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Table of figures
Figure 1: Starbucks worldwide (Starbucks 2013)... 7
Figure 2: Starbucks Logo (Starbucks 2013)... 8
Figure 3: Customer Satisfaction Framework (Johnston 2012) ...10
Figure 4: Decision Making Process (Noel 2009) ...11
Figure 5: Research: Out of home hot drink purchase behaviour (Mintel 2012) ...12
Figure 6: Research: Attitude towards coffee/tea/hot drinks out of home (Mintel 2012)...12
Figure 7: Service Quality Framework (Johnston 2012) ...13
Figure 8: Conceptual Framework for the present research project (Schoja 2013)...14
Figure 9: Research onion related to this research (Saunders and Lewis 2012) ...16
Figure 10: Research Process (Polonsky and Valler 2011)...17
Figure 11: Research Philisophy (Saunders and Lewis 2012)...17
Figure 12: Research Approaches (Burney 2008, Collins 2010) ...18
Figure 13: Types of Studies (Saunders and Lewis 2012, Richey et al. 2007) ...19
Figure 14: Research Strategies (Saunders and Lewis 2012) ...19
Figure 15: Time Horizons (Saunders and Lewis 2012, Fitzmaurice et al. 2011)...20
Figure 16: Sampling methods (Oakshott 2012) ...22
Figure 17: Pilot Test, Negative Critique, Question 5 ...25
Figure 18: Pilot Test, Negative Critique, Questions 6-8 ...25
Figure 19: Pilot Test, Positive Critique...26
Figure 20: Findings Gender ...27
Figure 21: Findings - Age ...28
Figure 22: Findings Place of Residence ...28
Figure 23: Findings - Service quality factors in order of importance...29
Figure 24: Findings Service Quality Factors in order of importance (Gender) ...30
Figure 25: Findings - Decision Making Factors in order of importance...3
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Figure 26: Findings Decision Making Factors (Gender) ...31
Figure 27: Findings Consumer attitude towards Starbucks` tax avoidance (Age)...32
Figure 28: Findings Consumer attitude towards taxes (Gender) ...33
Figure 29: Findings Consumer attitude towards Starbucks' tax avoidance ...33
Figure 30: Findings Consumer attitude towards Starbucks` tax avoidance (Integrity)...34
Figure 31: Findings - Consumer attitude towards Starbucks` tax avoidance (Place) ...35
Figure 32: Findings - The first medium ...36
Figure 33: Findings - Association ...36
Figure 34: Conceptual Framework for the present research project (Schoja 2013)...37
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Abstract
Due to the high supply on the market, companies have to investigate and understand
customer needs to adapt their products or services and be competitive within the highly
rival market. It is also initial to avoid any unethical behaviour as this may lead to
retrogressive turnover.
This business research project focus on the investigation of factors which determine
consumer behaviour within the catering industry. To concretise this extensive area,
this work will concentrate on Starbucks' tax avoidance in the United Kingdom, which
happened in December 2012.
As there are no relevant or current reports on Starbucks' tax avoidance and customer
behaviour, the primary research on this issue will be done in this work. However the
literature review provide a comprehensive review on relevant landmark studies of
customer satisfaction and previous research on customer behaviour within the catering
industry.
By means of self-provided conceptual framework and an appropriate methodology a
quantitative online questionnaire were created and implemented. Findings from the
primary research shows the importance of product quality for customers as well as less
attention towards unethical behaviour of companies. Half of respondents who are
aware of Starbuck's tax avoidance continue purchasing their products.
The research objectives, which were set at the beginning of the research are fully
responded. This reflect the validity and reliability of this project.
According to the customer satisfaction, as the findings show the importance of quality,
companies should maintain and reinforce the level of product quality to satisfy
customers. Moreover a recommendation for Starbucks is to become aware of the
issues of tax avoidance, apologize and get back their previous customers who boycott
the company currently.
5
1. Introduction
1.1 The Purpose of this Research
The purpose of this research is to study consumer behaviour within the catering
industry and to investigate the factors, which determine customer consumption
preferences, as well as the main buying criteria for customers towards a hot drinks
company. Due to Starbucks' tax avoidance in 2012 this research will examine whether
the consumer perceive this matter as an important factor which influence their own
decision making or not.
However, this research is focusing on a particular aspect `tax avoidance within the
catering industry' which has not been researched so well. There are not many studies
on this certain issue. Therefore this research will study a specific issue within the
overall complex of factors.
1.2 Structure of this Research
In the first chapter the literature will be reviewed, considering customer perception,
expectation and satisfaction as well as the decision making process and the previous
research, which has been done in this field.
In the following chapter the research methodology and the data collection process will
be investigated and discussed. The primary data collection will be analysed in chapter
4, followed by a conclusion and recommendations.
To provide a better understanding to the reader, each chapter will be introduced and
summarized at the end.
1.
3 Research Questions
As O'Leary (2004) mentioned, a research questions is essential as "it gives focus, sets
boundaries and provides directions". The questions for this research has been
emerged from current developments in the industry and the extensive literature review,
which has been done for the purpose of the research. The two main questions which
have been conducted are:
1. What factors determine customer consumption preferences in the catering industry?
2. What are the main buying criteria for customers towards a hot drinks company?
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1.
4 Research Objectives
Well formulated objectives can be seen as a road map, which guide through a research
project. They should be as specific and unambiguous as possible (MacDaniel 1998).
Polonsky and Valler (2011) complements that objectives should be clear, achievable
and will directly assist in answering the research question. To help in answering the
research question within this project, following research objectives were formulated:
1. Investigate the determinants which affect the consumer behaviour and satisfaction
and develop a conceptual framework for the research project based on previous
studies. This objective will be met through collecting and analysing secondary data
from academic text, industry reports and company website.
2. Examine the factors which determines the consumer decision making process, their
perception and expectation. This objective will be met through collecting and analysing
primary data, employing questionnaires as well as secondary data.
3. Explore how customers define service quality. This objective will be met through
collecting and analysing primary data, employing questionnaires.
4. Observe consumer attitude towards an existing problem: tax avoidance of
Starbucks. This objective will be met through collecting and analysing primary data,
employing questionnaires.
1.
5 Company Background
Starbucks is operating in the United States since 1971 and became a global
organisation with nearly 18,000 retail stores in 2013, in 60 countries worldwide. The
total net revenue in 2012 amounted to USD 13,3 billion. The mission of the company
is "to inspire and nurture the human spirit one person, one cup and one
neighbourhood at a time" (Starbucks 2013).
Figure 1: Starbucks worldwide (Starbucks 2013)
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The product range offered by Starbucks is wide and customized. Besides coffee and
tea, the company sells handcrafted beverages like Frappuccino or smoothies,
merchandise articles, as well as fresh food, including sandwiches, salads, yoghurt and
ice cream (ibid.).
According to Jobber (2010), the Starbucks customer profile shows a young, single and
high earner consumer. However, not only professionals and manager are their
customers, but also students are an essential customer group. "The language is
important for these consumers, where terms such as latte, cappuccino and espresso
allow them to demonstrate connoisseurship" (ibid.).
Starbucks describes themselves as a responsible company, "always believed in the
importance of building a great, enduring company that strikes a balance between
profitability and a social conscience" (Starbucks 2013).
According to the Starbucks customer care policy, the company "strives to make every
customer's experience pleasant and fulfilling, and they treat their customers as they
treat one another, with respect and dignity. Furthermore a legendary customer service
is a top priority at Starbucks". Even a Starbucks Ethics and Compliance Hotline is
provided for the customer around the clock, all week long with no charges, and it is
answered live. Here the customer can report any issues were ethics or legal issues
are involved (Starbucks Coffee Company 2011)
Considering compliance with laws and regulations, Starbucks state to be committed to
full compliance with the laws in every country where they operate and is committed to
the highest ethical standards in all business transactions (ibid.) Therefore in 2013 and
the previous 6 years the Ethisphere Institute (2013) has named Starbucks to the list of
"world's most ethical companies'.
This show the importance of the company and deduce from that, that if the company
is so important and it has so many customers worldwide, tax avoidance or any ethical
issues related to the company will be multiplied.
In December 2012 many people in the UK were stunned at how little corporation tax
Starbucks is paying (Murphy 2013). When Starbucks was asked why they pay so little
in corporate income tax the answer was: "We do nothing illegal" (Babones 2012). This
show that Starbucks do not perceive to have done something wrong.
Figure 2: Starbucks Logo (Starbucks 2013)
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2. Literature Review
2.1 Overview
The critically selected literature review will study previous research on the topic, identify
landmark studies and potential gaps in the academic literature. This research will
explore past work in order to be able to develop a conceptual framework, which will
assist in answering the research questions.
According to Ridley (2012) a literature review have to be done at the beginning of the
research. It is even "one of the most important parts of any piece of academic writing,
like a foundations upon which the rest of the work is build" (Oliver 2012). In fact a
contribution to knowledge can be made through reviewing the literature (Easterby-
Smith et al. 2011).
In this chapter the terminology and definitions from various authors will be critical
investigated. Different approaches of customer's behaviour, customer perception and
expectation as well as customer satisfaction will be critically discussed.
To get a better understanding of this research previous studies, which has been done
up to this point, will be reviewed.
Moreover, the theoretical framework, which is relevant for this research, will be
presented and complemented with essential factors to create a conceptual framework.
2.2 Relevant Literature
2.2.1 Customer Satisfaction and Dissatisfaction
A significant amount of work has been done so far on consumer behaviour, which is
defined by Noel (2009) as "a process involved when consumer purchase, consumer
and dispose goods so as to satisfy their needs".
Johnston (2012) describes a happy customer who would purchase more, towards an
unhappy customer, so the company can sell more. These kind of customers are also
the better listener and are already aware of the products the company offers, because
of the trust (ibid.). On the other hand, if people are unhappy, first of all they will
purchase less, but what is more important is the fact that they also will spread they
unhappiness with others by word of mouth (Heppel 2010).
Similar to the previous definitions, Noel (2009) indicated a great performance of a
product leads to encouragement of others to purchase through positive review as well
as dissatisfaction which can lead to encourage to non-purchase through negative
review. Even a boycott can be evoked by unsatisfied customers (ibid.)
To be able to make customers happy first we need to understand what exactly is
customer satisfaction and how can it be measured. There are plenty of definitions of
customer's satisfaction in the literature. Johnston (2012) defines customer satisfaction
as an overall assessment of their perception compared to the expectation which they
used to have before the purchase or the service delivery.
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A framework which can be used to explain customer satisfaction, was developed by
Johnston's (2012):
Figure 3: Customer Satisfaction Framework (Johnston 2012)
If the perception meets the expectation, the customer will be satisfied (Johnston 2012).
In contrast to Johnston, Littman (2009) identified another way how some companies
measure customer's satisfaction, where organisations measure the satisfaction by
looking on how well they avoid customer's dissatisfaction, which is a mistake as not
everyone who is not happy complains.
Additional to those authors, Ilhan (2010) stated in his quote that "companies need to
give their customers what they want and not what companies think the customers might
want, to get the customer coming back again and again".
This views provide different perspectives of the term `customer satisfaction' and
explores a number of aspects which influence customer's expectation and perception.
This knowledge can be used to influence the consumer behaviour.
2.2.2 Customer's Expectation
In business we study customer's expectation to be able to influence them into the
direction, we want our businesses to be developed, to be competitive, to increase profit
as well as to stand out on the market we need to know what our customer's perceptions
and expectations are.
On the market it is additional essential to retain customers, to be competitive. One of
the reasons Stevens (2010) mentioned in his work is that you can earn the money back
which an organisation have to spend to be the first and the longer you keep them, the
more amount of investment will be paid off.
2.2.3 Customer's Perception
There are different personal factors how perception accrues. It could be personal
experience with the brand or the product or the past, as well as culture, language,
values, interests and assumptions. All these factor can affect customer's perception
according to Johnston (2012). On the other hand expectations can be influenced by
price, alternatives, marketing, word-of-mouth, previous experience, customers' mood
and attitude and their confidence (ibid.)
Additional previous research has shown that satisfaction is heavily influenced by how
the experiences felt when they were at their peak, best or worst, and how they felt
when they ended. "If we create a good end to a service or a product, it is possible to
manipulate the customer to a feeling of satisfaction" (Johnston 2012).
Expectation
Service
Perception
Satisfaction
10
Kotler (2009) however, argued that "consumer themselves do not even know what
exactly influences their purchases, because 95% of their thoughts which are
responsible for purchases arise in the unconscious mind".
2.2.4 Consumer Behaviour Influences
According to Noel (2009) there are two different consumer behaviour influences:
internal and external. The external influence includes the 4 P's and consumer culture,
such religion, ethnicity, reference groups and social class. Where the internal includes
the psychological (motivation, perception, attitude and knowledge) and decision
making factors (problem solving, information search, judgement and decision making).
After the purchase there is also post-decision process, which includes purchase and
post-purchase behaviour.
In comparison to Noel (2009), Kotler (2009) is talking about 7 P's and other factors
such culture, social, personal and psychological aspects. This factors cannot be
controlled by marketers. He names the internal processes "buyer's black box", whose
content needs to investigated.
2.2.5 Consumer Decision Making
Considering the consumer decision making process, a framework developed by
various authors, describes how the usual decision making operates:
Figure 4: Decision Making Process (Noel 2009)
This framework mainly applies on expensive products, where for inexpensive products
after problem recognition the customer make a decision without evaluating or collecting
more information (Noel 2009, Kotler 2009). Jobber (2010) complements the evaluation
and purchase stages using high and low involvement.
Consumer research in any case do not only help marketers to identify problems, in
addition to it, it also helps to emerge opportunities (Noel 2009). Taking this into account
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this research will point out options, which catering industry, especially Starbucks, can
use to increase customer satisfaction and influence customer's decision making.
2.2.6 Previous Research on Consumer Behaviour within the Catering Industry
As we can see from the previous research below, Figure 5, in December 2011,
Starbucks was the second largest brand within "out of home hot drink purchase" close
behind Costa Coffee, which might be caused by different perceptions and
expectations.
Figure 5
:
Research: Out of home hot drink purchase behaviour (Mintel 2012)
Considering the next research findings, Figure 6 shows us that 66% of the respondents
stated that the `quality' is the most important factor when buying coffee out of home.
However as we have discussed before it is essential to define quality first.
Figure 6
:
Research: Attitude towards coffee/tea/hot drinks out of home (Mintel 2012)
29%
30%
34%
34%
40%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Restaurant/Pub/Hotel
Indeoendent coffee shop/Cafe
Fast Food/Sandwich shop
Starbucks
Costa Cofee
Out of home hot drink purchase behaviour, either eat in or
takeaway, December 2011
Percentage
20%
33%
35%
48%
66%
0%
10%
20%
30%
40%
50%
60%
70%
I usually choose the cheaptest place for tea/coffee etc...
I have a favourite brand which I will always use/visit...
I tend to pick the place with the shortest queues
Convenient location is more important than brand of...
Quality is most important to me when choosing where...
Attitudes towards coffee/tea/hot drinks out of home,
December 2011
Percentage
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2.2.7 Service Quality
According to Johnston (2012), customer satisfaction can be managed while influencing
customer perceptions and expectations. By doing so it is needed to understand how
exactly the customer perceive quality followed by influencing customer's expectation.
The service quality framework which is used by Johnston contains following factors:
Figure 7: Service Quality Framework (Johnston 2012)
This theoretical framework is used to create the conceptual framework for this
research.
2.2.8 Conceptual Framework
According to Kumar (2010) "a conceptual framework stems from the theoretical
framework and focuses on the section which become the basis of the study". This
research is based on theoretical framework, Figure 7, developed by Johnston (2012),
which explores the quality factors. The conceptual framework, Figure 8, will investigate
Service
Quality
Access
Aesthe-
tics
Atten-
tiveness
Availa-
bility
Care
Clean-
liness
Comfort
Commit-
ment
Commu-
nication
Compe-
tence
Courtesy
Flexibility
Friendli-
ness
Functio-
nality
Integrity
Reliability
Respon-
siveness
Security
13
the most significant factors from the theoretical framework as well as supplementary
factors which are essential for customers within the catering industry.
Based on the work of Johnston (2012), this research has identify following factors
which should be studied. This will help in answering the research questions: Availability
of service; Comfort of facilities; Competence of staff; Courtesy; Flexibility Willingness
to meet customer needs; Integrity - Honesty and trustworthiness with which customer
are treated by the organisation; Responsiveness Speed of service delivery.
To specify the questionnaire according to the case, two additional factors will be
enclosed: Knowing the customer Ability to provide the best service; Appearance of
personnel. The two additional factors are important as these concepts apply to the
catering industry as well as to Starbucks, since the company is highly specialized on
customer needs as well as appearance.
Figure 8: Conceptual Framework for the present research project (Schoja 2013)
This conceptual framework allows us to develop the questionnaire, focusing on the
specific categories of interest.
Conceptual
Framework
Service
Quality
Availability of
service
Comfort of
facilities
Competence
of staff
Courtesy
Flexibility -
Willingness to
meet
customer
needs
Integrity -
Honesty and
trustworthine
ss towards
the customer
Responsi-
vness - Speed
of delivery
Knowing the
customer
Appearance
of personnel
14
2.3 Conclusion of the Literature Review
This literature review highlights the landmarks which are relevant for this study.
Customer satisfaction and dissatisfaction were discussed looking at the customer
satisfaction framework developed by Johnston (2012) and complemented by Noel
(2009), Heppel (2010) and Stevens (2010).
Furthermore, according to Noel (2009) and Kotler (2009), two customer behaviour
influences were investigated, external and internal. Both authors stated similar
definitions, supplementing each other's work by additional factors.
Decision making process framework was acquired by various authors. This show a
similar thinking. However, Jobber (2010) addresses the evaluation and purchase
stages in depth, distinguished between low and high involvement.
From the previous research (Mintel 2012) it can be inferred that Costa Coffee and
Starbucks are top of mind brands and the most important factor for customers within
the coffee industry is the `quality'.
There might be no industry report written on the specific topic `Starbucks tax avoidance'
as this matter is too recent.
Using the most relevant factors from the theoretical service quality framework
(Johnston 2012) and adding two more factors, a conceptual framework has been
created. This will be applied for the questionnaire to answer the research question.
The landmark studies are essential for this research and can be used effectively for
the primary research as well as a guide for the research objectives.
15
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