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Now a days, business organizations are using Customer relationship factors in order to satisfy
the need of customers and also lure them to be retained with organization till long. Because, it
has been considered that getting a new customer is quite expensive and also the existing
customer actually benefits the organizations for long. After globalized slowdown hit various
nations at large then these giant business organization also understood the importance of CRM
because of which these business organizations are actually installing specialized CRM software
in order to manage the customers at large.
Same is the case with Coffee house business too. These coffee houses are also using various
tricks in order to retain their customer and make them loyal towards their brands itself. There
are various benefits which are being shown by CRM software which the coffee houses are
using currently in order to retain their regular customers such as segmentation of the customers
on basis of their number of visit in particular time duration, secondly promotions made by
business organizations and its effect on getting new customers, thirdly increase in purchases of
customers and lastly how many customers the organization could retain for longer duration.
INTRODUCTION OF STARBUCKS
In this report, the explanation about the CRM strategy of Starbucks have been explained which
is a premium coffee house chain based in USA. The company was firstly established in 1971
by three local businessmen in order to sell the high quality coffee beans but later on in 1981,
one of the partner decided to expand the business and planned to form a high quality coffee
house chain under the signature name of Starbucks. Once Starbucks was established, the aim
of the company was to provide the high quality coffee along with strong customer satisfaction
and innovative product range and high range quality of services for long.
The first coffee house of Starbucks was opened at Seattle, Washington. In 1990, the company
also developed a roasting plant too at same in headquarter location. By this year, Starbucks
was also able to open 60 new coffee houses in various other locations. Within a decade, the
company was able to create 3500 of coffee houses in different countries and continents.
Starbucks has become an inevitable part of life and approximately 50% of the USA population
are drinking coffee every day. In fact, coffee business was at its peak during 1990s and at the
same time, Starbucks also able to earn the benefit of time and situation and end up being one
of the premium coffee chain.
INTRODUCTION OF CRM
Customer is the king which is being taught in management since long back and now a days
another level of strategies are being carried out to retain and acquire the new customers. The
business organizations are actually introducing various method in order to build the strong
relationship with customers as strong customer base actually could prove to be much beneficial
during the economic slowdown. In fact, the customer expectations have also been increased
because of which the company’s duty is not only limited to just to provide product and services
to them but also to meet their expectations.
CUSTOMER LOYALTY
Customer loyalty was highly discussed in the 70s with theories by Jacoby (1971) or Jacoby and
Chestnut (1978) when the distinction between behavioural loyalty and cognitive loyalty was
made. In general, the authors agreed that customer loyalty is the act of a non-random repurchase
(behavioural loyalty), after following a process of evaluation (cognitive loyalty). At Starbucks,
behavioural loyalty is created through the quality of products and good customer service;
however, if customer service begins to decrease, there will be a variation in budget necessary
to maintain this behavioural loyalty.
On the other hand, cognitive loyalty is more difficult to embrace, and Starbucks generally
strengthens it with the loyalty cards that customers use to accumulate points which they later
exchange for free beverages or goods found in the e-shop. One can also become a gold member
and have higher benefits. As Rust et al. (2010) explains that the loyalty card brings more
benefits to the company than to the customer; it helps Starbucks track what products the
customer is buying and which stores he or she visits. This information is later used for product
proposition: customers will get special custom offers with their favourite products and give
them the feeling they are saving money by buying bigger quantities at lower price.
Starbucks has been criticised for the way they handle their customers, as Dooley (2013) shows
a golden customer must earn 30 stars per year, and if this is not met, the number of points are
set back to zero and the customer goes back to a green level card (basic). Many customers
rebelled against this policy claiming they were not warned of this action and switched to
competitors. Crookes (2012) shows customers must spend more today compared to 2011 to
gain the same rewards. For managing these activities more efficiently, Starbucks needs to have
a solid CRM in place.
Social media combined with the loyalty card facilitates observing the churn rate, Starbucks
must pay attention to this indicator since it shows how many loyal customers are lost and are
alerted, thanks to special software, when the customer is starting to lose interest for the brand
(e.g. less sales and store visits). As Traynor (2014) underlines, churn rate must be one of the
most monitored pieces of information so that the company has time to react to a declining loyal
customer in order to bring him back and minimise the costs to do so. According to Fournier et
al. (1998), a company must not "overkill" its customer with information and mail them every
day since this leads to customer dissatisfaction and loss of customer loyalty, and so this is not
a solution Starbucks should be using to regain their customers.
INDUSTRY REVIEW
Coffee is something which is being consumed globally and same also plays an important role
in deciding the economic scenario of various countries which are into production of coffee
beans. Though, the picture of regulations and deregulation along with strong corporate strategy
and increasing pattern of coffee consumption has brought change into coffee chain business
since last 20 years. The coffee producing countries have established various liberal rules in
order to promote its product and same has been the case with roasting and trading companies
too. Now after a long fight, the coffee consumption pattern has been taken a change where
there is fair trade and organized market system along with sustainable production process.
Since last two decades, various coffee chain houses have been emerged which are more into
production and providing of final consumption services at its personalized outlets. These coffee
chain allows its customers to choose their kind of taste from the offered product in terms of
origination and brewing of coffee along with different coffee grinding method. In fact, these
coffee retain chains are also adding different flavors and along with in differentiated packaging.
The customers can enjoy their kind of coffee taste in please ambience of these coffee chains.
INTERNATIONLIZED COFFEE
In last one decade, the coffee producing countries have also reduced the product of raw coffee
beans and this kind of growth in production of raw material has actually provided the ample
opportunity to these coffee house chain to earn handsome profit in just small span of time and
at certain place, the availability of these raw material is actually record breaking. As per ICO
(2005), the coffee producing countries collectively produced approximately 120 million bags
in financial year 2002-03 but the consumption was just 110 million bags at that time, which
means the production was actually higher than consumption.
The farming of coffee for small farmers is almost impossible because they could not produce
the coffee which could meet their financial requirement. In simple terms, the coffee farming
proved to be unsustainable for small coffee manufacturers. After 2005, the small farmers are
actually losing interest in production coffee and now a days, the global community is facing
the problem coffee crises. There are various nations which use to produce coffee earlier are
also under threat of economic issue because as per them, their farmers are leaving coffee
production which was once one of the basic livelihood for the country and it was also important
for the environmental sustainability of the country.
RESEARCH OBJECTIVE
The objective of research have been explained below:
To identify the factors which are actually responsible to act as CRM basis.
To relate the frequency of visit of customers and customer loyalty.
To understand the relationship between easy outlet access and customer satisfaction.
RESEARCH QUESTIONS
The research questions are mentioned below:
1. Do you visit Starbucks?
2. Do you think, the CRM strategy of Starbucks is satisfactory?
3. Do you think, gender and age group plays any significant role in deciding about the
CRM factor in Starbucks?
4. How often you visit Starbucks?
5. Which other coffee house brand you like other than Starbucks?
6. What are the major CRM aspect of Starbucks, which attracts you there?
7. Do you think, easy availability of store of Starbucks would make you more loyal to this
coffee house brand?
8. What are the recent trend of CRM going in coffee house brand?
9. Do you think, that the change in price of products offered by Starbucks may also affect
you loyalty towards the same?
10. What is your suggestion to improve the CRM activity at Starbucks?
RESEARCH MODEL
The research model has been explained below:
The research will be carried out in qualitative and quantitative format whereas the data
will be gathered with help of survey questionnaire. The data will be collected in text
and numeric format, so that easy data analysis can be done.
While conducting research, I have to rely on information provided by the respondents
and I will make sure that there should not be any repeat survey.
The information will also be collected via research journals and papers, books related
to CRM along with web information too.
The questionnaire will contain 10 questions and each question should be close ended
whereas one question will be open ended.
METHODOLOGY
The research methodology will be in two steps:
1. First study will be done with help of exploratory research methodology, where the
information will be collected from journals along with open ended interview with
industry experts who can share their CRM experience.
2. Second phase study will done with help of descriptive research work, where the data
will be based on fresh research and there will be combination of historical and current
information.
SAMPLE DESIGN
The sample of the study have been shown below:
Here, information will be collected from the people roaming around Starbucks café or
either the people coming out from the same.
Total people selected for study will be 90.
The survey questionnaires are taken as print out and contacted them and asked the
respondents to fill in person.
Yes 84
No 1
Sometimes 5
Sometimes
No
1% 6%
Yes
No
Sometimes
Yes
93%
The graph and table indicates that, while surveying 90 people, it was noticed that 93%
of the respondents use to visit Starbucks, whereas 6% of the respondents visits
Starbucks sometimes and lastly only 1% of the respondents stated that they do not visit
Starbucks at all.
2. Do you think, the CRM strategy of Starbucks is satisfactory?
Particulars Responses
Satisfactory 18
20%
76%
CRM is one of the important factor which are being highly considered by MNCs and
giant business organizations which are specifically into dealing with direct customers.
In the same way, Starbucks is also following CRM path as an effective customer
retention activity and implementing various methods in order to satisfy the customers.
76% of the respondents states that they are highly satisfied with CRM activity of
Starbucks whereas 20% of the respondents states that they feel that the CRM activity
of Starbucks is satisfactory and lastly 4% of the respondents were quite dissatisfied with
the CRM activity of Starbucks.
3. Do you think, gender and age group plays any significant role in deciding about
the CRM factor in Starbucks?
Particulars Responses
May be 1
10% 1%
89%
While talking about India, the population moreover belongs to thrifty group where
people are less likely to spent money at coffee houses or to hang around. In the same
way, Starbucks is also the kind of coffee house which is known for its premium pricing.
Thrifty behavior is actually followed by those people who are into certain age group.
For example, the young generation is more likely to follow the policy of earn and spent
would comfortable with these expensive bills of coffee houses. 89% of the respondents
states that, age and gender factor plays very important role, 10% people states that it’s
not true while 1% of the respondents stated that may be its true.
4. How often you visit Starbucks?
Particulars Responses
Very frequently 75
16%
1% Very frequently
83%
Barista 2
Costa Coffee 2
Any Other 1
1%
2%2%
It is generally happens that customer may like another brand parallel to the favourite
brand because of certain reason and in such circumstances, there is high probability that
the customer may shift. The chart shows that 74% of the respondents are very much
loyal to Starbucks whereas 21% of the respondents also like Café coffee day, 2%
respondents like Barista and Cost Coffee respectively and lastly 1% of the respondents
like any other brand.
6. What are the major CRM aspect of Starbucks, which attracts you there?
Particulars Responses
Hospitality 67
Any Other 4
5%
19%
Hospitality
Easy Location Search
2%
Nice Internal Environment
Any Other
74%
Customer visits any particular place, when he or she finds that the particular place is
worth to visit repetitively and for the same situation also exits with Starbucks too. There
are various CRM aspects which attracts the customers most and as per the chart, 74%
of the respondents states that they love hospitality of Starbucks, 19% respondents states
that they like nice internal environment whereas 2% of the respondents states about
easy store location and finally 4% agreed for any other reasons.
7. Do you think, easy availability of outlets of Starbucks would make you more loyal
to this coffee house brand?
Particulars Responses
Yes 54
No 35
May be 1
1%
39%
Yes
No
May be
60%
Easy access of outlets are also one of the factor which can satisfy the customer and
plays an important role in terms of deciding CRM factor. Just imagine, one person is
loyal to particular toothpaste brand but he could not get that brand easily in his locality
or any nearby place because of which he has to buy any other toothpaste in urgency
then how come, the person would prove loyalty to the same. Though in this survey,
60% of the respondents states that easy access of outlet is an important part of CRM
whereas 39% of the respondents were not agreed with the same and lastly 1% of the
respondents are confused and not sure for this statement.
8. What are the recent trend of CRM going in Coffee house brand?
Particulars Responses
Loyalty Cards 77
Gift Vouchers 12
Any Other 1
1%
13%
Loyalty Cards
Gift Vouchers
Any Other
86%
Well, it is also true that, sometimes increase in price of any particular product can also
affect the loyalty of customer towards particular brand. It happens because after
increase in price of product, it may happen that particular product happens to be out of
reach of the customer’s pocket. But, this may not be the situation with Starbucks
because here people go to its outlet because of passion not because of money as the
services and products of Starbucks is already quite high and expensive. The result of
survey indicates that 64% of the respondents will remain loyal towards same even in
case Starbucks increases the price of product, 5% of the respondents’ states that they
will shift to any other brand and lastly 31% of the respondents’ states that they cannot
say anything right now about their loyalty towards Starbucks.
10. What are you suggestions to improve the CRM activity at Starbucks?
While talking about suggestions, the customers have given so many but those are either
already has been implemented by Starbucks or that could not be implemented. Actually,
the coffee taste of Starbucks is quite strong which is not liked by some of the customers,
so they are asking to light up the taste of same coffee. But such things cannot be possible
as Starbucks is known for its exclusive taste of coffee.
Strength
The company is among top 100 employers globally
Ethical business
Premium quality coffee production
Friendly and warm interior
Coffee houses in premium locations
Constant demand of product
Provide free Wi-Fi too.
Weakness
Starbucks is expensive coffee retailer which may not be in the reach of various people.
Company has to face negative publicity because of tax evasion case.
Long waiting in its coffee stores.
Opportunities
Still, there is horizon to expand. The opportunity exists in many more countries.
Specialised stores are required for special category people.
Need of Tea houses too.
Coffee farms
Enhancement of in – store experience
Production of coffee capsules for home coffee makers.
Threats
Various branded competitors exists in market with lower price.
Company do not have its specialized coffee farms
Consumer’s buying power is decreasing because of global economic slowdown.
Decreasing production of coffee.
Saturated market
People are more inclined towards coffee machines.
FINDINGS
The findings of the study have been explained below:
93% of the respondents use to visit Starbucks, whereas 6% of the respondents visits
Starbucks sometimes and lastly only 1% of the respondents stated that they do not visit
Starbucks at all.
76% of the respondents states that they are highly satisfied with CRM activity of
Starbucks whereas 20% of the respondents states that they feel that the CRM activity
of Starbucks is satisfactory and lastly 4% of the respondents were quite dissatisfied with
the CRM activity of Starbucks
89% of the respondents states that, age and gender factor plays very important role,
10% people states that it’s not true while 1% of the respondents stated that may be its
true.
83% of the respondents states that they use to visit Starbucks very frequently whereas
1% of the respondents states that they do not like Starbucks at all and lastly 16% of the
respondents states that they do go to Starbucks sometimes but they are not a great
follower of same
74% of the respondents are very much loyal to Starbucks whereas 21% of the
respondents also like Café coffee day, 2% respondents like Barista and Cost Coffee
respectively and lastly 1% of the respondents like any other brand.
74% of the respondents states that they love hospitality of Starbucks, 19% respondents
states that they like nice internal environment whereas 2% of the respondents states
about easy store location and finally 4% agreed for any other reasons.
60% of the respondents states that easy access of outlet is an important part of CRM
whereas 39% of the respondents were not agreed with the same and lastly 1% of the
respondents are confused and not sure for this statement
86% of the respondents states that loyalty cards are one of the majorly used CRM
activity whereas 13% of the respondents talks about Gift cards and lastly 1%
respondent’s states that there are also the trend of gifts, movie tickets and may other
option.
64% of the respondents will remain loyal towards same even in case Starbucks
increases the price of product, 5% of the respondents’ states that they will shift to any
other brand and lastly 31% of the respondents’ states that they cannot say anything right
now about their loyalty towards Starbucks.
LIMITATIONS & RECOMMENDATIONS
The limitations and recommendations against CRM policies of Starbucks have been explained
below:
In countries like India and China, where there is lot of population and it becomes
difficult for any person to easily get seat in any restaurant. Same is the case with
Starbucks too as it is already having very limited number of outlets in India and also
they are almost fully occupied every time. In such situation, Starbucks must release any
mobile application which can help the customers to book his seat online and can also
know the status of his booking via same mobile app too.
Recently, India went through demonetization phase which was actually very much
traumatic for people as the people were not left with any cash with them. So, in such
situation, various outlets actually provided facility of payment through mobile
application but same was not the case with Starbucks. So, Starbucks must also start
mobile application payment system.
In India, there are very few outlet of Starbucks because of which people cannot enjoy
its coffee and services at ease. So, first Starbucks must open more outlets in India and
also release any application which can help people to locate their nearby outlet.
CONCLUSIONS
As because of global economic slowdown, Starbucks has to made cut into its prices because of
which, it has to lose its image of premium brand coffee chain and this issue has been majorly
faced in India and China. Though, company is constantly making effort to satisfy their
customers, so that they can actually act as brand ambassador for its product and quality served.
As the company is investing more and more into its marketing activity which is attracting the
customers again and thankfully, the customers are also coming back to its outlets again.
Though, now Starbucks is expanding itself in India but the company has to take care that in
order to expand itself with no leaps and bounds must not forget its major liability towards
customer satisfaction otherwise the company may lose its premium customers and also destruct
its brand image. Starbucks is not using traditional channel of advertisement over online such
as YouTube, Facebook, Twitter etc. in order to maintain its image as premium and actually has
launched the online campaign named as My Starbucks Idea. Basically, Starbucks is using a
very premium method of advertising in order to attract and retain its customer base. Though,
while the company opens up its outlet in any particular area then it must focus that to make a
local advertisement campaign so that, it can create hype in the local market at short duration.
Till now, Starbucks is known for its premium pricing but now it must also target low and mid-
income group segment because, In countries like India and China, there are more than half
population belongs to low and mid income group segment and these people can prove to be
much better customer and profitable for the company.
REFERENCE
Starbucks Coffee (2013) Find Refreshment All Day, All Summer at Starbucks.
Available at: http://www.youtube.com/ watch?v=jk7Cuod3SJQ (Accessed: 3 Feb
2017)
Tong, X. and Hawley, J.M. (2009), 'Measuring customer-based brand equity: empirical
evidence from the sportswear market in China', Journal of Product & Brand
Management, 18, pp. 46-61
Winchester, M., Romaniuk, J. and Bogomolova, S. (2008) 'Positive and negative brand
beliefs and brand defection/ uptake', European Journal of Marketing, 42(5/6), pp. 553-
570
Wood, Z. (2011) 'Starbucks staff offered £500 of free shares', The Guardian, 26 January
[Online]. Available at: http:// www.theguardian.com/business/2011/jan/26/starbucks-
offers-shares-to-staff (Accessed: 3 Feb 2017).
Traynor, D. (2014) 'CHURN, RETENTION, AND REENGAGING CUSTOMERS',
Intercom [Online]. Available at: http:// insideintercom.io/churn-retention-and-
reengaging-customers/ (Accessed: 3 Feb 2017).
Tietjen, D. (2013) 'Starbucks buys Teavana. First coffee dominance, now tea?', The
Christian Science Monitor, 23 October [Online]. Available at:
http://www.csmonitor.com/Business/2013/1023/Starbucks-buys-Teavana.-First-
coffeedominance-now-tea (Accessed: 3 Feb 2017)
The Guardian (2014) 'Starbucks to expand evening beer and wine service', The
Guardian, 20 March [Online]. Available at:
http://www.theguardian.com/business/2014/mar/20/starbucks-expand-beer-and-wine-
service / (Accessed: 3 Feb 2017)
Rafii, L. (2013) 'The Starbucks or McCafé Crowd: Who Counts More Politically?',
Huffington Post, 11 December [Online]. http://www.huffingtonpost.com/ladan-
rafii/the-starbucks-or-mccafe-c_b_4262104.html (Accessed: 3 Feb 2017)
LOGO OF THE INSTITUTION
NEW DELHI
Hello, I am the student of NAME OF INSTITUTION. I am conducting a research to know
about the critical information regarding “CRM IN STARBUCKS”. It is therefore requested
you to please fill this questionnaire with your respective attention.
3. Do you think, gender and age group plays any significant role in deciding about the
CRM factor in Starbucks?
Of course, it’s very important
No, it’s not true.
May be!
5. Which other coffee house brand you like other than Starbucks?
Only Starbucks, no other brand
Café Coffee Day
Barista
Costa Coffee
Any other
6. What are the major CRM aspect of Starbucks, which attracts you there?
Hospitality
Easy location search
Nice environment
Any other
7. Do you think, easy availability of store of Starbucks would make you more loyal to this
coffee house brand?
Yes
No
May be
8. What are the recent trend of CRM going in coffee house brand?
Loyalty cards
Gift vouchers
Any other
9. Do you think, that the change in price of products offered by Starbucks may also affect
you loyalty towards the same?
Of course not, I will be loyal to this coffee house as it is
Yes, I will shift to another brand
I can’t say anything now