Starbucks

The underlying problem for Starbucks is that the behaviors and expectations of the two customer segments--new young customers and the old more established customers, were not being met. Starbucks original service proposition in the 90s is facing difficulties in meeting the expectations of the two customer segments. Ultimately, Starbucks was trying to appeal two completely opposite customer demographics. In other words, Starbucks was stretching itself think by trying to give the two segments the best of both worlds. During Starbucks early years, their product-market fit was perfectly aligned with their current customer base. However, as Starbucks expanded into new territories, along with new customers, Starbucks was not able to adapt its product-market fit to the new customer base. In analyzing Starbucks problem, I recommended both a short term and long term solution:

Short termWith that being said, I believe that Starbucks should invest the $40 million annually in the companys stores. I believe that Starbucks should indeed use that investment to increase the number of Baristas at each store. The outcome of the investment would be to improve speed-of-service and thereby increase customer satisfaction. Increasing staff at Starbucks stores should in theory result in resolving the most problematic area (according to Exhibit 11) of friendlier, more attentive staff and faster, more efficient service. The real question we should ask, however, is at what point would the additional staff increase pay off? Furthermore, another factor we should examine is the customer service. We must also ask how many customers would we have to convert from being satisfied to highly satisfied for the investment to be worthwhile. (See Appendix)

Long term solutionAlthough investing the $40 million in the companys stores may address most prominent pain point of customer service, it is not going to solve Starbucks big picture problem of incongruence in product-market fit. One solution that I would offer Starbucks is that the company has to make a decision as to what customer base they want to focus their efforts and resources on. On one hand, they could continue to focus on their original customer base from the 90s--the affluent, well-educated, and white-collar customers. Or, they could pivot their focus on the new and emerging customers--the less affluent, less educated, and younger customers.