Starbucks Delivering Customer Service

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Lifetime Value For Unsatisfied, Satisfied And Highly Satisfied Customers The story of Starbucks transformation from a small independent coffee shop tucked away in a corner of Seattle’s Pike Place Market to a cultural phenomenon spanning the globe is legendary. A number of factors have been attributed to the success - one being a keen understanding of its patrons. There are multiple methods used to obtain customer information and the value derived therein. Customer lifetime value is one. Customers are assets, and their values grow and decline. Segmenting customers based on their lifetime value is a powerful way to target them because marketing mix activities can then aim at enhancing customer value. (Ho, 2006) Roughly translated,…show more content…
We used the same discount rate, 12%, and took that rate times the product of the number of Starbucks visits/month and average ticket size annualized. CLV = m * r/(1 + I – r) Exhibit 8 % of Starbucks’ customers who first started visiting Starbucks . . . In the past year 27% 1–2 years ago 20% 2–5 years ago 30% 5 or more years ago 23% Average 25% $40 Million Investment In Improving Its Customer Service Using the data provided from Exhibit 3 in the case in regards to sales data broken down for each company operated store in North America we derived the figures in the table below. Daily Weekly Monthly Yearly Average Store Sales $2,194 $15,400 $66,733 $800,800 Average ticket/visit $3.85 $3.85 $3.85 $3.85 Average Customer Count 570 3,990 17,338 208,050 One assumption made was the investment in improving customer service would be restricted to North American stores (4,574) from our calculations regarding the forecasted cost of $40 million. As mentioned in the case, “the company had plans to open 525 company-operated and 225 licensed North American stores in 2003.” (MOON, 2006) Consequently, these were the figures used to determine the
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