Starbucks Delivering Customer Service Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Starbucks Delivering Customer Service Case Solution

Starbucks delivering customer service

Question 1

How can customer lifetime values be estimated?

Starbucks is known as the leader in retailing and roasting for specialty brand coffee across the globe. It comprises of 7500 stores across the globe. The expansion of Starbucks will encounter all sorts of new product markets with new customers’ demand for attracting products.Irrespective of the unfavorable economic situation pertaining in the country, Starbucks is planning to open new stores around the globe. In the year 2002, Starbucks was planning to open 600 new stores in different localities worldwide of which 25% would comprise of China. By using the sales figure from 2002 we can estimate the customers’ lifetime value of an average Starbucks customer.

For estimating customers’ lifetime value several steps should be taken into considerations which are as follows:

STEP 1:AVERAGE VARIABLES

• Customer expenditures per visit ($)
Customer 1 = 3.50
Customer 2 = 8.50
Customer 3 = 5
Customer 4 = 6.50
Customer 5 = 6
Total average = 3.50+8.50+5+6.50+6 / 5
= $ 5.90 average customer expenditure per visit.
• Customer visit per week
Customer 1 = 4
Customer 2 = 3
Customer 3 = 5
Customer 4 = 6
Customer 5 = 3
Total average = 4+3+5+6+3 / 5
= 4.2 average customers visit per week
• Average customer value per week (expenditures * visits)
Customer 1 = 3.50 * 4 => 14
Customer 2 = 8.50 * 3 => 25.50
Customer 3 = 5 * 5 => 25
Customer 4 = 6.50 * 6 => 39
Customer 5 = 6 * 3 => 18
Total average = 14+25.50+25+39+18 / 5
= $ 24.30

STEP 2: CALCULATE CUSTOMER LIFETIME VALUE.

• The average customer lifespan is 20 years.
• Customer retention rate is 70 percent.
• Profit margin is 21.3 percent.

Customer lifetime value can be calculated with the help of a simple equation which is as follow:

Number of weeks in a year = 52
Average customer value per week = 24.30
Life span = 20 years
So the equation can be number of weeks (average customer value per week) * lifespan.
Customer lifetime value = 52 (24.30) * 20
= $ 25272.

Moreover, if customer satisfaction is increased then there is a possibility that the customer lifetime value also increases. It is said by experts that if a 5% increase in customer retention is made by any organization then there is a possibility that the profit margin is increased by 25% to 50% which is a great figure. Customer retention can be increased by for example giving away special offers to loyal customers such as on every second visit the customer can enjoy a free cup of coffee just for the sake of customer retention..................

This is just a sample partial case solution. Please place the order on the website to order your own originally done case solution.