This article last week by Tim Harford discusses price discrimination by Starbucks. Apparently, there is a size of cappucino that they do not list on the menu and you have to ask for specially: the "short" cappucino, which is higher quality and cheaper.
Making you ask for it is the way that they differentiate their customers: people who are more price-conscious are more willing to go through specially asking for the size.
This strategy is similar to the strategy of offering coupons. Another example mentioned in the article is a British grocery store, Tesco, that puts its cheaper store-brand of products in notoriously ugly packaging (again, more price-conscious customers will care more about the price than the packaging).
Any other examples of businesses trying to segment their customers this way? Any other explanations for why Starbucks would have that secret menu item?
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6 comments:
I am SO sorry I just remembered that we had to do this. It could be possible that Starbuck’s had the short cappuccino on the menu at on time and they took it off because it was not one of their top sellers. A lot of times places like Starbuck’s and other restaurants will still serve you things that are not on the menu if you ask. However, you have to know what else they serve that is not on the menu, so in the situation where the menu changed, only a customer that has been going to Starbuck’s for a long time is going to know about it. This might almost be a special reward for people that have been going to Starbuck’s for a long time.
Jessica Monk
I have seen the "hidden" cup size. It makes sense, i mean why else would they have their smallest size be "tall" instead of "short"? I really don't go to starbucks very often because their coffee is too expensive and not very good, but it makes perfect sense for starbucks to price discriminate like that. Obviously, they charge people who want their coffee and want it now more, because those people are more reluctant to ask around about different coffee sizes than the "tall" "grande" and "vente" trademarks of starbucks. This same sort of price discrimination can be equated with buying a car. A car buyer has a better negotiating position and can get a better deal if he or she researches the car desired. Likewise, if a dedicated starbucks' customer came in, grabbed all of the brochures on the counter, he or she would probably find out about the small cappucino size. However, it may just be that the starbucks menus are out-of-date with
giving only three cup sizes for a cappuccino.
David Wyant
Another example of price discrimination is restaurants where they have soda in the bottle and from the fountain. Customers who order from the fountain get free refills, while the people who order bottles usually only get two bottles. If you just ask for soda, they give you the bottles. This separates the customers who don't know to ask for the fountain drinks and also separates the people who prefer the glass bottles.
Gas stations also ingage in this kind of price discrimination. Some have special cards for people who come in alot (like fuelman) and they recieve special discounts on their gas. And as far as to way they might does this... it is possible that they use this option to find their select drinkers because from what Mr. Arjona said the smaller it is the better. From this they could gather emails and have a mailing list.
John Garrison
I have always wondered why the smallest size on the menu was called a "tall" why not calling it a "small". But now its crystal clear to me.....because there is a short size. If the "hidden" small cup is a third of the size of the small, why don't they take advantage of it! I know that Sam said that they used the small cup at one point, but it didnt sell well, but now look at our society. We are in the age of diets and diet-programs. Although coffee doesn't have a really heavy calorie count in it, Starbucks could use this "short" cup and make an entire campaign out of it, marketing it towards those "dieters out there" who still need their Stabucks Fix!
If Starbucks happens to get on to the "WalkerEconomics Blog" and get this idea, Please contact me, because it was MY IDEA FIRST!
Thats the way the cookie crumbles
In my opinion I think that this hidden cup of cappuccino was not very popular which led to taking the product off of the menu and only those customers that have gone to Starbucks long enough would know to order it which shows their loyalty. But i also believe that most people who go there, go there for a quick fix no matter what the cost and i don't think people would actually spend time searching for those "hidden short cups" when they are willing to pay for a larger size.
courtney
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