BC BUSINESS MENTAL MODELS
Saved by @DattaTanishq

“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 🧵

 1/ Starbucks is all about positioning

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.
2/ Premium brand = premium customer base

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.
3/ "More than coffee"

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)
4/ Lighting and visual cues

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).
5/ Shop layout

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.
6/ Mobile app

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.
7/ Starbucks card

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.
8/ Loyalty program

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.
9/ Personalized orders

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.
10/ Menu structure

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).
10/ Pricing

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.
11/ No dollar signs on menu

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.
12/ If you enjoyed that, I write threads breaking down tech and business 1-2x a week.

Def follow @TrungTPhan to catch them in your feed.

Here's one you may enjoy: https://t.co/GsnF25dBwj
13/ I discuss interesting topics like this once a week (with a healthy dose of dumb jokes) on the Not Investment Advice (NIA) podcast.

🔗https://t.co/WY6Xehj30C
14/ Sources

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
15/ Here's an interesting WSJ price breakdown of a Starbucks drink:
16/ Oh, also, a Starbucks barista one gave a famous answer on Quora explaining "what your drink said about you":
17/ One more of the Starbucks barista's insights

🔗https://t.co/rMfxx0pwVx
18/ Some Reddit comments from former Starbucks baristas...which are big if true https://t.co/mqcj0qUhmD
19/ Last thing.

If you enjoyed this thread, you'll DEF like this one: https://t.co/WZZYWQhlzD

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Trung Phan \U0001f1e8\U0001f1e6
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Peter Thiel's 2014 Reddit AMA is full of nuggets 🧵

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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


😂😂😂


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Trung Phan \U0001f1e8\U0001f1e6
Trung Phan 🇨🇦...
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Our intuitions often leads us astray. A good reminder: study counterintuitive math and economic results.

Here are 9 of them 🧵

The Birthday Paradox

In a room of 23 people, there's a >50% chance that 2 people share the same birthday.

This type of probabilistic thinking does *not* come naturally to many people.


The Coastline Paradox

Fractal geometry is also confounding:

The coastline of a landmass does not have a well-defined measurement. As the unit of measurement gets smaller (eg. from KMs to cm), the length increases without limit.


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In an auction, the winning bid will usually exceed the intrinsic worth of an item leading to a significant overpay (and negative net profit for the winner).


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Removing an extra road can make everyone's commute time faster.

Why? The existence of a "fast" road leads to congestion because everyone uses it. If you remove the shortcut, traffic flows better.
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Trung Phan \U0001f1e8\U0001f1e6
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A Netflix user will browse the app for 90 seconds and leave if they find nothing.

Thumbnail artwork is actually NFLX's most effective lever to influence a viewer's choice. A user will look at one for only 1.8 seconds, so NFLX spends huge to optimize them.

Here's a breakdown🧵


1/ Spoiler alert: humans are visual animals.

Our eyes move 3-4x per second to process information and we can analyze an image in as little as 13 milliseconds.


2/ In 2014, Netflix consumer research showed that thumbnail artwork:

◻️ is "the biggest influencer...to watch content"
◻️ is the focus of 82% of browsing time

A user looks at one for only 1.8 seconds. If they can't find Netflix content in 90 seconds, they'll leave the app.


3/ Consequently, Netflix uses an elaborate thumbnail selection process for each of its 200m+ users.

The process is called aestethic visual analysis (AVA), which starts by pulling all the frames from a video.

For reference: a 1hr episode of "Stranger Things" has 86k frames.


4/ In a process known as "Frame Annotation", each frame is tagged with metadata identifying key variables:

◻️ Saliency
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