The chain has higher prices vs competitors. But that's the point.
People typically assign higher value/quality to higher prices. Known as "irrational value assessment", this makes Starbucks an everyday luxury that people will pay for.
“I spend too much at Starbucks” is a legendary meme.
It's also not an accident: the coffee retailer -- worth $120B -- uses many psychological hacks in its store and menu designs to get you to drop more cash.
Here are 11 of them 🧵
The chain has higher prices vs competitors. But that's the point.
People typically assign higher value/quality to higher prices. Known as "irrational value assessment", this makes Starbucks an everyday luxury that people will pay for.
By setting its prices higher, Starbucks attracts clientele that are relatively price insensitive.
Starbucks frequently raises its prices with little negative effect to its bottom line.
Former Starbucks CEO Howard Schultz created the premium feel by emphasizing experience:
◻️Positioned SBUX as a "third place" (b/t home, work)
◻️Brought bean grinding in-store (for aroma)
◻️Banned auto espresso machines (it took away from the barista craft)
The Starbucks operations is about "flow", efficiently moving people around the store+ getting them to spend.
To form lines, it directs people to well-lit areas (usually the merchandise, which provides the added benefit of nudging products for sale).
Across its 32k+ locations, Starbucks places its cashiers in the middle or back of the cafes. As customers work through the line, they're watching other patrons enjoy their beverages and bites.
This is all priming them for their eventual orders.
There's a psychological effect known as "peak-end rule": people remember experiences by the most intense part and the end.
The pre-order app takes away 2 of the most unpleasant parts (paying + waiting), improving the *whole* experience.
Customers have $1.6B+ on Starbuck's apps/cards (hence the joke "SBUX is a bank").
In a concept called "mental accounting", people irrationally classify money in different buckets and treat them differently. That SBUX money is way more *spendable* than cash.
Starbuck's Loyalty Program has 20m members and they contribute ~50% of the company's revenue.
The retailer takes all customer data and is able to provide individualized offers at scale. The freebies are habit forming and keep people coming back.
We all know the joke: "Starbucks mispelt my name". However, the very fact that the baristas write it down increases your affinity for the brand.
This is known as the "cocktail party effect": people focus (and assign more value) to info about themselves.
Through the 90s, the 3 sizes that Starbucks listed were Short, Tall and Grande. It has since bumped Short (you can still order it but its not on menu) and added Venti.
Now, the most popular size is the Grande (the new middle option and larger than SHORT).
In addition to upping default sizes, Starbucks also uses pricing to steer you.
In what is known as the "attraction effect", your choice-set gravitates to the items that are "closer together". Here, the price b/t Grande and Venti is *closer* than Tall and Grande.
Why? psychologically, a dollar sign triggers the idea of "price" and "spending...instead of "experience" and "what you're receiving".
Here IS a dollar sign: ~$29B, which is Starbucks projected sales this year.
Def follow @TrungTPhan to catch them in your feed.
Here's one you may enjoy: https://t.co/GsnF25dBwj
Huy Fong's Sriracha hit revenue of $150m+ a year...with no sales team, no trademark and $0 in ad spend.
— Trung Phan \U0001f1e8\U0001f1e6 (@TrungTPhan) June 27, 2021
Its creator is Vietnamese-American David Tran, making the sauce's success a tale of immigrant hustle and a product that literally sells itself.
Here's the story\U0001f9f5 pic.twitter.com/siEoK6UeLs
🔗https://t.co/WY6Xehj30C
Formation: https://t.co/aqCrODYrof
Bloomberg: https://t.co/2EStUU7BLW
CNBC: https://t.co/99JjI8OlbH
Medium: https://t.co/A4APLJQiBO
Brightside: https://t.co/wc1DAS8qAD
Price Intelligently: https://t.co/hz8FGpeqQv
Kent Hendricks: https://t.co/FtePg3mwJ2
11/ Starbucks
— Trung Phan \U0001f1e8\U0001f1e6 (@TrungTPhan) June 13, 2021
"I'll decaf someone if they are really rude to me. I only do it when the customer is being a REAL a-hole. You have to really earn those decaf shots from me."
"The shops spend more on dairy ingredients than on coffee."
If you enjoyed this thread, you'll DEF like this one: https://t.co/WZZYWQhlzD
Costco is the world's 3rd largest retailer by sales, notching $190B+ annually (behind Amazon, Walmart).
— Trung Phan \U0001f1e8\U0001f1e6 (@TrungTPhan) October 23, 2021
The company is all about "value" and uses psychological hacks in its business model and store design to get shoppers to spend dough.
Here are 14 of them \U0001f9f5 pic.twitter.com/mjtk7KRukO
More from Trung Phan 🇨🇦
The Wall Street Bets due diligence on Wendy’s is gold.
The catalysts are:
◻️ The release of a new summer salad
◻️ The @Wendys Twitter account, which has mastered “meta pragmatic roasting” (which is effective with younger people)
◻️ The fact it literally sells chicken tendies
OP:
Here’s a more fundamentals-driven analysis of Wendy’s
https://t.co/A2k19S9M7J
😂😂😂
Further Wendy’s analysis from @CliffordAsness !!
The catalysts are:
◻️ The release of a new summer salad
◻️ The @Wendys Twitter account, which has mastered “meta pragmatic roasting” (which is effective with younger people)
◻️ The fact it literally sells chicken tendies
OP:
Here’s a more fundamentals-driven analysis of Wendy’s
https://t.co/A2k19S9M7J
😂😂😂
\u201cThe name of the company is Wendy\u2019s International $WEN. It is a cutting edge high tech firm out of rural Ohio that is awaiting imminent patent approval on the next generation of summer salads that have both huge military and civilian applications.\u201d pic.twitter.com/qmk4hkKL3N
— u/1ronyman (@1ronyman1) June 8, 2021
Further Wendy’s analysis from @CliffordAsness !!
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"I really want to break into Product Management"
make products.
"If only someone would tell me how I can get a startup to notice me."
Make Products.
"I guess it's impossible and I'll never break into the industry."
MAKE PRODUCTS.
Courtesy of @edbrisson's wonderful thread on breaking into comics – https://t.co/TgNblNSCBj – here is why the same applies to Product Management, too.
There is no better way of learning the craft of product, or proving your potential to employers, than just doing it.
You do not need anybody's permission. We don't have diplomas, nor doctorates. We can barely agree on a single standard of what a Product Manager is supposed to do.
But – there is at least one blindingly obvious industry consensus – a Product Manager makes Products.
And they don't need to be kept at the exact right temperature, given endless resource, or carefully protected in order to do this.
They find their own way.
make products.
"If only someone would tell me how I can get a startup to notice me."
Make Products.
"I guess it's impossible and I'll never break into the industry."
MAKE PRODUCTS.
Courtesy of @edbrisson's wonderful thread on breaking into comics – https://t.co/TgNblNSCBj – here is why the same applies to Product Management, too.
"I really want to break into comics"
— Ed Brisson (@edbrisson) December 4, 2018
make comics.
"If only someone would tell me how I can get an editor to notice me."
Make Comics.
"I guess it's impossible and I'll never break into the industry."
MAKE COMICS.
There is no better way of learning the craft of product, or proving your potential to employers, than just doing it.
You do not need anybody's permission. We don't have diplomas, nor doctorates. We can barely agree on a single standard of what a Product Manager is supposed to do.
But – there is at least one blindingly obvious industry consensus – a Product Manager makes Products.
And they don't need to be kept at the exact right temperature, given endless resource, or carefully protected in order to do this.
They find their own way.