STARBUCKSDO PEOPLE CHOOSE STARBUCKS FOR THE COFFEE?

KATHERINE SPIVEY, SAAD ABUKHADRA, AND HENRY REID-MORRISON

image: www.colourbox.com

CLIENT: STARBUCKS COOPERATION

This is a hypothetical situation for an academic purpose in order to understand Starbucks’ customer loyalty

2image: en.wikipedia.org

1: http://bi.galegroup.com.ezproxy.neu.edu/essentials/article/GALE%7CI2502055000/87a2cae2da202ddc48710374008f560f?u=mlin_b_northest2: http://adage.com/article/news/starbucks-hits-3-limited-ad-spending/227316/3: http://www.starbucks.com/about-us/company-information/starbucks-company-timeline4: http://www.statista.com/statistics/270091/coffee-house-chains-ranked-by-revenue/image: http://www.statista.com/statistics/270091/coffee-house-chains-ranked-by-revenue/

STARBUCKS THE MEGA-LATTE EMPIRE▸ In 2014 Starbuck was the Largest Snack &

Beverage Company having a 58.1% command over the industry (over 13 billion in sales) 1

▸ Dunkin Donuts commands 32.3% of the S&B Industry

▸ Leading Coffeehouse Chain World Wide4

▸ Starbucks spent only $94.4 million on advertising in 2011 (this is low compared to other franchises in the US spending up to 800 million on advertising)2

▸ Starbucks has a extremely recognizable brand that the newest cup design in 2011 only has logo3

▸ 21,366 Starbuck’s Café Worldwide3

▸ Starbucks has a customized service: a consumer can view the barista making their cup of coffee

▸ this experience is further customized with the consumer’s name written on the cup

RevenueinbillionU.S.dollars

16.45

3.16

2.53

1.21

0.75

0.49

0.43

0.39

Revenueofselectedleadingcoffeehousechainsworldwidein2014(inbillion

U.S.dollars)

Sources::Statista;Varioussources

©Statista2015

Starbucks

TimHortons

PaneraBread

CostaCoffee*

Dunkin'Brands

KrispyKremeDoughnuts

EinsteinNoahRestaurant Group(2013)

CaffèNero(2013)**

0 102.5 5 7.5 12.5 15 17.5

AdditionalInformation:

Worldwide;2014

3

1: http://smallbusiness.chron.com/starbucks-target-audience-10553.html2: http://www.businessinsider.com/15-facts-about-starbucks-that-will-blow-your-mind-2011-3?op=1image: http://thecoffeeteam.blogspot.com/2012/02/identifying-starbucks-customers.html

WHO ARE THE COFFEE DRINKERS AT STARBUCKS?

▸ Adults make up 46% or Starbuck’s Sales1

▸ Young Adults make up 40% of Starbuck’s Sales1

▸ this audience grows 4.6% every year

▸ young urban adults are Starbucks “core customers”

▸ The average Starbucks customer visits 6x per month2

▸ no other restaurant chain has this kind of customer frequency

▸ Top 20% of consumers 12x per month2

4

1: http://www.fastcompany.com/3017375/most-innovative-companies-2012/24starbucks2: http://www.business2community.com/customer-experience/buyer-psychology-customer-value-people-buy-starbucks-coffee-0995182#xQ8DXGgrmfCLsp0w.97image: http://www.statista.com/statistics/219513/starbucks-revenue-by-product-type/

BEVERAGES ARE THE MOST IMPORTANT PRODUCT IN LINE▸ Starbucks spends money and research on

developing what they call a “sensory preference” map1

▸ The Blonde Coffee took 18 months to develop the perfect blend 1

▸ 80,000 drink customization combinations using Starbucks product line 1

▸ Beverage Purchases make up 60 - 75% of Sale 1

▸ Most Starbucks drinkers like a lighter mild roast1

▸ In a blind test the average American prefers Dunkin Donuts over Starbucks2

RevenueinbillionU.S.dolla

rs

6.24 6.75 7.22 7.84 8.59 9.4611.12

1.681.88

2.012.09

2.422.51

3.09

0.971.13

1.452

2.172.37

2.62

0.890.95

1.02

1.37

1.71

2.11

2.34

RevenuedistributionofStarbucksfrom2009to2015,byproducttype(in

billionU.S.dollars)*

Beverage Food Packagedandsingle-servecoffeesandteas Other**

2009 2010 2011 2012 2013 2014 2015

Source:

©Statista2016

0

5

10

15

20

25

AdditionalInformation:

Worldwide;2009to2015

5

RESEARCH OBJECTIVES

Determine the relative value of coffee and non-coffee related factors in choosing Starbucks compared to major competitors

6image: www.starbucks.com

WHAT ARE POSSIBLE OUTCOMES…

▸ H1: Customers go to Starbucks due to non-coffee related factors

▸ H2: Customers go to Starbucks due to coffee related factors

▸ H3: Starbucks has superior non-coffee factors over other brands

▸ H4: Starbucks has superior coffee factors over the brands

▸ H5: Females are more likely to choose Starbucks over Males

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STUDY DESIGN

8image: theplate.nationalgeographic.com

▸ Population of interest:

▸ People aged 18- 60

▸ People that drink coffee at Starbucks, Dunkin Donuts and/or Pavement Coffeehouse.

▸ Regular coffee drinkers at Starbucks, Dunkin Donuts and/or Pavement Coffeehouse.

image: yenilikplatformu.com

STUDY DESIGN

▸ Data Collection Method: Survey (online)

▸ Launch an online survey using social media (Facebook, Twitter, and Reddit)

▸ Expansive reach and large response number

▸ Effective in reaching the target audience

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image: bostonopendata.boston.opendata.arcgis.com

STUDY DESIGN▸ Sampling Frame:

▸ Approximately 100 customers from Starbucks, Dunkin Donuts and Pavement Coffeehouse.

▸ Predominantly within the ages 18-42

▸ Boston Metropolitan Area

▸ Specific network of people

▸ Northeastern University students

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STUDY DESIGN

▸ Sampling Method: Convenience Sampling, Cluster Sampling and Internet Sampling

▸ Convenience - Leveraging our friends that fall under the population of interest.

▸ Cluster - Using the Northeastern community to conduct our surveys at coffee chains located at or nearby campus.

▸ Internet - Posting our survey on websites including Facebook, Twitter and Reddit.

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image: yenilikplatformu.com

STUDY DESIGN

▸ Sampling Design Errors:

▸ Population Specification Error

▸ We are limiting our population with a majority of our respondents being students. We are aware of this and we can thus ensure a percentage of our respondents go beyond the population of interest.

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image: commons.wikimedia.org

STUDY DESIGN

▸ Measurement Errors:

▸ The question is unclear or ambiguous

▸ Inability to ask the correct questions, specifically regarding the brand image perception of Starbucks, Dunkin Donuts and Pavement Coffeehouse.

▸ Strategy to minimize error:

▸ Skip Logic

▸ Simple language

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image: www.ascendus.com

STUDY DESIGN▸ Response Rate

▸ Shortening our survey since respondents may not be as willing to spend time completing a survey in person as they would online.

▸ Telling respondents what the purpose of the survey is and how their feedback will be used.

▸ Letting respondents know how long the survey will take.

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STUDY DESIGN▸ Length of Questionnaire

▸ 5-7 minute survey (online)

▸ Expected Incidence Rate: 90%

▸ Actual Incidence Rate: 54%

▸ Survey was too Long (after 10 respondents shorted survey by two questions)

▸ Uncertainty About Pavement Café Caused Confusion

▸ Unclear Questions (after 10 respondents clarified confusing questions)

▸ Mostly structured data; time needed for data recoding and mining.

▸ Time to collect data: 11 days

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image: www.pinterest.com

AREAS OF QUESTIONING: WHERE & HOW MUCH DO RESPONDENTS DRINK COFFEE?

▸ Q: How often do you drink coffee a week?

▸ A: Daily, 4-6, times a week, 2-3 times a week, Once a week, Never

▸ Q: Are you a frequent coffee drinker?

▸ A: Yes or No

▸ Q: What is your preferred café?

▸ A: Starbucks, Dunkin Donuts, Pavement, or Other

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AREAS OF QUESTIONING: UNDERSTANDING RESPONDENTS AVG CAFÉ EXPERIENCE

▸ Q: When purchasing a beverage do you take it “to-go” or drink it in the café?

▸ A: to-go or in the café

▸ Q: Approximately how long do you usually spend in the each of the given cafés? (Starbucks, Dunkin Donuts, Pavement)

▸ less than 15 min, 15 min, 30 min, 45 min, 60 min, 2 hours, 3 hours, more than 3 hours

▸ Q: What is the highest amount you are willing to pay for a medium size coffee at the given brands? (Starbucks, Dunkin Donuts, Pavement)’

▸ A: $1, $2, $3, $4, $5, $6, $7,

▸ Q: What coffee chain does you close/family go to?

▸ A: Starbucks, Dunkin Donuts, Pavement

17image: commons.wikimedia.org

image: www.magic4walls.com

AREAS OF QUESTIONING: WHAT MAKES A GOOD COFFEE?

▸ Q: Why do drink coffee?

▸ A: for taste, because it is a habit, for the energy boost, other

▸ Q: Rank what is important to you in your coffee tasting experience (5 being most important and 1 people the least important)

▸ available descriptors to rank: strength of flavor, temperature, freshness, caffeine intensity

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image 1: https://en.wikipedia.org/wiki/File:Starbucks_Corporation_Logo_2011.svgimage 2: haleysstarbucks.blogspot.com

NON-COFFEE RELATED FACTORS VS COFFEE RELATED FACTORS

Environment/ Ambiance

Fast Service

Friendly Service

Charitable Efforts

Strength of Flavor

Temperature

Freshness

Caffeine Intensity

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AREAS OF QUESTIONING: UNDERSTANDING THE IMPORTANCE OF NON-COFFEE & COFFEE RELATED FACTORS

▸ If applicable, rate each aspects of Starbucks (1 being the least and 5 being the highest)

▸ aspects to rate: the environment/ambiance, coffee flavor strength, fast service, charitable efforts, friendly service, coffee temperature, coffee freshness, coffee coffee intensity

▸ A: 1, 2, 3, 4, or 5

▸ If applicable, rate each aspects of Dunkin Donuts (1 being the least and 5 being the highest)

▸ aspects to rate: the environment/ambiance, coffee flavor strength, fast service, charitable efforts, friendly service, coffee temperature, coffee freshness, coffee coffee intensity

▸ A: 1, 2, 3, 4, or 5

20image: commons.wikimedia.org

AREAS OF QUESTIONING: DEMOGRAPHICS

▸ Q: What is your gender?

▸ A: Male, Female, Other

▸ Q: What is your age?

▸ A: 18 - 21, 22 - 25, 26 - 29, 30 - 33, 34 - 37, 38 - 41, 42 and older

▸ Q: Do you live campus?

▸ A: Yes or No

▸ Q: What is socioeconomic status?

▸ Upper, Upper Middle, Middle, Lower

▸ Q: What is region are you from?

▸ North America, South America, Europe, Middle East, Africa, Asia, Australia

21image: popsop.com

SPECIFICATION ASSUMPTION▸ Anticipated:100 responses

▸ Collected:

▸ 103 Completed

▸ 89 Partially Completed

▸ Avergage interview length: 7 minutes

▸ Avergage completion rate: 54%

▸ Open Ended Questions:

▸ Q1: List three adjectives that describe Starbucks

▸ This question is to gage how consumer feel about the brand image in general with qualitative data

▸ Q2: Have any additional comments?

▸ This question is shown at the end of the survey to give respondents the opportunity to give us any more information that they fill was not included in the survey

▸ Type of Sampling:

▸ We are distributed a link to Northeastern Students via Social Media (Facebook, Twitter, Linkdin, iMessage)

22image: depositphotos.com

23

STATISTICAL ANALYSIS OF SURVEY RESPONDENTS

image: en.wikipedia.org

* Pavement & Other Cafes were combined for improved statical significance

H1: CONSUMERS CHOOSE STARBUCKS FOR NON-COFFEE RELATED FACTORS

24image1: commons.wikimedia.orgimage 2: www.dunkindonuts.com

▸ Binary Logistic is used in this scenario for the interval data

▸ the data shows that consumers choose to Starbucks for the non-coffee related factors (appendix C pg. 50 table 1)

▸ the data shows that consumer do NOT choose Dunkin Donuts for non-coffee factors at the 10% level (appendix C pg. 50 table 2)

H2: CONSUMERS CHOOSING STARBUCKS FOR COFFEE RELATED FACTORS IS NOT SIGNIFICANT

25image1: commons.wikimedia.orgimage 2: www.dunkindonuts.com

▸ Binary Logistic is used in this scenario for the interval data

▸ the data shows that no statistically significant conclusion can be made about consumer choosing Starbucks for coffee related factor (appendix C pg. 50 table 1)

▸ the data shows that consumer do NOT choose Dunkin Donuts for coffee related factors at the 10% level (appendix C pg. 50 table 2)

+

=

26

H3: NON-COFFEE RELATED FACTORS & CAFÉ PREFERENCE

4.2 3.92 3.02 3.89

3.7 2.75 3 2.86 3.2 3.48 2.2 3.36

STARBUCKS HAS SUPERIOR NON-COFFEE RELATED FACTORS

27image1: commons.wikimedia.orgimage 2: www.dunkindonuts.com

▸ Starbucks Cafés shows superior non-coffee related factors (fast service, friendly service, ambiance/environment, charitable efforts) over Dunkin Donuts & Other Cafés

▸ ANOVA is used in this scenario for the nominal data

▸ the data shows that consumers rank the non- coffee related factors over both Dunkin Donuts & other Cafés (appendix D pg. 51 table 1)

28

H4: COFFEE RELATED FACTORS & CAFÉ PREFERENCE

3.83 3.53 3.84 3.67

2.68 3.14 3.21 2.93 2.88 3.44 3.24 2.64

STARBUCKS HAS SUPERIOR COFFEE RELATED FACTORS

29image 1: commons.wikimedia.orgimage 2: coffeecolorkhaki.tumblr.com

▸ Starbucks Cafés’ show superior coffee related factors (strength of flavor, freshness, temperature, and caffeine intensity) over Dunkin Donuts & Other Cafés

▸ ANOVA is used in this scenario for the nominal data

▸ the data shows that consumers rank the coffee related factors over both Dunkin Donuts & other Cafés (appendix E pg. 52 table 1)

30

H4: CAFÉ PREFERENCE & FACTORS OF TASTING EXPERIENCE

STARBUCKS CONSUMERS

31image: www.thrillist.com

▸ Consumers prefer Starbucks due to the coffee’s caffeine intensity over both Dunkin Donuts & Other Cafés

▸ Consumer prefer Starbucks due to coffee temperature over Dunkin Donuts

▸ ANOVA is used in this scenario for the nominal data

▸ this shows that Starbucks has superior coffee related factors over competitors (appendix F pg. 53 table 1)

32

H3/H4: INFLUENCES FOR DRINKING COFFEE & CAFÉ PREFERENCE

*Mean Averages

Taste

Energy Boost

Habit

Other

STARBUCKS CONSUMERS DRINK COFFEE BECAUSE IT IS A HABITUAL EXPERIENCE

33image: commons.wikimedia.org

▸ Respondents with the preferred café choice of Starbucks ranked “habit”the reason behind drinking coffee to be higher than that of other brands.

▸ ANOVA is used in this scenario for the nominal data

▸ the data shows that Starbucks consumers drink coffee because it is a habit (appendix G pg. 54 table 1)

34

H5: CAFÉ PREFERENCE & GENDER

GENDER & PREFERRED CAFÉ IS NOT SIGNIFICANT

35image: commons.wikimedia.org

▸ the data shows there is no significance between gender and the choice of Starbucks as the preferred café

▸ cross-tab is used in this scenario for the nominal data (appendix H pg. 55 table 1)

36

MANAGERIAL SUGGESTIONS

▸ Increase Awareness of Starbuck’s Charitable Efforts

▸ Starbuck’s Coffee Products Are Ranked High by Coffee Consumers; Continue to Expand Product Line & Promote Seasonal Flavor Coffee Options

▸ Starbucks Non-Coffee Related Are Ranked High

▸ Ambiance/Environment: Ranked Much Higher; Updating & Renovating Starbucks Location is Key to Brand Success

▸ Friendly Service: Ranked Much Higher Than Dunkin Donuts; Emphasis on “Barista” style service gives Starbucks an advantage over other franchised cafés

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APPENDIX A: SURVEY LINKhttp://northeastern.qualtrics.com/SE/?SID=SV_bgEe1jPpnQZ2DSR

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APPENDIX B: SURVEY

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APPENDIX B: SURVEY

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APPENDIX B: SURVEY

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APPENDIX B: SURVEY

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APPENDIX B: SURVEY

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APPENDIX B: SURVEY

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APPENDIX C: SPSS OUTPUT FOR H1 & H2

50

TABLE 2: the choice of Dunkin Donuts as a café and non-coffee related factors is significant at a p-val of .10 & the choice of Dunkin Donuts as café a coffee related factors is NOT significant because the sig is greater than p-val .10 —> Because the Beta for non-coffee factors is negative, customers do not enjoy non coffee factors.

TABLE 1: The choice of Starbucks as a café and non-coffee related factors is significant because the Sig is less than the p-val .05 & The choice of Starbuck as a café and coffee related factors is NOT significant because the Sig is greater than p-val .05

TEXT

APPENDIX D: SPSS OUTPUT FOR H3

51

* the overall ANOVA test is significant because it is less than p-val .05 and the Post Hoc Test shows Starbuck’s Non- Coffee Related Factors have a statistically significant higher ranking than Dunkin Donuts or Other Cafés

TEXT

APPENDIX E: SPSS OUTPUT FOR H4

52

* the overall ANOVA test is significant because it is less than p-val .05 and the Post Hoc Test shows Starbuck’s Coffee Related Factors have a statistically significant higher ranking than Dunkin Donuts or Other Cafés

APPENDIX F: SPSS OUTPUT FOR H4* This data shows that

consumers that choose “Other” as their preferred café rank the strength of flavor, temperature and freshness over Dunkin Donuts.

* This data shows that consumers that choose “Starbucks” as their preferred cafe rank temperature over Dunkin Donuts and caffeine intensity over both Dunkin Donuts and Other Cafés

53

TEXT

APPENDIX G: SPSS OUTPUT FOR H3/H4

54

* because the Sig. is less than p-val .05 for “Starbucks & Drinking Coffee as a Habit” and “Starbucks & Drinking Coffee for Other Factors” there is a statistical significant relationship between the two

TEXT

APPENDIX H: SPSS OUTPUT FOR H5

55

* because the Asymptotic Significant is greater than p-val .05 there is no statical significance between café choice and gender

TEXT

APPENDIX I: SPSS OUTPUT FOR “FACTOR ANALYSIS”

56

* The variables do NOT have high cross loading across coffee and non-coffee related factors

* RULE FOR CROSS-LOADING: Above .60 for the 1st factor & below .35 for the 2nd factor

TEXT

APPENDIX J: OTHER FINDINGS “CORRELATION”

57

* because the p-val is less than .05 the highlighted variables are correlated

* Preferred Café & Ethnicity

* Age & Ranking Coffee Factors

* Socio-Economic Status & Ranking of Non-Coffee Factors

TEXT

APPENDIX K: SPSS OUTPUT FOR “CLUSTER ANALYSIS”

58

* Using the Cluster Analysis Two Segments were determined”

* Segment 1: Coffee Fanatics

* Segment 2: Café Bums

TEXT

APPENDIX L: SPSS OUTPUT FOR “INDEPENDENT SAMPLE T-TEST”

59

1. Levene’s Test: Sig is above p-val .05 so refer to “equal variance assumed”

2. Sig (2-Tailed) is less p-val .05 meaning that Females are willing to pay more than Males for a medium sized coffee at Dunkin Donuts

TEXT

APPENDIX M: PERSONEL INVOLVED: HENRY REID-MORRISON

▸ Past Co-ops

▸ Brown Brothers’ Harriman

▸ Current Experience

▸ BSBA Candidate with a Concentration in Finance and Marketing

60

TEXT

APPENDIX M: PERSONEL INVOLVED: SAAD ABUKHADRA

▸ Past Coops

▸ Mendix: Sales and Marketing Analyst

▸ Current Experience

▸ BSBA Candidate with Concentrations in Entrepreneurship and Marketing

61

TEXT

APPENDIX M: PERSONEL INVOLVED: KAT SPIVEY

▸ Current Experience

▸ BSBA Candidate with a Concentration in Marketing

▸ Minor in International Relations Concentration in the Middle East:

62

APR 6TH 2016 ANALYSIS & RESULTS

COMPLETION

TEXT

APPENDIX N: TIMELINE

FEB 26TH 2016 SUBMIT PROPOSAL

MAR 18TH 2016 LAUNCH SURVEY

MAR 29TH 2016 SURVEY COMPLETION

APR 12TH 2016 FINAL PRESENATAION

63