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day permlink Monday, 9 January 2006

permlink Short, cheaper Cappuccino

I've heard about this before (and I think I can remember when short drinks were on the menu), but it bears repeating - you can get cheaper drinks at Starbucks, and chances are they'll taste better. They're just smaller.

Starbucks Economics - Solving the mystery of the elusive "short" cappuccino. By Tim Harford [Slate]
They will serve you a better, stronger cappuccino if you want one, and they will charge you less for it. Ask for it in any Starbucks and the barista will comply without batting an eye. The puzzle is to work out why.

...the elusive "short cappuccino" -- at 8 ounces, a third smaller than the smallest size on the official menu, the "tall," and dwarfed by what Starbucks calls the "customer-preferred" size, the "Venti," which weighs in at 20 ounces and more than 200 calories before you add the sugar.
Side note: I've successfully cut down on the size of the drinks I want at Starbucks - nowadays I typically go with a Tall, rarely a Grande, and I honestly don't remember the last Venti I bought... I do remember getting them often in the late 90s, and it coincided with the slow steady expansion of Middle Steve. Now that I've cut out the Big Gulp/Venti lattes, soda, and any other drinks with high fructose corn syrup (like "teas" and "fruit juices" that really aren't .. psst, try Honest Tea [unsolicited endorsement]), I've shaved some inches off my maximum circumference.

Even so, it's hard for me to think about getting a Short. If I pay ~$2.50 for a hot, tasty coffee experience, I don't really want it to be over very quickly. I'm probably underestimating how much you get, but that's my visceral reaction.

The interesting part about this story is how it's really all just a form of market segmentation:
...why does this cheaper, better drink -- along with its sisters, the short latte and the short coffee -- languish unadvertised? The official line from Starbucks is that there is no room on the menu board [HA! please..], although this doesn't explain why the short cappuccino is also unmentioned on the comprehensive Starbucks Web site, nor why the baristas will serve you in a whisper...
I'm tempted to order a Short just to see how they'll handle it...
Economics has the answer: This is the Starbucks way of sidestepping a painful dilemma over how high to set prices... if some of your products are cheap, you may lose money from customers who would willingly have paid more. So, businesses try to discourage their more lavish customers from trading down by making their cheap products look or sound unattractive, or, in the case of Starbucks, making the cheap product invisible. The British supermarket Tesco has a "value" line of products with infamously ugly packaging, not because good designers are unavailable but because the supermarket wants to scare away customers who would willingly spend more...

... [Another example is the] airport departure lounge. Airports could create nicer spaces, but that would frustrate the ability of airlines to charge substantial premiums for club-class departure lounges.
Fine article; the rest is worth reading too, particularly the part about why train-cars for poor passengers lacked roofs.

Related: Joel on Software on segmenting one's market permlink   Economics   1 comment(s)  
In lemming fashion I picked up some Honest Tea the other night at My Organic Market (there's my non-plug) and I like what I have had so far. It really makes you think about how overly sweetened most things are. I usually do my fresh-brewed iced tea black, but the slight, natural sweetening is nice; and at 30ish calories a bottle you can have 5 bottles before you exceed the caloric value of a smaller can of root beer.
      ...posted by Andrew on January 11, 2006 4:32 PM
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