Indian Institute of Management Rohtak

Consumer Behaviour
Final Report
 STARBUCKS

 
In Guidance of – Prof. Neha Bhardwaj
 Submitted By- Group 11
Atharva Patankar: PGP12260

Gargi Sharma: PGP12219

Rahul Jain: P2GP12256

Vini Jaiswal: PGP12228

Kushagra Kedia: PGP12253

Naitik Srivastava: PGP12188

 Acknowledgment

We would like to acknowledge our sincere gratitude and thanks to our Consumer Behavior
Professor, Dr. Neha Bharadwaj for her valuable suggestions and insights through this project
work.

We are thankful to all our batchmates, friends, and relatives for their invaluable help in
completing this project.
 Letter Of Transmittal Pending

Dr. Neha Bhardwaj

Professor
IIM Rohtak

Dear Ma’am,

Subject: Consumer Behavior Project on Starbucks

As per the guidelines provided by you during the classroom discussion, we hereby submit a
report after going through the entire notes and scrutinizing the facts and data from various
sources. The report contains relevant facts about the consumer experience at Starbucks.

Kindly evaluate the same and provide your valuable input.

Thanks & Regards

Group 11
 Table of Contents

Acknowledgment
Letter of Transmittal

1. Company Background
2. Reasons behind Starbucks’ great customer experience
3. Market Segmentation, Targeting, Positioning for Starbucks
4. Visiting Cycle of a new customer
5. Problems faced by consumers
6. Why people prefer local coffee shops over Starbucks
7. Self-experience after visiting Starbucks
8. Recommendations
 Company Background

The first Starbucks was established in 1971 by three businessmen named Jerry Baldwin, Zev
Siegal, and Gordon Bowker in Seattle, Washington's Pike Place Market. Selling equipment and
coffee beans were their main goal. During their first year of business, they bought green coffee
beans from Peet's, a merchant and roaster of specialty coffee.

They thereafter started purchasing coffee beans straight from the growers. Howard Schultz, a
businessman who believed that the company could sell coffee and espresso drinks in addition to
coffee beans, joined the business in 1983. The business partners believed that offering coffee and
espresso beverages would detract from their main objective of providing coffee beans.

Since the plan did not succeed, Schultz founded his own business in 1985 under the name II
Giornale coffee bar chain. The chain's original proprietors sold it to Schultz's II Giornale in 1987.
Schultz rapidly started to grow after converting II Giornale locations into Starbucks operations.

With more than 34,000 locations throughout 94 countries, including Australia, Canada, China,
Puerto Rico, and more, Starbucks coffee has developed into the largest coffeehouse corporation
in the world. Starbucks offers both single-origin coffee and thirty blends.

You may also buy Starbucks brand coffee in nearby shops to brew at home. Starbucks has more
than 160,000 employees worldwide and serves more than five million people each week. At one
point, regular customers came in on average six times per month, while devoted clients came in
eighteen times each month, spending an average of $50.

Reasons behind Starbuck’s great customers experience

  A progressive investment in its employees

Starbucks was the first private business in the United States to offer full and part-time eligible
employees stock options in the early 1990s. That is, the more satisfied the consumer, the bigger
the employee's wallet. Starbucks' emphasis on its employees originates in part from the fact that
Howard Schultz, the previous CEO of Starbucks, was severely injured while working at his blue-
collar job. Schultz's father did not obtain health care or worker's compensation, which harmed
his potential to pursue the American dream. That "scarred" Schultz, but it also inspired him to
establish a company where his father would be pleased to work.

 A personalized experience

One detail you may not see, but it is incredibly significant, is that every time you visit Starbucks,
the Barista welcomes you, asks for your name, and writes your name on your order. That is
extremely unusual, especially for a company like Starbucks, which serves over 100 million
people per week. Details are important, and in an age where communication is often more
generic than personal, Starbucks consistently provides a personalized level of service. This effect
is amplified when the Baristas recognize you and greet you without even asking your name.
While personalization is a buzzword for many, it is an old hat for Starbucks. Starbucks claims
that its customization strategy is the "single biggest driver" of increased spend per consumer.

 A community-like atmosphere
There is a sense of camaraderie in any Starbucks in your city or throughout the world. The
baristas are happy. They want to know your name. There's a spot where you can sit and relax
without feeling obligated to buy anything. Free WiFi, which was provided long before it was
popular, invites you to stay even longer. Even the music, which sometimes sounds fantastic and
sometimes makes you want to skip through to the next song, feels familiar. Starbucks likes to
refer to its locations as a "third spot" between work and home. When all of these elements are
considered together, they produce a world-class client experience.

 Control over the customer experience

Starbucks' lack of a franchise model is one of the primary reasons for its constant customer
experience. In response, Schultz stated, "we believed very early on that people's interaction with
the Starbucks experience would define the brand's success." Our success would be determined by
the culture and values of how we linked to our clients, which are reflected in how the company
responds to our [workers]. And we believed the best way to have those kinds of global ideals
would be to develop around company-owned stores and then issue stock options to every staff,
giving them a financial and psychological stake in the company. And we were dealing with a
premium product, which might be difficult to master, must be explained to the consumer, and
necessitates educated personnel. If we had franchised, it would have been difficult to deliver the
kind of customer sensitivity and product understanding required to build the Starbucks values.
 Market Segmentation, Targeting, Positioning for Starbucks

 Market Segmentation of Starbucks

Starbucks divides its market into demographic, geographic, behavioural, and psychographic
segments. They then employ a product differentiation strategy to cater to various consumer
segments. The corporation has retail outlets in many areas, and each store represents the
preferences and tastes of the local market, as with geographic segmentation. The stores may have
similar designs but provide different products such as baked goods and coffee.

Demographics will include the age, employment, and income level of the company's target
market. Meanwhile, psychotropic variables such as client tastes and styles are used to produce
authentic items for a wide range of customer wants. Starbucks' market segmentation includes
behavioural variables that can address consumer loyalty and consumption behavior.

 Targeting of Starbucks
Starbucks' target markets are middle to upper-income office workers looking for high-quality
products. Because Starbucks has stores all around the world, the firm creates local pleasures that
reflect cultural differences among customers. Tourists traveling to nations and visiting a
Starbucks chain can taste the country's local food through the items that they have, in addition to
residents sampling out local goodies given by Starbucks.

Starbucks intends to give tables of drink and food nutrition such as fat, calories, fiber, sodium,
and protein on its website as people continue to seek cleaner and more sustainable cuisine.
Customers that are concerned about their calorie intake might use this information.

 Positioning of Starbucks
In the case of Starbucks, the company has developed a distinct market positioning in order to
effectively differentiate its products from other brands and give them an excellent strategic
advantage in their target markets. The company's positioning strategy is customer-centric,
providing more than the customer need. Aside from manufacturing amazing coffee, it fosters a
good reputation in its target market by providing a wonderful retail environment, environmental
protection, and social commitment. As a result, buyers will believe that by purchasing Starbucks
products, they are also contributing to the environment and society.

Every coffee shop provides free Wi-Fi and a comfortable area for customers to rest or study.
Some stores include a 'drive-thru' for people who prefer not to enter the store.
 Why people visit Starbucks

It is one of the world's most successful companies, not just in the coffee shop industry. It has
been so successful because it was able to deliver an experience that revolutionised how many
people thought about coffee shops and how many of us consume coffee outside of our homes.

The “Third Place”

Starbucks has always put their focused on their coffee and space based on its “Third Place”
concept. The global coffee chain has been loved by many around the world. The third-place
concept comes from Starbucks' philosophy of offering a comfortable place for their customers
that is outside of their home and work. Even though Starbucks charges a premium price for their
coffee, customers still choose to go there as their third place to spend a comfortable time and
meet with friends or work with colleagues. From a design and branding perspective, what
Starbucks does is rather brilliant in fact. As one can understand, Starbucks doesn't simply focus
on raising the quality of their coffee or products to charge that additional premium fee, instead
they put a lot of their focus on the customer's experience. Customers at Starbucks are there for
their welcoming and comfortable atmosphere.

Drinks
Many customers are obsessed with the Caramel Latte or the Frappuccino. Excessive roasting
imparts a flavour to the espresso shots that complements these sweet concoctions, resulting in the
perfect balance of flavours for each of Starbucks' premium speciality coffee drinks. Because
these drinks are so popular, other coffee shops have had to produce comparable items to
compete. Following Covid's arrival in the sector, many individuals attempted to avoid coming
inside in order to maintain social distance. As a result, Starbucks outlets with try driving are
quite popular, with some extremely long line-ups of cars waiting for their Starbucks shot.

The Starbucks App

Starbucks introduced its mobile app in 2011 to give its regular customers with an even more
comfortable experience. This application allows you to order, pay for, and pick up drinks without
having to wait in big lines. Simply order any favourite drink from the app, and it will notify
customers when it is available for pickup. Users may even order using the app before leaving the
house or workplace, and the drink will be ready by the time they get to the store.

Popular Celebrities
This popular and very chic coffee shop is frequently visited by celebrities enjoying their day out
as well as their favourite Starbucks coffee! These celebrities frequently share their Starbucks
experiences or just selfies on their social media profiles, resulting in high engagement and
boosting the brand's popularity.
Visiting Cycle of a new customer (consumer decision-making process)

 Need Recognition 
As a new customer to Starbucks first customer develops a need. It can be from friends and family
who recommended to visit Starbucks or social validation, self-satisfaction or the customer’s love
for authentic coffee, or getting influenced by social media. 

 Information search
After developing the need the customer tries to collect the information, he may do it by visiting
social media posts, Starbucks page, or collecting information from friends who have visited
Starbucks and taking their reviews.

 Evaluation of alternatives
Now the customer is fully aware of the product (Starbucks). After this he may look for an
alternative, comparing Starbucks with other brands or the local coffee shop he may visit
regularly. Comparison is made on the different parameters and asking the question to himself-
Why only Starbucks? 

 Selection 
After comparing different alternatives on the different parameters, the new customer decided to
visit Starbucks. As for a customer, this will be a unique experience.

 Purchase decision 
Now customers have decided to visit Starbucks for the first time. This will be his first experience
with this fine level of coffee experience in terms of ambiance, taste, and perfection.

 Post-purchase Behaviour
Now the customer got his first experience of Starbucks, his experience will influence his
upcoming decision of visiting Starbucks. He may develop his own preferences of visiting
Starbucks, like for some taste may be the determining factor for some the ambiance and calm
work environment, from all this the further loyalty of the customer will be determined.
 Problems faced by customers

Missing Ingredients

For a good portion of 2021, Starbucks has been dealing with a shortage of ingredients, and thus a
shortage of menu options. After experiencing brief shortages of flavored syrups and oat milk in
the spring, the restaurant finally admitted in June that its supply chain problems were ruining its
menu. Due to depleting supplies of commodities like hazelnut syrup, toffee nut syrup, chai tea
bags, and green iced tea, numerous popular items were formally placed on "temporary hold."
Customers began to voice complaints over shortages of breakfast sandwiches and Frappuccino
mix at the end of 2021. These are just two of the most fundamental elements that make up a
traditional Starbucks experience.
Some of the drinks that rely on the missing ingredients include the Cinnamon Dolce Latte, White
Chocolate Mocha, and their popular lines of Refreshers, like the Strawberry Acai and Mango
Dragon Fruit drinks. Many Starbucks fans have used social media to express their frustration.
 
 

Mobile order is a Chaos

Things for the already overworked Starbucks baristas became considerably more challenging
when mobile orders really started to take off during the pandemic. One issue is that too many
orders can enter the digital system at once, creating a bottleneck that staff members are unable to
resolve quickly. Another reason is that the mobile app enables countless drink adjustments, thus
delaying the creation of drinks.
In addition to creating havoc at cafés that are routinely understaffed, the smartphone app presents
difficulties for clients. Insiders within the chain claim that the app has bugs and inaccurately
reflects the availability of components at the majority of Starbucks locations, which results in
botched orders where essential ingredients are either absent or replaced with undesirable
substitutes.
 
 
 Too Much Customization

Starbucks customers can go far with their drink customizations, according to some baristas,
making changes that are "extreme," "ridiculous," and "disgusting." More than a dozen current
and past baristas expressed their boredom with preparing Refreshers, such as iced white mochas
from TikTok, cold brews, and other too-sophisticated drinks. The majority of special drink
orders are straightforward. According to a Starbucks official, fewer than three unique alterations
were made to 75% of the company's customized beverages. However, the baristas claimed that
complicated beverages prolonged order times and that clients occasionally became irate when
their personalized drinks weren't prepared flawlessly.
 Why people don't go to Starbucks and choose Local Shops

Starbucks is like the “Apple” of coffee. They’re not selling you the coffee, but the whole
experience! From the Taylor Swift music on their Spotify to their moody baristas, they have the
whole package. Many people still prefer local coffee shops over Starbucks, this can be due to
various reasons. We have conducted the survey and focused group discussions to understand
consumer preferences in this regard. We find that the primary reason for not preferring Starbucks
is that it is the costliest coffee. Let’s look at the various reasons why people don’t go to
Starbucks and choose local shops

 Overpriced & Expensive: Undoubtedly, Starbucks is more expensive coffee than

all the options available, they charge up to 5 bucks for a cup of fancy coffee. Many
people don’t want to spend that much amount of money on a single cup of coffee

“Overall mediocre coffee at a premium price”

 Taste: Many people do not like the taste of Starbucks coffee. Starbucks coffee beans
are roasted in a way that ensures consistency. A Starbucks coffee should taste the
same, no matter where you buy it. The result of this is that Starbucks roasts its
coffee beans until they are almost burnt. And this results in a coffee that has a very
pronounced bitter flavor

“The coffee is over-roasted for my taste; the drinks are supersized and over-sweetened”

 Destroying Capitalism: Consumers see various benefits to buying things locally. When
they buy local products, the money we spend on buying them will not only go to the
product we get but will also go back to benefit the community through taxes, and
supporting local businesses often leads to the quick development of local neighborhoods.
Just because of that, buying products locally seems more logical

 Inconsistent Experience: There are some Starbucks where the coffee was made
good, the music was right and more importantly the baristas were friendly and did
 their job right. On the other hand, some people have experienced that there are some
Starbucks where the baristas are unhappy to see you and be rude to you when you
order or when they mess up
 Local Shops: There are various cafes and coffee available. There are so many options, and
unlike Starbucks, all of them have unique specialties and atmospheres. Customers can
find a great cafe practically anywhere in their city
 Self-experience after visiting Starbucks

Many people noticed that Starbucks' rise to prominence in the early 1990s wasn't just about
coffee, but also about the company's emphasis on characteristics like atmosphere, coffee quality,
customer service, and partner (staff) satisfaction. Starbucks aimed to be a spot where patrons
could unwind with a great drink, companions, or perhaps just a book. The goal of creating this
ambiance was to create a warm and welcoming setting. Because of their success, coffee drinkers
all around the world now view coffee shops as places to enjoy fine coffee rather than just as
places to buy it. Starbucks touches upon all the senses a human can feel.

We visited Starbucks and took reviews from our peers regarding the experience and found the
following:

Feel: The first thing we noticed even before visiting the store was that the store was present
in a posh locality. This gave us a premium feel regarding the brand. This helps Starbucks to
increase its aspirational value. The outdoor ambiance was lucrative and the brand name and
logo were visible from far.  The moment we walked into a Starbucks, we were greeted with
a smile and a friendly attitude. This made us feel more comfortable and made us hooked on
the place. The training of the staff, in both, how to be personable with customers and
knowledge of the product offering has provided me with a much superior experience than I
would have ever expected. 

Aroma (Smell): Starbucks takes the aroma of its outlet very seriously. They even went as far
as to stop selling heated sandwiches because it interferes with the aroma of coffee. The
highlight of the place is the sweet and musty aroma of fresh coffee beans being churned all
around in the atmosphere. We were able to sense the aroma of the coffee from outside the
outlet itself and this was one of the factors which intrigued us to visit the café.
Ambiance (See): Starbucks provides an ambiance that stimulates creative thinking and
concentration. We felt the infrastructure was like a library, the wooden walls and tables, the
warm glow of the lighting in the late afternoon, and earthly colors. They also provided free
WIFI which attracted a lot of corporate people to work form there. We noticed that all the
people working over there were very well dressed and were trained to behave in a certain
manner. The entire appearance gives a very premium feel to the customer

Chatter (hear): We noticed that only a few people were present there for a casual coffee.
Others were discussing their work. We also heard a few students studying. There was soft
music playing in the background constantly and we noticed that employees were talking
with regular customers and it seemed like they have a personal relationship. Employees
also make an effort to connect with customers inculcating a personalized experience and
securing customer loyalty. We also heard that barista greeted their regular customers by
name and often get into casual conversation. This somehow makes other customers feel like
they also want the same treatment. We were also listening to music that sometimes sounded
good and at times left us impatient for the next song that would feel familiar

Taste: The best part which we realized after visiting a few Starbucks is that it has a similar or
more or less same feel and that our drink order tasted the same in all the outlets irrespective of
geographies. We all came to a consensus that Starbucks did not offer the best coffee we have
ever come across in terms of taste. The taste of the coffee was 3.5 out of 5. Though the taste
of the side product was good and they can focus more on that.
 Recommendations for Starbucks:

1. Digital expansion: One of Starbucks’ key priorities should be to expand its digital
interactions with customers. To do so, it may implement new ways to attract digitally
registered customers beyond the rewards program.
2. CSR Campaigns: CSR campaigns are very important for a brand to personally connect
with the masses. Starbucks’ social responsibility strategy is based on three pillars:
Community, Ethical Sourcing, and the Environment. They can leverage this to attract
customers who are concerned about the environment.
3. Community-based campaigns: Community marketing is the connection of a brand to a
specific community, using a platform to communicate, exchange values, and create
mutual meaning. Starbucks can create specific campaigns for communities like LGBTQ,
competitive exam aspirants, etc.
4. Festive Marketing: Starbucks can create special campaigns for festivals. They can
provide special offers and discounts during festivals.

Strategic Alliances to enhance the experience and reach: Starbucks can launch exclusive
merchandise with e-commerce giants like Amazon. The pandemic caused a great shift in how
people shop and also encouraged people to shop for home-grown products. Starbucks needs to
capture this opportunity.
Thank You