting a particular
objective
6. Continue with Product and Service innovation, proactively conduct an
environmental scan to launch new products
7. Validate Market Research metrics and methods of sampling, data analysis
ii. Service Performance categories
iii. Does the data translate in to measurable metrics that can impact sales and
profitability?

Top 5 Attributes of Starbucks:

1. Known for specialty/gourmet coffee (54% strongly agree)
2. Widely available (43% strongly agree)
3. Corporate (42% strongly agree)
4. Trendy (41.5% strongly agree)

5. Always feel welcome at Starbucks (39% strongly agree)

Recent Findings of peoples experiences:

Starbucks cares primarily about making money

Up from 54% to 61%

Starbucks cares about building more stores

Up from 48% to 55%

Key Issues Rewards Card is not free

Mystarbuckidea.com is not connected to Consona
In Store feedback forms are weak
Long waiting times at 1-800-23-LATTE
Starbucks Shared Planet and Community Involvement programs
Baristas and the Community

Is STARBUCKS really growing with CRM?

Critical measurements-

Online and store surveys to measure customer satisfaction

Employee satisfaction survey
Number of Starbucks Cardholders: Customer reactivation, Cross-sell
Number of customer complaints
Revenue per store/ per region
Profit per customer
Customer retention, acquisition
Total Revenue & Growth

Recommendations Improve feedback: key in pads, 24x7 customer service, better in store
feedback
Rewards Card program: free card, direct communication, easy use of
coupons
Empower the store manager and the regional office to take key decisions
: Community Involvement: Increase local events like go green, gettogethers
Product offerings: customize some products to suit the demographics
of the area
Better BI and Data warehousing tools
Employee feedback opportunity
Improve barista-customer relations
Consolidate the current customer relation systems to one platform

BiblographyManan prakash Marketing strategies & plans

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http://waveagency.my.iscom.org/2015/04/01/the-customerrelationship-management-the-example-of-starbucks/

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