Starbucks Refines the Customer Experience

Starbucks the Seattle-based company that popularized the "coffee culture" is brewing up higher sales through new beverages and new cafes in global markets. A stop at Starbucks has become part of many consumers' daily routines. Some are attracted by the high-quality, brewed-to-order coffees, while others look forward to relaxing and socializing in the "third place" between home and work.

Starbucks has researched and refined every aspect of the customer experience, from the size of its coffees ("tall" is actually "small") to the number of minutes that customers spend waiting in line. To speed up purchases, it offers a pay-by-cell phone option called "mobile pay." Consumers with iPhone or Android cell phones simply download the app and let cashiers scan the Starbucks code on the screen during checkout. The app links to the customer's Starbucks Card, which combines the rewards of a loyalty program with the convenience of a prepaid card for making purchases. Mobile pay is a big hit: in its first 15 months, customers used their cell phones to make more than 42 million payments to Starbucks.

Well established in the intensely competitive U.S. market, Starbucks is growing much more quickly in Asian markets. The company will soon have 1,500 cafes and 30,000 employees in China, where consumers drink, on average, just three cups of coffee every year. By opening in more locations and encouraging consumers to bring their friends for coffee and conversation, Starbucks aims to increase demand and boost sales throughout China. In Japan, where Starbucks now has more than 1,000 cafes, consumers have long enjoyed the tradition of meeting in neighbourhood coffee shops.

Through market research, Starbucks stays in touch with what its customers like and what their lifestyles are like. Coffee lovers are still buying their espressos or lattes, but they're also "looking for a healthier lifestyle, "says a Starbucks executive. In response to this trend, the company bought Evolution Fresh, which makes premium juices, and opened its first Evolution Fresh store in Bellevue, Washington. On the menu: all-natural, freshly-blended drinks from nutritious fruits and vegetables, plus salads and wraps. Over time, Starbucks is adding Evolution Fresh drinks to the menu in all of its cafes and opening additional Evolution Fresh stores on the East and West Coasts. Although expanding into fresh juices means competing with Jamba Juice and other rivals, Starbucks is relying on its brand-building expertise to juice up this part of its business.

Taking note of consumer interest in energy drinks, which has blossomed into an $8 billion market, Starbucks has also launched Starbucks Refreshers, a line of carbonated drinks with more than half the caffeine content of an espresso shot. Available in supermarkets and in Starbucks cafes, these all-natural drinks combine green, unroasted coffee with fruit juices for a fruity, non-coffee flavor. To gain significant market share, Starbucks must battle Red Bull, Rockstar, and other well-known marketers of energy drinks.

Starbucks also believes in social responsibility. It offers health-insurance benefits to both part-time and full-time employees and donates generously to community projects. It also protects the environment by recycling in every cafe and constructing buildings designed to save energy and water. Finally, the company follows ethical purchasing practices to ensure that coffee growers get a fair price for their premium beans.

Questions for Discussion

1. In terms of situational influences and level of involvement, what are the benefits of mobile pay?

2. With Evolution Fresh, which psychological influences on consumer buying decisions does Starbucks seem to be addressing?

3. Why would Starbucks want customers to know that it believes in social responsibility?