Of Starbucks, Which Offered a Defective Cappuccino Maker to One of Its Customers - Case Study Example

Strabucks' Case This part of the essay deals with the first question, discussing the case of Starbucks, which offered a defective cappuccino maker to one of its customers. In while the conflict escalated to the national scale, with the attention of many medias focused on Starbucks with uncomfortable feeling. At first an argument base is outlined. The solution based on the arguments is given next: it would be cheaper for Starbucks to fulfill demands of the customer. The famous case of a Starbuck's defective cappuccino maker has become a classic illustration of importance of considering the needs and desires of every customer in business. Simply, there are no unimportant customers. However, before drawing any recommendations, a careful analysis of the situation should be made. Especially I would like to focus on the three key points in the whole story. First, final costs of settling the issue with the dissatisfied customer, who went on anti-Starbucks ad campaign, are much greater than the initial costs of satisfying the client, who returned his defective cappuccino maker. Second, during the investigation of the case by Starbucks the customer was disturbed so many times, that his dissatisfaction had grown greatly, almost turning into aggression. He had to tell his story to every manager he talked to, and had to face several weak attempts of compromising before his demands were satisfied. Third, problems with Starbucks coffee makers did truly happen. It can be concluded from a wave of phone calls on the phone line established by the furious customer. "Upon the first advertisement's appearance, Dorosin received a "ton of calls." He said he had received thousands of calls, from customers, competitors and employees who felt Starbucks misrepresented themselves to the public." (Barr et al 1998) Therefore, Starbucks did perform badly. In fact the customer was so upset, that this issue has overgrown the simple financial compensation. What he though Starbucks should do is to apologize. The point is in moral compensation, not just financial. This fact is supported by $20,000 spent by client on the case: "He set up a toll-free line with six telephones installed in his small scuba shop and hired extra employees to answer the calls. In one year he received about 6,000 responses. His total estimated outlay: $20,000." (Kalis and Leaf 1999) The media attention to the situation made the position of Starbucks even more complicated. Now let us turn to Starbucks profile and background. The company has been developing rapidly since 1988, offering various coffee drinks and beverages, operating through its own stores. The company's competitive advantage was based on three whales: highly differentiated offers, suitable position of its stores, and a great attention paid to customers. "Customer service was a key ingredient to Starbucks' success. One of the five guiding principles of the company was 'Develop enthusiastically satisfied customers all of the time.'" (Barr et al 1998) It was the reason people preferred the large corporation offering rather expensive beverages to tiny comfortable cafes. In the light of this strategy a weak decision of replacing Dorosin's and his friend's machines with two new ones at a cost of $270 instead of top-of-the-line cappuccino maker priced $2500 and apology looked very bad. From the external viewpoint it looks like, not only the company has failed to deliver its services to customer on the proper level of quality, but also tried to pinch pennies on the compensation. After all, what is one top-of-the-line machine to Starbucks in compare to its brand image Nothing. If given a decent amount of attention from the Starbucks' management the issue would have been resolved without unnecessary noise in the media. The hysteria raised by press was even more uncomfortable, because Starbucks experienced another problem: the company was accused in the elimination of local coffee businesses throughout the country, which could not match to the corporation. "'I like supporting a local business,' says Conrick, a 28-year-old student and hospital therapist. 'I didn't like the idea that Starbucks moved in next to my favorite coffee shop, so I've avoided them in Kansas City.'" (Spivak 2000) After that unwise try for compromise the company was receiving hits from both sides, endangering its reputation of a customer caring corporation. The solution proposed in this essay uses all the previous data gathered and analysed to state: demands of the customer should be fully satisfied. Of course, funding of a charity is not cheap, but it still presumes the smallest disadvantages for Starbucks. Moreover, in the context of media attention it can be used to regain all the gold taken from the brand image after the conflict with Dorosin. It would be perceived not only as an apology, but also as a generous gesture, leading to the increase of competitive advantage through strengthening the brand. At the same time the company should make sure this will not ever happen again. Mistakes made were largely entailed by the complexity of connections between different executive. Therefore, the inner management system should be analysed on the matter of improvement. Additionally, corporate culture requires better accent on customer satisfaction if Starbucks wants to like a great customer-caring company. Finally, the issues on service delivery have to be investigated, resulting in root reasons of defective cappuccino makers to be opened. Once again, the attention of media will help to achieve the second goal of investigation (obviously, the first one is quality improvement): the crowds of dissatisfied consumers want something to blame for. The result of the investigation will provide them this chance at the same time clearing the image of the whole company in their eyes. The increase of consumer activism in developed countries, especially in USA makes it important to operate the delivery of service with devoting large amount of attention to customers. "Consumer activism is growing and the ever-stronger business ethics 'industry' is debating codes of conduct, standards, labels, monitoring and other mechanisms to demonstrate corporate social responsibility, as well as the pace at which change is implemented." (Transfair.ca 2003) That is why even such giants as Starbucks find it costly to ignore their customer's complaints. Activists among consumer present a formidable force able to tear to pieces the good reputation of a company with the help of media channels: newspapers, TV. Internet, etc. Curiously, the case of Dorosin is not over yet, although Starbucks has fulfilled all his demands. His website www.starbucked.com continues to function, and to support consumer activist movements throughout the world. A problem he sees is major loosing of customer's opinion by large companies: "This is a much more general problem about corporate America losing sight of customer-based values. It's not just a problem of Starbucks." (Colliver 1999) Just for reminder, where did this story start: none of that would have happened if the cappuccino maker bought by Dorosin was faultless. Gap 3: Customer Perspective The gap model discussed in this part of the essay was developed by Berry et al. in 1985. Service providers have to understand the gaps that might exist in the delivery of their service, which will eventually give them better insight into what hinders them from providing good quality of service to their customers. The gap analysed in this essay is the third one: it is a gap between service quality specifications and service delivery. It is also commonly called the service performance gap. If this gap occurs the quality of the service delivery is reduced and consequently, the quality of the service itself lowers. Obviously, most of the service performance gaps occur due to personnel mistakes. It is they, who make a delivery of a service - therefore its quality is largely dependent from the staff. The causes of the discrepancies could be employee role ambiguity, role conflict, poor employee-job fit, poor technology-job fit, inappropriate supervisory control systems, lack of perceived control, and lack of teamwork. However customers also have their role in influencing the service quality gap, which is mainly to provide the company with the information on the specifics and quality of service delivery they would like to see. In brief, customers influence gap 3 in following ways: role-related issues (e.g. lack of understanding, lack of ability, lack of willingness, ambiguity and uncertainty in what they want); rewarding or not a service providers for good performance; and interaction with other customers. In general it is extremely important five customers a feeling of control of service. "Feelings of control - such as providing choice where an outcome is the result of a consumer's own decision - are important to allow consumers to feel satisfaction."(Chung et al. 2002) If the service delivery is simple than it is a "self-service" in many ways for experienced customers. However new customers usually need assistance during service control. Therefore one of the ways to increase service performance is to control customer's involvement level in service design and standards. Now, let us look with better detail at each of the aspects of customer's possible influence on the service delivery. First is the customers' awareness of their role and their involvement in the service design processes. There could be different reasons for a customer not helping the personnel to deliver a service of proper quality: customers may not understand their role, or don't have the ability to perform it (e.g. lack of communication with the company), or they may not be interested in providing the required information, or they simply may know themselves what kind of service delivery they want. All these factors can be negative if true, or positive if false. The level of customer involvement in performing their role is almost impossible to control for the company, yet not completely impossible. NatWest retail bank can serve as an example for skillful control of customers' involvement into their role. It is a known fact that customers often have lifetime relationships with their banks. Self-actualizations is a difficult task to establish in banks, however once established it gives clients almost autonomous control over the services they need. "This isn't about interference but working in the background to help customers manage their finances in such a way that it releases what was 'dead' time back to them and lets them get on with their lives." (Chung et al. 2002) Clients are almost able to design the delivery of the needed services themselves. Second is rewarding companies for the good performance of delivery of their services. Obviously, this aspect cannot be influenced by the company. Instead it is a way for a customer to influence the company. If the customer gives a positive feedback on the service delivery, it can be set as an ideal by the company that will keep up to it in future. For instance, some passengers give premium money to cab drivers, or offer a tip to waiter in a restaurant to show that they are satisfied with the way an employer delivers services of the company - these are the most primitive examples of rewarding for good performance. Nevertheless, not all the customers give a feedback. Especially it is hard to receive negative feedback, when a quality of service delivery leaves much to be desired. In fact 96% of unhappy customers never complain, and for every 1 complaint, 26 more have problems (Abdel-Ghany 2005).Complaint by itself should be seen as an issue, which needs to be improved quickly. However if a customer gives completely no information on the quality of services delivery it is hard for the company to grasp what model to choose for an ideal. Various questionnaires and customer surveys can help to improve this situation, still it is a customer's choice whether to participate in it or not. The third and the last but not the least aspect of customer influence is communication to other customers. It is known that a customer who has a problem with services performance tells from 8 to 10 others about it, and those, whose problem was satisfactorily resolved, inform only 5 (Abdel-Ghany 2005). Communication with other customers can induce them to influence service design themselves, or on the contrary to leave it completely on the personnel's responsibility, therefore reducing its quality. Dissimilar to physical goods which can be produced and sold at a later stage, most services are produced and consumed at the same time. "This means that consumers will often interact with each other and can negatively or positively influence the experience, e.g. loud diners at a nearby table in a restaurant. Users will talk about the service experience and a negative or positive reputation will result." (Chung et al. 2002). This will not only influence the reputation of the company, but also make changes in the customer's desire to control service design processes, eventually closing or extending the service performance gap within the particular company. Thus all of the aspects of customers influence were overlooked. In conclusion it is important to stress that customer-dependent issues of influence made on the gap 3 are very hard to control for a service providing company. Ironically, although the customer satisfaction is the ultimate objective of every business, it is often almost impossible to help customers help themselves. Such great amount of variability introduced by customers into operation of the company leads us to another finding: customer involvement into design services processes should be limited and controlled to reduce this variability. Nevertheless, it is recommended to maintain balance and to treat customer as a partner, not end-user, or master. References Abdel-Ghany, M. (2005). Quality Service. Retrieved November 6, 2005 from http://www.ches.ua.edu/departments/rhm/faculty/maize/rhm303/Power%20Point%20Slides/Ch%204-Quality%20Service.pdf Barr, T.F. Boyd, T.C. and Rosenthal, D.W. (1998). Starbuck Coffee: The Dorosin Issue. Case Research Journal. Retrieved November 6, 2005 from http://www.starbucked.com/index.phppage=case_study Chung et al. (2002). Services Marketing. Draft Paper. Retrieved November 6, 2005 from http://www.cim.co.uk/mediastore/Covers__Executive_Summary_(6th_Draft)_Links.pdf Colliver, V. (1999). Anti-Corporate Crusader. San Francisco Examiner, June 11. Retrieved November 6, 2005 from http://www.starbucked.com/index.phppage=history_news Kalis, L. and Leaf, C. (1999). Rage Against the Machine. Smart Money, April, pp. 125-132. Spivak, J. (2000). Latte Lovers Choice: Locals or Chain The Kansas City Star, January 18. Retrieved November 6, 2005 from http://www.starbucked.com/index.phppage=history_news Transfair.ca. (2003). Company Profile. Retrieved November 6, 2005 from http://www.fairtradetoronto.com/pdf_files/tfcfaq.pdf Berry, L.L. Parasuraman, A. Zeithaml, V.A. (1985). A Conceptual Model of Service Quality and Its Implications for Further Research. Journal of Marketing, Vol. 49, pp. 41-50. Read More