My theory on the Starbucks business model

I’m not going to slam the coffee giant for charging too much for coffee – instead, I’m going to applaud them for their subtlety and craftiness…

I’ve always had this theory that their average-priced standard brew was a little eclectic on purpose (we don’t all like to grow hair on our chests every morning!) so that most customers choose something else from the coffee menu. ANYTHING else. Because while the prices for may not be exactly the same, they’re all roughly double that of plain old coffee.

I’m not a fan of anything but their Caramel Apple Cider (see? we all love something at Starbucks!), which I let myself have once a year as a fall treat. If I pick up a cup of coffee to go (maybe 5x a year), I take it home and add some water and about 50% milk (double what I normally put in coffee) rather than pay $2 more for…whatever they call coffee with a lot of heated milk. I haven’t learned StarSpeak, sorry…in fact, on the rare occasion that I have to drink something on premises, that’s exactly how I order it. 

Or I just get tea. Heck, even with tea it gets awkward – the small cup comes with one bag, the large cup comes with two, and the medium requires you to make a choice and you are charged accordingly. I don’t object to this – I just think there are less stressful – and less expensive! – ways to obtain a hot drink. Just my (three dollars and ninety-) two cents.

4 Responses

  1. I don’t drink at Starbuck’s regularly but I do like some of their special offerings in the fall too, particularly their pumpkin spice latte. I’m going to have to check out the Caramel Apple Cider later this year. With respect to their business model, I think it’s actually smart of them to ream their customers in a good economy since (I’m assuming) they have a wide profit margin that they can slash when times are bad. But then again, Starbuck’s business model never interested me much so I may be completely wrong.

  2. Interesting, I’d never thought of it that way. Yes their standard brew is pretty tough, but I figured it had to be to stand up to the Pacific NW chill. Their newer brew, Pikes Peak, isn’t as harsh. I usually get regular coffee cause I’m not a fan of milk and coffee, I like mine black.

  3. Shtink – you’re absolutely right, they’re very well-positioned to make great use of that very accurate rule of thumb “it’s always easier to drop your prices than raise them”.

    Miss M – I love how everyone calls the new blend “Pike’s Peak” – makes you wonder if they wanted to call it that but couldn’t, so they gave it a name they new everyone would screw up exactly like this (it’s called Pike’s Place). It’s still ridiculously strong, but yes, at least it doesn’t have that burnt bouquet like the last one.

  4. Hey- love your blog 🙂 I very rarely go out for coffee because I think it’s a total waste of money, however I can say this about Starbucks because a friend of mine is a manager there- they treat their employees well, and even part timers can get health insurance. Knowing that makes me feel not so bad for occasionally paying their high prices. Oh, and awhile back there was a thing going around saying how Starbucks is a millitary-hating company, blah blah blah… turns out that wasn’t true but it did turn a lot of people off unfortunately.

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