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Dear Ms. Christine Day,

I have reviewed the case and would like to thank you for all the information provided. I congratulate Starbucks on its success and gigantic presence worldwide in a short period of time. I do not advise the company to invest $40m in increasing the labor at the stores. Please find my analysis and recommendations for the same presented below.


Starbucks in early 1990s was catering to a niche, urban market. It had successfully established itself to an extent as the "Third place" for its customers. An important aspect that contributed to its success then was that it was the first one of its kind and was upscale. Consumers spent time at the store and also were ready to pay more for good quality coffee and service.

As a result of its expansion, the customer base has increased and now includes a wide variety of consumers .The new kind of consumers have a brand loyalty of 25% against 44% of the established customers. The reasons for this are the change from a niche to the mass market, increase in the number of competitors and a change in lifestyle. The new customer base has a lower income level, are less qualified and younger. They may visit Starbucks for its convenience and inevitable presence and not for its quality coffee and to spend time. They are on the lower side of coffee consumption as well. Increasing the labor is not a solution to these customers' dissatisfaction. They should be captured by giving personalized service and special treatment to all our customers.

According to the survey in 2002, only 65% of the customers request for a faster service.75% would like to be treated as a valuable customer and 73% would want friendly staff in a store. These are the key attributes that the customers think are required for customer satisfaction. There is no evidence that they are areas of improvement for Starbucks. According to the Factors driving "Valued Customer" perceptions survey, 28% of the customers are satisfied and 31% have voted for an improvement in service. Of that 31%, 19% have asked for friendlier staff and 10& for faster service. 19% have also voted for a free cup service. The question asked for this survey "How could Starbucks make you feel more like a valued customer" is biased towards achieving higher standards than inquiring the current satisfaction rate. The wait time has been steadily decreasing as per



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