Comments on: The Elusive Starbucks Short http://www.smallist.com/2007/03/08/the-elusive-starbucks-short/ Small products, small living, the smallest stuff in the world. Tue, 06 Jan 2009 22:40:06 +0000 http://wordpress.org/?v=2.1.2 By: Jim G http://www.smallist.com/2007/03/08/the-elusive-starbucks-short/#comment-5 Jim G Thu, 08 Mar 2007 23:23:19 +0000 http://www.smallist.com/2007/03/08/the-elusive-starbucks-short/#comment-5 Interesting stuff on SBUX, but flawed. 1) They don't take unit volume into consideration. What if Alice doens't like to pay more than a buck because she has 5 cups a day? and Charlie is rich cause he's a tightass and only buys a Venti once every two days. Alice is money. 2) The difference between a short and a tall is only about 15 cents. Problem could also be that we are talking ``cappucino''' in the text but the graphs are talking ``coffee'' -- big difference in profit margin I'm sure, as a short drip is less than $1.50 and a short cap is almost $1 more than that. But to your theme: that's probably why they don't push drip coffee. Adam Smith is widely know as the Al Bundy of economic minds. Always wash after shaking the invisible hand. Interesting stuff on SBUX, but flawed.
1) They don’t take unit
volume into consideration. What if Alice doens’t like to pay more than a buck
because she has 5 cups a day? and Charlie is rich cause he’s a tightass and only
buys a Venti once every two days. Alice is money.

2) The difference between a
short and a tall is only about 15 cents. Problem could also be that we are
talking “cappucino”’ in the text but the graphs are talking “coffee” — big
difference in profit margin I’m sure, as a short drip is less than $1.50 and a short
cap is almost $1 more than that.

But to your theme: that’s probably why they don’t push drip coffee.

Adam Smith is widely know as the Al Bundy of economic minds. Always wash after shaking the invisible hand.

]]> By: condour http://www.smallist.com/2007/03/08/the-elusive-starbucks-short/#comment-6 condour Fri, 09 Mar 2007 05:21:12 +0000 http://www.smallist.com/2007/03/08/the-elusive-starbucks-short/#comment-6 On 1, though, I think his basic point is still true. Yes, it's oversimplifying to suggest the only reason Alice might not want the $ coffee is because she's poor. But even if she just won the lottery, the marginal value of more than the $1.00 quantity might be very low -- either because she has a weak bladder, is extremely sensitive to caffeine, etc. But you're right that creating a low-quality product (a la the no-frills line) might dissuade someone with a high unit volume. The fact remains that Sbux's can maximize profits if they can sell a $1 cup without cannibalizing their $2 sales. As far as 2) goes, I just used simple numbers and a single product for my chart. In reality, drip coffee vs. fancy is a bit like the smaller coffee, although I'd guess it's less labor intensive than the cappuccino too -- and therefore the actual discrepancy in the production cost is more reflected in the price difference. On 1, though, I think his basic point is still true. Yes, it’s oversimplifying to suggest the only reason Alice might not want the $ coffee is because she’s poor. But even if she just won the lottery, the marginal value of more than the $1.00 quantity might be very low — either because she has a weak bladder, is extremely sensitive to caffeine, etc. But you’re right that creating a low-quality product (a la the no-frills line) might dissuade someone with a high unit volume.

The fact remains that Sbux’s can maximize profits if they can sell a $1 cup without cannibalizing their $2 sales.

As far as 2) goes, I just used simple numbers and a single product for my chart. In reality, drip coffee vs. fancy is a bit like the smaller coffee, although I’d guess it’s less labor intensive than the cappuccino too — and therefore the actual discrepancy in the production cost is more reflected in the price difference.

]]> By: /shogo.john/ » Blog Archive » short coffee @ starbucks http://www.smallist.com/2007/03/08/the-elusive-starbucks-short/#comment-598 /shogo.john/ » Blog Archive » short coffee @ starbucks Tue, 24 Jul 2007 10:25:53 +0000 http://www.smallist.com/2007/03/08/the-elusive-starbucks-short/#comment-598 [...] The Elusive Starbucks Short [...] […] The Elusive Starbucks Short […]

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