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, widely-implemented strategy for managing a company’s interactions with customers, clients and sales prospects. It involves using technology to organize, automate, and synchronize business processes—principally 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.

Purpose-

The 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 browser-based 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 CRM-

CRM 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. Customer Service2. Sales Force Automation3. Campaign Management .4. Customer Service

Customer service-

The 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 Automation-

Your company’s 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 Profile-

Starbucks 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. We’re 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

We’re called partners, because it’s not just a job, it’s 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. It’s 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. It’s

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 Coffee’s Vision Statement-

Starbucks Coffee does not readily present its vision statement. However, a careful reading of the company’s 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 McDonald’s 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 cafés. 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 single‐origin premium arabica coffees.

Handcrafted Beverages: Fresh‐brewed coffee, hot and iced

espresso beverages, coffee and non‐coffee blended beverages, Vivanno™ smoothies andTazo® teas. Merchandise: Coffee‐ and tea‐brewing 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

Seattle’s Best Coffee brands), Starbucks VIA® Ready Brew, Tazo®

2. tea filterbags and tea latte concentrates.  

• Ready‐to‐Drink (RTD): Starbucks® bottled Frappuccino® coffee drinks, Starbucks Discoveries® chilled cup coffees,

Starbucks Doubleshot® espresso drinks, Starbucks Doubleshot® Energy+Coffee drinks; Seattle’s Best Coffee® Iced Lattes,

Tazo® bottled iced and juiced teas.  

• Starbucks® Ice Cream: Super‐premium coffee and coffee‐free flavors.

Brand Portfolio-  

Starbucks Coffee, Seattle’s 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 Company-

We 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: We’ve developed strong, long‐term relationships with farmers all over the world that help ensure we

are ableto buy the high‐quality 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 we’re a part of. Bringing people together, inspiring change and making a difference in people’s lives – it’s all part of being a good neighbour. By 2015, we plan to contribute one million volunteer hours each year to our communities.

Website-

www.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 card-

Keep 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 monthTwo free beverage customizationsA free tall drink on purchase of 250g whole bean coffeeFree size upgrades on featured beverages during the first 2

weeks of its launchA free tall drink reward every 10 StarsA personalized Gold Card

Special Offers-

Once 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 payment-

A great way for small companies to jumpstart their businesses is by using cloud-based 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’ customer’s demand for mobility, which is very important in today’s 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 everyone’s convenience and reference. Nutrition information are also provided under each entry of whole bean coffee, tea, and other drinks. What’s 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 year’s 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 won’t 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 Facebook’s 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 nation’s 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 Accessibility-

Starbucks 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 third-party 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 you’ll know about the progress we’re making.

2D barcode system-

“No 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 CRM-

Starbucks is one of the enterprises adapted social media to the company’s CRM strategy. Having 3.6 Million followers in Twitter, 34 Million Facebook users “like” the page, 6.6 Million Views on Youtube. As we’ve learned from marketing course, Starbucks doesn’t 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 multi-channel 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 Misfire-

Starbucks' 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, you’d 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…

That’s a fairly gentle letdown, since it’s so “easy” to get your status back. But the email continues with, “So you’re 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 hadn’t 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 doesn’t need to bribe them with mathematically predictable freebies. But, that doesn’t 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 customer’s affection for the brand becomes more important than the rewards.

I’m 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, here’s a sampling of tweets from unhappy ex-gold 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 won’t be surprised by an out-of-the-blue “you’ve been demoted” notice.

Don’t drop all accumulated “stars.” Clearly, these customers aren’t 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 isn’t 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 it’s 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 é 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 & Evaluations-

1. 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 O’Dea. 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’ Options-

1. 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

Solutions-

Starbucks 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 Action-

Plan 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 people’s 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”, get-togethers

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

Biblography-

Manan prakash Marketing strategies & plans www.starbucks.com http://www.forbes.com http://www.destinationcrm.com/Articles/Columns-

Departments/Insight/Starbucks-Building-an-Inspiring-Brand-91935.aspx

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

Rion-Gaboury, J. (2005). From Words to Action: A Vision Statement Can Do More than Light a Path. Leadership, 34(5), 14.

Starbucks Coffee Company (2015). Company Information – Starbucks Coffee Company.

Starbucks Coffee Company (2015). Mission Statement – Starbucks Coffee Company.

Swales, J. M., & Rogers, P. S. (1995). Discourse and the projection of corporate culture: The mission statement. Discourse & Society, 6(2), 223-242.

Williams, L. S. (2008). The mission statement A corporate reporting tool with a past, present, and future. Journal of Business Communication, 45(2), 94-119