In the very mature financial services industry, it is rare for a new financial product to garner much attention, let alone be named one of BusinessWeek's outstanding products of the year. But what started as a way for Starbucks, a leading specialty coffee company, to add value to its existing Starbucks Card program developed into a financial product that many other institutions are interested in exploring. The case describes a study conducted by Starbucks Coffee Company, partnered with Bank One and Visa, to test the viability of a dual-function card concept. Starbucks Coffee Company, which pioneered the study, aimed to take their customers' satisfaction experience to another level. The research was conducted to explore how receptive customers would be to the marrying of their existing pre-paid stored-value card with that of a major credit card. Preliminary findings from the study indicated that the dual function card concept yielded success.
This case relates well to various chapters. Used with Chapters 4 and 5, you can build the management-research question hierarchy, as the introductory stage of the research project. Exhibit 4-2 provides an example. Exhibits 5-6, 5-8 display the management-research question hierarchy and provide students with detailed steps, stepping from the management dilemma up through the process. The case can also be used with Chapters 9 and 7 to discuss data collection methodologies such as surveys and interviews. Used with Chapter 14, you can discuss basic sampling concepts. Used with Chapters 11 and 12 allow students to explore different measurements and measurement scales used in research.
This case is also a video case on the text DVD. We suggest that you review the video case analysis as well as the answers to the questions below, as even if you dont assign the video your students may discover it on the DVD and use it as a means to prepare for discussion. We suggest that you assign the video case as it enriches the student's understanding of the full scope of the research.
Types of Research Studies in Starbucks
Starbucks conducted three types of studies, product functionality, product optimization, and a brand tracking study, all of which provided further insight and understanding as to the nature and complexities of their target market.
Product functionality study: This study was carried out at the concept testing stage of the research, through the use of an online survey. The purpose was to understand which of the two credit card concepts customers preferred (the dual-function or two separate cards). This type of study is beneficial to the research being conducted, as it sought to reveal how appealing the concept was, as well as measuring how much customers understood the dual-function aspect of the card. Owing to the information the study served to provide, this would essentially aid in determining what areas of the dual-function card needed refining or restructuring in addition to its marketability or lack thereof. At this early stage of the research, if findings were to reveal that the dual-card concept was not appealing to its target market, or that it would hurt more than enhancing the image of Starbucks because of its partnering with other companies, this information would give researchers the opportunity to adjust or change strategies. If the product did not function as Starbucks desired, the findings of this study would be pertinent information to assist Starbucks and its affiliates in determining the strengths and/or weaknesses of the study's design. Product optimization study: This study was also conducted at the concept testing stage of the research and also utilized an online survey.
Here Starbucks aimed to determine how certain features from the dual-function card would impact the customer's decision to apply for the card. They also sought to discover which features had the greatest potential to increase sales. A predictive mechanism was incorporated at this stage, as the yielded results would determine which features to include that would prove more beneficial, and therefore encourage customers to apply for the card. Being able to determine who would not only apply for the card but also use it would help Starbuck gauge their profit margin based on the features that appealed most to customers. This concept testing stage of the research gives Starbucks the ability to experiment with other types of features the card provided. This would assist in uncovering what issues were salient to customers, and, in so doing, decide what would more likely encourage customers to use the card. The giving back to the community feature that the card presented could appeal to customers who see this as a necessity, and so would enjoy the convenience of a dual function card, that also allows them to give back to society. Brand tracking study: This is an important step of the research, which was performed at the measuring return on marketing investment stage of the study.
At this final stage, the purpose was to evaluate feedback after the launch of the product. At this step, Starbucks reviewed and compared the findings based on its set goals and criteria for success. This study was completed via an online survey and measured how aware participants were of the promotional materials, whether they applied for the card, and why or why not. This type of study at this stage of the project facilitates an assessment of their success, how they achieved it and whether their stated goals were accomplished. It strengthens the research as it has the potential of providing feedback that could benefit Starbucks, in terms of areas in which their initial objectives were not realized. If they chose to conduct future studies, they could benefit from knowing some of the salient customer concerns, why they chose not to apply for the card; or if they have applied for the card, what are the reasons for not using it.
Management Research Question Hierarchy for Starbucks
The issue facing Starbucks and its partners is more dealing with capitalizing on an opportunity, rather than on a particular dilemma. The issue being dealt with is how receptive customers would be to the dual function card. They were also concerned about how well customers understood the dual card concept and their willingness to apply for and use the card. Starbucks was also interested in ensuring that its partners, Bank One and Visa, were committed to delivering the exceptional customer service that its customers were accustomed to receiving.
Management questions: What steps can Starbucks take to increase customers' understanding of the purpose of the dual function of the card? What should be done to encourage customers to apply for the card and use it? What types of features should be included to encourage customers to apply for the card? What measures should Starbucks put in place to ensure that its partners maintained the high standards of customer satisfaction that it was dedicated to delivering to its customers?
Research Questions: Should Starbucks utilize the surprise and delight and monthly reward feature the card offers as a means of testing its appeal? Should the give back to the community component of the card be used to gauge sales lift and determine how likely customers were to apply for the card? Should the dual card concept be modified?
Investigative Questions: How will customers benefit from the features the card offers? How easy will the transition be from the old Starbucks card to the new dual-function card? How receptive are customers to the existing features of the current Starbucks card and what kind of problems do customers encounter with this card? How does Starbucks anticipate mitigating some of the confusion that may evolve with the use of the dual-function card?
Measurement Questions: The actual instruments were not included.
Pros and Cons of Starbucks Online Survey
Given the large target market that Starbucks and its associates appealed to, the use of an online survey to test functionality, benefit, and brand fit aided in the timely execution of the survey, however, it presents drawbacks that could possibly affect the findings. Functionality: The use of an online survey to assess the functionality of the product may not be as effective given the feedback yielded from the focus groups. Starbuck's aim was to ensure that customers
understood the dual function purpose of the card. Based on the results from the focus groups, some amount of confusion was still evident as many found the concept difficult to grasp. Though the online survey allowed for timely completion and flexibility, it has potential drawbacks. Given the confusion and apprehension that existed, an intercept study or phone interview could have provided more direct human contact where respondents would have the opportunity to clarify their concerns or questions. Brand fit: In terms of brand fit, the online survey served an important purpose as it allowed respondents to remain anonymous given the nature of Starbucks ' objective where brand fit was concerned. Here they aimed to determine if there were any negative connotations associated with past credit card experiences.
Given the fact that Starbucks had partnered with Visa and Bank One, if customers' previous experiences with credit card companies were not favorable, then this could affect their interest in the card. The online survey gave them the opportunity to voice concerns while maintaining their confidentiality. Benefits: To assess benefits, where Starbucks sought to determine whether customers valued the instant rewards feature of the card, the online survey could prove advantageous. Here Starbucks has the ability to utilize visual stimuli, to enhance its presentation of the features it anticipated using to appeal to customers. Starbucks also had concerns about customers choosing to use other cards that offered enticing rewards such as hotel stays or airline miles. The online survey gives them the ability to be creative with visual aids so as to further entice customers. The use of the online survey does, however, present drawbacks despite its many pluses. This can be a very effective tool that calls for skill and expertise, which can be extremely costly. In addition, there may be persons who are interested in the dual card concept, but do not have access to computers or may not be Web-savvy. The elderly population is one such group who may appreciate the convenience of the card and the ability to give back. In this regard, an intercept study, mail, or phone survey may prove more advantageous in securing depth information.
Sample Frame for Online Survey
For future online or phone surveys, the Duetto Card team could consider maintaining a database of all persons who applied for the card, whether they were approved or not. For supplemental listings, Starbucks could also maintain a database of persons who have applied for, possess, and use the Starbucks prepaid card. Some of these customers may have opted to not apply for the Duetto Card, or may have applied for the Duetto Card, but were not approved. A listing of such customers can serve as a useful sample frame and should be maintained for future research purposes. Prior to the launching of the product, a press release was delivered from the Duetto team encouraging Website visitors to share their views of the new card. The team received significant feedback from visitors to their Website and this would be an opportune time to secure and store these e-mail addresses, so as to be able to use this group as part of future studies.
Starbucks Duetto Visa: Questions for Measurement Scales
Do you find the Duetto Visa card as a more useful card compared to the Starbucks prepaid card?
Has the Duetto Visa Card enhanced your customer satisfaction experience?
Do you find it more convenient to be able to make purchases with one primary card rather than two?
How would you rate the level of customer satisfaction experience you have received from Bank One?
How would you rate the surprise and delight component of the card?
How often do you use the Duetto Card to make purchases at Starbucks?
How often do you use the Duetto Card to make purchases outside of Starbucks?
Have you used the card to make contributions to the community on a regular basis?
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