2011

Starbucks Business Model

Entrepreneurial Marketing

Christi Gisca,

Andy Negus,

Charlotte Smith

& Grace Waite

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Table of Contents

1. Introduction .................................................................................................................................... 3

2. Background Analysis ....................................................................................................................... 3

3. Business Model Framework ............................................................................................................ 4

4. Value Creation ................................................................................................................................. 5

5. Market Factors ................................................................................................................................ 6

6. Internal Capabilities ........................................................................................................................ 7

7. Competitive Strategy ...................................................................................................................... 9

8. Economic Factors .......................................................................................................................... 10

9. Personal/Investor Factors ............................................................................................................. 11

10. Conclusion ................................................................................................................................. 11

Appendix 1 – Swot Analysis .................................................................................................................. 13

Appendix 2 – Starbucks Current App Technology Available in USA ..................................................... 16

Appendix 3 - The New Service App Process .......................................................................................... 17

Appendix 4 – Business Model Components Table ................................................................................ 18

Appendix 5 – Survey Design and Rationale........................................................................................... 19

Appendix 6 – Primary Research Findings .............................................................................................. 22

Appendix 7 – Interview Transcript ........................................................................................................ 26

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1. Introduction

1.1 Schindehutte et al (2009) defines a business model as “a concise representation of how an

interrelated set of decision variables in the areas of venture strategies, venture architecture,

and venture economics will be addressed in order to create sustainable competitive advantage

in defines markets”. In this report, a new innovative business model will be introduced and

discussed in regards to an entrepreneurial competencies framework for Starbucks coffee

company.

2. Background Analysis

2.1 Starbucks is one of the few coffee shop businesses that, owing to its premium brand status,

enjoys a high degree of customer loyalty and has over time gained a significant competitive

advantage over lesser known coffee brands1 through their entrepreneurial approach to

business centred around innovation and customer intimacy.

2.2 Despite this ongoing success, it is vital for the business to continue to meet customer needs

and understand their values through innovative business models and furthermore, to

capitalize on existent and potential opportunities.

2.3 After conducting primary and secondary research into the organisation and its consumers, it

has been highlighted that although Starbucks enjoys a loyal customer base and has built up

a very successful business model, there are still areas in which new opportunities could be

pursued (appendix 1).

2.4 After speaking to a store manager it became clear that there was in issue between both staff

and consumers in regards to the ordering process with the stores. Research has shown that

customers who visit the store feel that the time they spend queuing, ordering and waiting

for beverages is acting in detriment to their experience with the organisation. (appendix 5, 6

& 7)

1 Datamontitor (2010) Company spotlight: Starbucks MarketWatch: Drinks, March 2010, Vol. 9 Issue 3, p29-34

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2.5 It has therefore been proposed that a new business model is to be introduced in order to

facilitate the ordering process and improve customer experience, whilst still preserving an

entrepreneurial approach that the company has always maintained.

3. Business Model Framework

3.1 Schindehutte & Allen (2009) developed a framework in order to define the core

competencies of a business model from an entrepreneurial perspective, consisting of six key

components. This framework will be applied to the proposed business model in order to

ensure that an entrepreneurial approach is taken towards the new venture, in keeping with

Starbucks current approach to business. These competencies will then be expanded upon,

taking into consideration three levels; foundation, propriety and rules levels, bringing focus

to how value can be created in each area of competence.

3.2 The foundation level concerns the basic understandings of each component, detailing what

the company proposes to do. Next, the propriety level expands on the first by defining the

innovation involved in the venture, focussing on how the business model will create value in

each component and creating originality in the model which cannot be easily replicated by

competitors. The rules level, determines how the first two levels will be implemented and

maintained by providing a specific guideline to work by. This level therefore will create a

disciplined strategic manner to apply the Foundation and Proprietary level elements.

3.3 All of six components of Schindehutte's framework will be applied to these levels to ensure

innovation and creativity in the business model whilst also offering a guideline to maintain

the model.

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4. Value Creation 4.1 The first component in the framework is concerned with value creation. This component

comprises of any elements of the new business model which offer value from the firm.

Starbucks will create unique value through the creation of an improved customer

experience, facilitated through a new interactive service.

4.2 The new service being offered consists of a new Starbucks mobile phone application,

expanding on the existing app currently available in the States (see appendix 2). The new

app will consist of a new and unique ordering process (see appendix 3), allowing consumers

to find their nearest Starbucks store in a given radius, view the in store menu via their

mobile phones, choose the beverages they wish to purchase, pay for the products through a

secure card payment method and finally be given a waiting time and a progress update of

their order to be collected. The aim of this new service is to enhance the customer

experience that Starbucks customers currently feel could be improved upon with the

elimination of queuing times. By giving customers the option to purchase beverages through

this medium, without the need to go in store, it allows individuals to spend the time that

they would spend queuing, to continue their everyday tasks, for example shopping, working

etc. and removes the need for queuing and waiting in store.

4.3 At the Foundation level, the new service offers customers the opportunity to download the

Starbucks ‘app’ to their Smart-phones, enabling them to order coffee and food from their

mobiles before entering their nearby store and pick up the order.

4.4 At the propriety level, the value to the customer derives not only from eliminating waiting

time but enhancing the overall experience and delivering a more well-designed service

attuned to changing customer needs. Customers are able to browse through the Starbucks

menu on their phone at their own pace, without feeling rushed in-store to choose their

order. The app also enables customers to predetermine the time they will be waiting for

their beverages, displaying a waiting time for customers through the app is they ordered a

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beverage and then once a purchase is made, giving them a total waiting time and a progress

report of their order.

4.5 The application can be customized to each individual user by the inclusion of the Starbucks

Loyalty card through the app. Customers are able to save their favourite items and orders

within the ‘app’ or choose suggestions recommended by Starbucks. This will also enable the

existence of a customer database, facilitating future personalized marketing

communications.

4.6 These proprietary concepts therefore enhance the coffee experience for the customer by

creating a relaxed and queue-free environment within the store whilst offering consistently

rapid and on time delivery.

4.7 To ensure that the service offering is consistent and maintained, it will be enforced at the

rules level that orders should always be delivered in the time given to the customer and that

the progress time displayed to the consumer will never exceed 30 minutes. Customers must

also be made aware of the waiting time of an order through the app before purchase to

ensure they are aware of the waiting time and to prevent disappointment.

5. Market Factors

5.1 The next competence is concerned with the market to which the value will be created for.

Schindehutte (2009) describes that this element “focuses on the nature and scope of the

marketing in which the firm will compete” (p.136).

5.2 At the foundation level, the target market for the new application will be a consumer

market, aimed at a younger, technology savvy audience that are current users of Starbucks

services, and are knowledgeable of current application technology and have this technology

available to them.

5.3 At the proprietary level, the aim is to introduce this app on a national scope, allowing access

to consumers across the UK. In doing so, customers who have the app can use the service in

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any Starbucks in the UK and therefore not alienating the wider Starbucks audience and

allowing the service to be distributed across a broader market.

5.4 Although the app will be available across the UK, initially marketing strengths will be

heavily focussed throughout carefully selected larger towns and cities in which the target

audience are most likely to purchase and be willing to use the new service due to the

commercial nature of the areas.

5.5 At the rules level, it will be enforced that the new service will be available to any individual

in the UK who wants to use to application and that they are able to use the application at any

Starbucks store on a national level.

6. Internal Capabilities

6.1 The next element of the framework defines the firm’s internal source of competence.

Schindehutte (2009) explains that this is “used to capture an internal capability or set of skills

that enables a firm to provide a particular benefit to customer” (p.136). This suggests that

this element of the framework includes any process within the company which allows it to

work more efficiently and deliver these results to the consumer as a source of value

creation. The core competencies of the new service are the following:

6.2 Production and Operating Systems

6.2.1 At the propriety level the new app allows the ordering process to become much

moreefficient as orders are received prior to the consumer’s arrival in store. Therefore,

the product will be ready at a given time, reducing queuing time and delivering a less

stressful environment for both consumer and employee.

6.2.2 At the rules level, it will be ensured that the order shall be ready by the time agreed, and

if this is not met a policy will be enforced in which the consumer will receive a discount

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on their order. It will also be implemented that at least one employee (dependable on

size of branch and location) shall be designated to the production of app orders.

6.3 Selling/Marketing

6.3.1 At the proprietary level, promotions will be communicated via the app, allowing for a

valuable communications gateway towards customers. Marketing efforts will also be

enhanced as the new app will allow building a detailed customer database with

purchasing behaviour as its main driver. This will then allow for more personalised

promotions and communications with consumers by sending promotional material such

as vouchers and special offers exclusively through the app specific to the individuals

buying behaviour and usage and further increasing the desire to obtain the app.

6.3.2 At the rules level, marketing material (e.g. promotions/offers) shall be updated and sent

out at least once a month to keep the service new and exciting for the consumer and

building on customer intimacy whilst not bombarding them with marketing messages.

6.4 Technology

6.4.1 At the propriety level, while the original Starbucks app currently exists in the UK, the

expansion of this app service will greatly improve on the existing technology, positively

affecting customer experience and allowing for increased customer relationships and

experience through the willingness to adapt services to new technology innovations.

The key developments are the abilities to pre-order drinks and to collect loyalty rewards

through repeat purchases at any Starbucks location within the UK.

6.4.2 At the Rules level the app shall be reviewed on a regular basis to ensure that it is

functioning effectively and so that any issues that have been found with the service are

rectified immediately. Research and development of the app will also be carried out on a

regular basis in order to discover any improvements, new tools or expansions on the

app can be made in line with advancements in the application technology.

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7. Competitive Strategy

7.1 The next component of the business model concerns the manner in which the company will

competitively position itself within the market. This element, therefore, will determine how

the proposed business model will allow the organisation to differentiate itself from its direct

and indirect competitors. Schindehutte et al (2009) explain that “differentiation involves

creating something perceived to be truly unique in the marketing place” (p.136).

7.2 The challenge that organisations face with the development of new products or services is

that these new ventures are often imitated by competitors; therefore a focus on the

preservation and safeguarding of the business model must be sought. A variety of different

elements will be used in order to position the proposed service.

7.3 At the Foundation level, the app service will display a leadership in innovation with the use

of current technology and new unique ordering facilities. This will allow the company to

gain a competitive edge and also demonstrate to customers that the brand is changing the

service offerings to keep up to date with the busy lifestyles of consumers through a popular

medium. The facilitation of the ordering process through the new service process also

demonstrates differentiation as it will allow consumers to go through the process of

ordering beverages in a less time consuming yet efficient manner, eliminating the queuing

element which consumers feel detriments to their customer experience.

7.4 When deciding on how the organisation will position itself, it is important to consider that

Starbucks has always endeavoured to create intimate customer relationships and therefore,

this must be carried through to the new business model. This intimacy and focus on

customer experience is evident in that the venture aims to create a new customer

experience which facilitates the ease of ordering and acquiring beverages in a manner which

is adapted to consumers’ lifestyles and seeks to eliminate elements which may hinder the

experience.

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7.5 This focus on creating a new customer experience displays the business model at the

Proprietary level. Instead of the new phone app service being at the centre of the model,

the focus will be on the way in which this service allows the consumer to have a greater

customer experience, facilitated through the new service that creates an improved

environment within the stores.

7.6 At the Rules level, the organisation will aim to achieve the most effective ordering system in

the coffee industry with the best customer satisfaction.

8. Economic Factors

8.1 This component of the business model will define how the business intends to make money

through the new service, taking into consideration factors such as sales volumes, profit

margins and the source of revenue within the business model.

8.2 At the Foundation level, the firm draw revenue from the current business plan through

high sales volumes and low profit margins. The app will experience relatively low operating

leverage, however, the low fixed costs and internal competencies will result in increased

revenues.

8.3 At the Proprietary level, the added incentives and efficient drink orders offered to

customers ordering through the Starbucks app will cause an increase in turnover as quicker

orders generate more custom as well as creating long term customer value.

8.4 At the Rules level, the app will remain at a fixed price of 59p for its initial purchase. The

customer will also pay a transaction fee of 10p per order which will remain a fixed price per

order and act as additional profit to that of the order itself, but not too much that the

consumer feels that the service is not worthy of the extra cost.

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9. Personal/Investor Factors

9.1 The personal/investor factors component considers the objectives behind the new business

model and determines what the organisation wants to achieve as a result of its efforts.

Schindehutte explains “it is helpful to view a new venture in terms of an investment model”

(p.137). This suggests that by looking at the business model in relation to an investment into

the organisation, the ambitions of the venture can be established.

9.2 The proposed venture is characterized in terms of the growth model. As Starbucks is

already a well established and successful business, the emphasis will be on increasing the

value of the firm with the new service focusing on the improvement of the customer

experience with the store with the aim of organisational growth.

9.3 At the proprietary level, using this investment model will ensure that the proposed business

model will correspond with Starbucks existing business model which focuses on creating

new sources of value for the organisation in order to promote growth within the business

whilst keeping emphasis on the consumer.

9.4 At the Rules level, the rate of growth will be managed and monitored to ensure that the

proposed venture is meeting growth objectives effectively. This will be facilitated through a

number of different monitoring methods including a trial period of the new service which is

carefully planned and implemented in order to determine the success of the venture once

introduced in its entirety.

10. Conclusion

10.1 This report has highlighted the key components that will form the new business model

for coffee company Starbucks from an entrepreneurial perspective. Each component has

been looked at in detail and has been adapted to the three levels of competence in order to

ensure their innovative characteristics and to define the key guidelines to ensure that all

components are maintained and managed effectively.

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10.2 What needs to be remembered when devising business models however is that,

although it provides a good foundation to base a new venture on, it does not necessarily

mean that it will lead to the desired outcome. Instead the development of a business model

can be an ongoing process in which certain elements can be changed and modified during

the implementation stage. Schindehutte (2009) explains “as competencies are developed

within the venture, keener insights may result regarding sources of innovation or competitive

advantage as they relate to those competencies” (p.142). It may also be suggested that the

focus of the different components of the business model may shift over time and decisions

will become more strategic. Therefore it must be remembered that no components of the

model should remained fixed or static, but instead should be able to grow and transform

with the venture to create the combinations that create greatest effectiveness.

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Appendix 1 – Swot Analysis

Strengths

Strong brand equity lends a competitive edge - Starbucks is a brand with massive amounts of equity developed year after year, a company which is the 5th most influential lifestyle brand in the world (Schindehutte, 2009, p. 183) and has ranked no. 3 in the Fortune 500 of 2010 (Gallaugher and Ransbotham, 2010)

Wide geographic presence - Starbucks Coffee corporation is one of the biggest worldwide

coffee shop chains, spanning an impressive number of approximately 17,000 active locations (Mahalo, 2011) for its business. The number is even more notable when considering the brand’s plan to expand its number of coffee shops to around 25,000 worldwide (Bishop, 2002)

Strong research and development capabilities ensure product quality - the company has

remained true to its initial value set out in its beginnings in Seattle in 1971 to deliver a ‘love of fine coffees’ (Starbucks Case Study, 2011) and customers’ perception is that the brand ‘has consistently high quality’ (Mintel, 2011a)

(source: Mintel, 2011a)

Opportunities

Launch of Starbucks VIA Ready Brew instant coffee - The brand has diversified its offerings, attempting not only to serve customers walking into one of its 17,000 worldwide locations, but also enabling customers to create their own instant coffee ‘the Starbucks way’ (http://www.youtube.com/watch?v=7KoN2v4yFAY&feature=player_embedded). This has the opportunity of shifting the brand from a simple coffee shop to that of a daily trusted lovemark, even in the most time-constrained of situations in which consumers may find themselves.

Launch of Starbucks app in UK - Most companies tend to ‘rather observe passively - and cheer - from the sidelines’ (Schindehutte, 2009, p. 59) any instance of consumers actively taking hold of the way a product ,service, or smartphone application, in this case, will best address an existing need. However, the launch of the application will not only give consumers the chance to actively participate and become (more) engaged with Starbucks, but it will also bring into full force the true meaning of ‘the third place’ system through an informal, yet relevant manner of consumers voicing out opinions, suggestions, appraisal, ultimately becoming similar to the opinion of automakers who ‘view apps as a way to make cars (or coffee shop brands) more appealing’ (Olga, 2010) (note: personal emphasis added).

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The app can greatly enhance the already-present association of Starbucks with the concept of ‘fun’ and ‘vibrant’ (Mintel, 2011b)2 and has the potential in the long-term to be a generator or a motivator of the brand’s association with other qualities such as ‘innovative’ or ‘always there for you’

Licensing agreements & partnerships - already a strong player by the use of effective strategic alliances with Yahoo!, Apple, Facebook, Twitter, Youtube and Foursquare (Gallaugher and Ransbotham, 2010), Starbucks has the capability of furthering its social media efforts into a constant and longevous relationship with its customer base, giving them the possibility of getting closer to the brand.

Weaknesses

Class-action lawsuits threaten brand image - Lawsuits targeting Starbucks and attacking the brand for issues such as unfair share of tip pools (Hassen, 2009) and negligence in the workplace, which led to some private information becoming available to third parties (McMillan, 2009), may cause the organization to be perceived as a profit-oriented and unprofessional company. Needless to say, this blatantly contradicts the image towards which Starbucks is aspiring, that of a caring, trustworthy and socially-friendly third place.

Accruing diversified market of Smartphone applications. The launch of the Starbucks

application depends entirely and benefits from the technological achievements in the market of Smartphone’s. However, as in any profitable market, there are a number of key players that share relatively large shares of market penetration. The two main platforms are Android with 33% and its main rival, Apple with 25.2% (Smith, 2011). This marketplace rivalry means that from a technological point of view, it is necessary to attempt to achieve the proverbial feat of ‘hitting two birds with one stone’ by offering the same application, capable of crossing platforms. Nonetheless, in this sense, what can be classed as a possible weakness can very easily become an opportunity, demonstrating a strong understanding from Starbucks that consumers’ needs and lifestyles are different but that the brand makes every effort to ensure that no potential customer gets left behind.

Heavy restructuring and store operating expenses impact profits - The need for

modernisation is, from a financial perspective, taking its toll on the reported profits of the company. In the UK alone, the number of stores that were newly opened as of October, 3rd 2010 totalled 601, thus adding heavily to the ‘construction costs associated with new store openings’ (Starbucks Corporation, 2011).

Consumers tend to perceive free Wi-Fi services as being vulnerable to attacks from hackers

‘who want to steal the financial information or personal info you’re inputting’ (Bassett et al, 2011)3 . This issue can, nonetheless, be addressed via an enhanced set of protective measures that will be communicated to the consumers at the start of the awareness/promotion programme that will closely follow and support the launch of the application itself.

2 Mintel (2011) Coffee Shops correspondence maps, Mintel Oxygen [online]. Available from:

http://academic.mintel.com/sinatra/oxygen_academic/search_results/show&/display/id=545197/attach

ment/id=545197&seq=1 [Accessed 12th

April 2011]. 3 Bassett, A. et al (2011) The 35 best money apps,

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Starbucks is still lagging behind Costa Coffee in terms of market share: 23% Starbucks vs.

27% Costa Coffee (Mantel, 2011b)4

Threats

Consumer spending adversely impacted by global economic downturn - the market in which Starbucks operates can be still regarded as one depending on discretionary income. Thus, the brand may be subject to the discretionary purchasing power of consumers which, in the recent economic climate, has suffered sharp declines.

Increased minimum wages - Starbucks recognizes the fact that ‘labour costs such as

increased health care costs, general market wage levels and workers’ compensation insurance costs’ (Starbucks Corporation, 2011)

Increasing health consciousness among consumers5 - The brand is faced with a growing

concern of ‘adverse health effects’ (Starbucks Corporation, 2011) which can be highly

detrimental to brand perception by its target audience.

4 Mintel (2011) Coffee Shops - UK- February 2011, Mintel Oxygen [online]. Available from:

http://academic.mintel.com/sinatra/oxygen_academic/search_results/show&/display/id=545197/displa

y/id=565396?select_section=565398 [Accessed 11th

April 2011]. 5 Datamonitor (2010)

Appendix 2 – Starbucks Current App Technology Available in USA

Figure 1 Starbucks Current App (http://www.starbucks.com/coffeehouse/mobile-apps/mystarbucks)

Appendix 3 – Starbucks New Service App

The New Service App Process

As in the current app, the application will firstly display a Map using GPS to show the available Starbucks stores within the area. Once the Individual

has selected their area, they are given a time show in the first image which will show them how long it will take to get their order if they purchased

now. The Menu which is available on the current app will then be used to select the order and purchase it through a secure card payment method.

Once an order has been placed, a progress screen as displayed in the middle image will be available, showing the progress of the order and the waiting

time remaining. Once the order is available, the app will inform the customer that the beverage is ready and available for collection at the given store,

shown in the final image.

Appendix 4 – Business Model Components Table

Foundation Level Propriety Level Rules

Component 1

Value Creation

Phone application

software to facilitate

order process

Eliminate waiting time

Customer does not feel

rushed, app creates stress-

free efficient ordering system

Create an ordering process

which is enjoyable and up to

date with current technology

Orders always delivered in

the given time

Progress time displayed to

the consumer will never

exceed 30 minutes.

Customers made aware of

the waiting time of an order

through the app before

purchase

Component 2

Market Factors

Consumer Market National

Young, technology savvy market

Availability to all Starbucks users who have the technology

Access across the UK with a focus on carefully selected larger towns and cities

Service available to any

individual in the

Able use the application at

any Starbucks store on a

national level

Component 3

Internal

Capabilities

Production/Operating Systems

Selling/ Marketing Technology

Production made more efficient through pre-ordering

Database and communications made more efficient

Innovative technology approach

Policy ensuring drinks are ready at the specified time or receive discounted purchase

Monthly updates of promotions and offers

Regular review of app functionality and frequent R&D into improvements

Component 4

Competitive

Strategy

Portray leadership in innovation

Quality service experience

Facilitation of ordering process creating operational excellence

Improved customer intimacy

Focus on the customer service

Stress the efficiency of the service

Achieve most effective ordering system in the coffee house industry with the highest customer satisfaction

Component 5

Economic

Factors

Mix of variable and fixed costs

Relatively low operating leverage

High volumes Low profit margins

Added incentives and quicker order times as well as internal capabilities will result in high profitability

Fixed cost of 10p per transaction.

Initial cost for Starbucks app fixed at 59p to download

Component 6

Personal/Inves

tor Factors

Growth Model Focus on creating new sources of value for the organisation in order to promote growth within the business and keeping emphasis on the consumer

Manage and monitor growth rate

Use initial trial to gauge effectiveness

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Appendix 5 – Survey Design and Rationale

The survey detailed below was designed in a manner in which it could address both existent

and potential Starbucks customers. By using a qualitative and quantitative design( both

closed questions and also open questions allowing for more in-depth personal information to

be written down), it was sought that as much information as possible be elicited from

respondents.

Q1)

Are you …

Male Female

Q2)

Please state your age

Q3)

a) Do you currently have a Smartphone (e.g. IPhone, Blackberry, HTC, etc)

b) Do you have an active Internet option on your mobile phone? Please detail

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Q4)

Have you ever visited a Starbucks coffee shop?

Yes No

Q5)

a) Please state how much you agree with the following statement: “The time needed to

queue at a coffee shop is very important to me”

Not important Somewhat Neither important Somewhat Very

at all unimportant nor unimportant important important

b) Why do you consider that?

Q6)

a) Would you agree to pay a small extra charge for having your order waiting for you when

you walk into a Starbucks coffee shop rather than having to queue for it?

b) Would you welcome the opportunity of ordering via a Smartphone application? (Please

offer any information; e.g. thoughts, possible concerns, etc)

Q7)

What words would you choose to best describe Starbucks?

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Q8)

How much do you agree with the following statement: “Starbucks is not just a coffee shop, it

is much more than that, it is an experience”

Definitely Somewhat Neither agree Somewhat Definitely

agree agree nor disagree disagree disagree

Q9)

How important is access to free Wi-Fi to you when considering going to a coffee shop?

Very Somewhat Neither important Somewhat Very

important important nor unimportant unimportant important

Would you choose Starbucks if it provided a free Wi-Fi service? Why? Why not? (please

detail)

Survey available from: http://www.surveymonkey.com/s/5DF33HR

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Appendix 6 – Primary Research Findings

The online survey was successfully completed by 55 respondents (37 F, 18 M) with a mean age of

25 years. Of these, approximately 64% (35 respondents) owned a Smartphone. Overall, however,

86% of those who answered (47 respondents) had an active Internet option available for use on

their handsets. 96% of respondents (53 respondents) had previously visited a Starbucks coffee

shop. Thus, the responding audience was considered relevant and sensible to the issues

investigated.

With regard to question 5, the majority of respondents rated the time needed to queue in a coffee

shop as being very important (22% - 12 respondents) and somewhat important (56% - 31

respondents).

In the second part of the question, when prompted for the reasons behind their choice, some of

the answers illustrated issues of heightened valuation of personal time ( “if I see that I need to

queue long time I rather go somewhere where I do not need to spend that time. Coffee is not that

different that you want to spend time queuing when the next door you get no queue”; “Depends on

how busy I am. If I'm rushing and there is a queue I'll leave disappointed without waiting to be

served”; “On entering a coffee bar/ cafe/shop, I'm expecting somewhere to relax…therefore the

LAST THING I need is some kind of stress...no matter what....I'm there to get away from that kind of

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thing”; “Because I don't want to have to wait too long. Starbucks is a place where you should be

able to grab a quick drink”), everyday needs and time-constrained obligations (“Because

sometimes I might be a hurry and don’t have time to be waiting too long for a coffee”; “Time is

important, people have a lot to do in a day. Queues frustrate a lot of people as well”; “Sometimes

in a rush don’t want to waste time queuing”) or a general resentment of waiting for service for a

commodity that is widely-available and should fit in perfectly with a rapid lifestyle ( “Hate queues”;

“if I want a cup of coffee I don’t want to wait for it”; “I don’t want to be waiting 10 years for a

drink”; “don't want to be stood in a queue for ages waiting for just a drink. I want to be quick”).

In continuation and in direct accordance with the findings revealed by question 5, 71% of those who

answered the survey (39 respondents) declared themselves willing to pay extra in order to have the

drink ready and waiting for them upon arrival at the store.

Opinions regarding the popularity of this concept demonstrated a genuinely welcoming attitude:

“Yes, if done efficiently then this would be ideal”; “Yes would be more convenient and save a lot of

time”; “yes, if I am in a rush I would use it and I definitely think it is a good idea especially for

business people on their lunch”; “yes sounds like an interesting idea, and with the current level of

technology you can order almost anything from a Smartphone, so I don’t see why this would not

work”; “I would, as long as I wouldn't have to do it way in advance. Maybe about 10' before”.

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One respondent went so far as to declare that “I would even consider buying a smart phone if this

application was to be used not only buy Starbucks but in the hope of other stores using it as well” ,

hence shedding some light on the socially beneficial role that the implementation of this application

could bring about.

The findings from questions 7 and 8 are especially noteworthy as respondents agreed with the idea

that Starbucks offers an experience and is not solely representational of the coffee around which

this is created, with the highest percentages of customers strongly agreeing (22% - 12 respondents)

and somewhat agreeing ( 47% - 26 respondents).

What is more, the prompted words for describing the brand, some of the answers illustrated

Starbucks as “Warm, friendly, relaxing”; “It is a small space of Calm amongst Madness”; “great start

to the day” “coffee place with little extra”; “ MMMMMMMMMMM”; “Cosy”, thus further

underlining the important potential of the customer-brand relationship which can only be increased

via the putting into practice of an online continuous communications portal such as the proposed

Smartphone application.

The interview with the manager of the Starbucks Lincoln branch also highlighted the possibility of

the app giving customers more of an enjoyable experience, hence adding tremendously to the value

offered by the brand and, in the long-term, having the possibility of increasing customer loyalty and

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persuading other non-customers to include Starbucks in their repertoire due to, in the manager’s

opinion, of an overall tendency to look up to any technological improvements that brings an

improvement to their lives as a laudable and commendable achievement, an aspect that would

undoubtedly translate into heightened levels of equity and brand valuation.

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Appendix 7 – Interview Transcript

I = Interviewer

R = Starbucks Lincoln Manager

I= Thank you ever so much for agreeing to take part in this, it really helps a lot with our project

and…we do understand how busy you must so we appreciate tremendously the fact that

you’ve…well…taken the time to do this

R = No worries, you’ve come in one of the most quiet days we’ve had this week, so…as long as

there’s no fire alarm or anything like that, we should be alright (laughs). I got all the time you need

I= Really? Is this one of the most quiet days you’ve had?...It seemed quite busy out there.

R = It’s really alright now, we’ve had days when we didn’t even have time to breathe…I remember

one instance when I had to help the baristas cause they weren’t facing up to the number of people

who were walking in through the door.

I = Oh…how come? Were you having a promotion that day or …was it … just a usual business day?

R = I can definitely tell you there wasn’t any promotion going on then…although…we sometimes

get that, I mean there are certain…how should I put it…peak times, I guess, when there are quite a

number of people who suddenly decide to come to Starbucks all at once (laughs). It can get quite

stressful, I mean…especially for those poor guys who have to pay attention to well…the

customers, the orders, delivering good service and…well…all of this while still keeping a smile on

their faces, it can get tough, you know what I mean?

I= Actually, that is one of the reasons why I’m here. My colleagues and I are sort of…developing a

business plan that seeks to … bring to life the use of a Starbucks application which would be

available to smartphone users.

R= But you do know Starbucks already has an app for Apple users…

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I = Yes sir, we are very aware of that but …what we are looking into is something quite different to

the already existing app in the sense that …uhm…customers would be able to pre-order any

beverages via the application itself and then, well…they can just walk into the store and pick up their

order.

R = Oh right, I see…

I = Do you think that this is something from which the brand could benefit?

R = Well, I could definitely see potential in this…new…invention you’re bringing into the market

but what I’m concerned about is mainly the logistics of implementing the system. Have you

thought about that as well? Cause…I mean…how would consumers be able to pick up their drinks

and know who has ordered what? You know what I mean?

I = Well the way we’ve thought about it is that consumers would be able to see a progress bar, or a

…progress screen, sort of…on their app and this would detail all the necessary information. And…

R = And what about the baristas? How would they…

I = Well, the application would have a sort of display screen, as I already mentioned, that would be

linked to a display in the store that would only show the …progress bar and each order…I mean, the

status of their brewing process and all that.

R = Oh Ok, I think I got it now. So what you’re talking about essentially is a sort of…an application

that would allow customers to pre-order their coffees before getting to the actual store right?

I = Exactly, how do you feel about this?

R = Well as I said, I think it can be a great idea if implemented the right way and…to be honest…it

does fit in nicely with the whole technology hype that is going on at the minute (laughs) There

seems to be a new application or an improvement to smartphones every second (laughs) It’s quite

amazing…so yeah…I can see where you guys are coming from now, think it could really work

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I = Thank you, it’s really great to hear that you’re actually considering the effect that this could

have…

R = Oh definitely, as long as it makes the brand seem better…well, not seem, but actually make it

better and give us that sort of …competitive edge over the rivals.

I = Yes, I agree with you…well, the app is primarily targeted or, the way…we thought about it was to

reduce queueuing times for Starbucks customers. Do you think it could catch on to…say…sway any

non-customers to start visiting Starbucks?

R = Well it all depends on the public’s perception of the whole thing, doesn’t it? I mean, if it turns

into a sort of technology craze, the likes of …I don’t know…Facebook or ITunes or anything like

that…not really into the whole gizmo side of things as you can tell (laughs) … right, so if people

start to use it a lot I think others will follow and yes…to answer your question, I think it does hold

some very strong potential to become quite a groundbreaking thing.

I = Do you normally consider queuing times to be an issue in your store or does the brand…think of

reducing queuing times?

R = Well, it’s not top of our ‘to-do’ list but as I was telling you, there are days when …oh Lord… you

wish everyone was using the app (laughs) it gets worse during festivals or special occasions so…my

opinion is that it could save people quite a lot of frustration and stress…

I = And do you...

R = Plus, sorry to interrupt, it could help us become the better coffee shop and the one

that…people choose, you know what I mean, because a queue can only go so far…I mean…if

you’re in the High Street and see 15 people waiting to be served you’re not actually going to think

…oh… ‘I guess I’ll stand in this queue as well’…I mean, no.. people have short tempers and

everyone thinks their time is precious…which it is, I’m not saying it isn’t but… on the whole yeah I

think something like this could help us deliver more of an impact and more of that …experience…

because we do… pride ourselves in…in being called….

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I = ‘The third place’

R = Spot on! So because we’re promoting that friendly and intimate atmosphere, I personally

believe it’s…quite important for people to feel comfortable…that’s why we invest so much in

training our staff and the whole business is dedicated towards…well…I guess you could call it a

proper relationship with customers (laughs).

I = Right ok then, well…the last issue I wanted to talk to you about is the fact that…uhm…we are

going to charge for the application…I mean…in the business plan that we’re writing we’re saying that

both the availability of the app…and…the…usage…to order something, customers will have to pay a

small fee

R = Right ok, and…have you…thought about the price of the whole thing?

I = Well we’ve come to the conclusion that the cost of downloading the app is 59p…

R = Right…and…

I = And for every order made via the app, a small charge of 10p will be …requested from the

customer

R = That’s not too bad, I was thinking you had planned to ask for something like £2 or maybe even

more, I was just a bit concerned (laughs)

I = Ah no no…nothing of that sort…we are trying to be as sensible as possible but at the same

time…it’s value to the customer that should be reflected in the value to the brand …in terms of

finance I mean. Plus, I think this will also be a good way of increasing the loyalty of some customers

and making others want to try Starbucks…

R = Of course, couldn’t agree more, I mean you have to realize that well…even if it is a fictive

scenario, the whole setting up of such a service would still require some funds from the whole

aggregate brand. But yeah…I believe the fee charged is quite small for having the sort of…luxury,

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isn’t it… to have the coffee all waiting for you on the counter, the moment you walk in so you

should be alright with that. And you also said that you’d want to see this increase …

I = Customer loyalty

R = Ah right, loyalty, well ...the way I see it…if it’s managed properly and supported by the

company rather than saying… ‘right there’s the app for you, try to use it as much as possible and

visit us twice as more as you did up until now’…I’m thinking some advertising, promotion, raising

awareness, that kind of communications for it…but yeah, if the design and the whole procedure is

comfortable, well…more comfortable than sitting in a queue anyway and you do see people on

the street texting or looking down at their mobile phones … I think a lot of them wouldn’t mind

accessing the app and ordering as they’re heading down to one of our stores…

I = Right, ok, thank you for that…in a more objective manner, would you as a person …say you

wouldn’t hold the position you are here at Starbucks…would you be enticed to thing better of the

brand?

R = I honestly don’t see why not, I mean…if it’s progress and technology blended together…I really

think that’s something that has come to be appreciated more and more nowadays…and people

tend to look up to anything that can improve their lives, even if it’s getting their cups of coffee two

or three minutes faster (laughs)

I = Absolutely. Well, thank you very much for that, you’ve been of tremendous help and all of this

has been extremely insightful. Really thank you.

R = No worries, it was actually quite interesting…