Never Lose Sight of Customer Satisfaction: How Starbucks Turned it Around

The story of how US coffee shop chain Starbucks rescued itself from mediocrity provides a compelling example of why a business cannot ever afford to ignore customer satisfaction. Riding high as one of the largest food and beverage retail chains in the world, Starbucks had 15,000 stores by 2007. Intoxicated by success, then CEO Jim Donald diversified the business into sales of music, coffee accessories, and food. He even challenged McDonald’s and said that Starbucks would eventually have 40,000 outlets. In putting ego in front of sound business strategy, Donald made two critical mistakes: expanding the Starbucks offering beyond its core products; and pursuing the 40,000 store goal despite a shaky local economy. As result, the famous Starbucks success story came to an end in 2007, with its sales and share price plummeting. When founder Howard Schultz returned to the company as CEO in early 2008, he immediately focused on improving the core product – coffee, and creating a unique customer experience. All the coffee beans were ground locally, and the in-store setup was changed so that customers could more easily see the barristers. In addition, the company guaranteed that any drink not made to a customer’s satisfaction would be replaced. Schultz also shrewdly cut the number of Starbucks locations by nearly 1,000 and the number of workers by over 15,000. Consequently, Schultz returned Starbucks to the position of being a premium – and highly profitable - global brand.

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