Starbucks: Price-Targeting, iPhone App, Free Birthday Drink

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For some reason, I’ve managed to collect a bunch of random Starbucks news. Granted, I’ve been going there more often recently for the ability to read and work in a comfortable atmosphere outside the distractions of home. I’m okay with paying about $2 for some caffeine plus an few hours of productivity once in a while.

First, I found out that last month Starbucks lowered the price of their basic drip coffee and lattes, while increasing the price of their “complex” drinks like Frappuccinos. This is classic price targeting, which involves company extracting the maximum money out of the most customers possible.

People who are frugal and pay attention to prices will now find that a large drip coffee from Starbucks costs just about the exact same amount as a large coffee from a place like Dunkin Donuts. Result: Starbucks gets more price-comparing people. A person who was paying $4 for a Frappuccino before was already paying 100% more for extra sugar, whipped cream, and 5 seconds in a blender. They most likely won’t mind paying another 25 cents. Result: Starbucks extracts more money from non-price-sensitive person.

iPod Touch/iPhone App
Want to buy coffee? There’s an app for that. The Starbucks Mobile App, from what I can gather, tries to make your iPhone or iPod Touch act like your Starbucks card. And right now, if you use it to reload $25 or more using your Visa card, you can earn a one-time $5 bonus. That’s two free drinks for me… too bad I don’t have an iGadget.

Free Birthday Drink
I’m usually not big on gift cards, but there are some decent perks with using a registered Starbucks card. You get 2 hours of free Wi-Fi per day, unlimited refills on drip coffee, and now you also get a free drink on your birthday. I like the first two features better, but free is free.

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  1. Starbucks (basic drip down) coffee are indeed a gem. One cup of Starbucks coffee is probably equivalent to 2 to 3 cups of Dunkin Donut watered down coffee. So if you still like DD’s coffee, buy Starbucks cofee and add water to it and save money.

  2. I get what you’re saying about price sensitivity (I have also read the Undercover Economist). But I don’t see drip coffee versus frappucinos as a price sensitivity issue. I am very price sensitive, which is why I make all of my drip coffee at home. In fact, my last three bags of coffee were free as part of a rebate deal with Kraft and Albertsons. But I am willing to spend the $4 for extra sugar and five seconds in a blender because the taste and texture of a frappucino is not something I can replicate at home (I have tried many times). Also, to try to replicate it at home probably takes me about 20 minutes, so considering that I am self-employed and time is money, it’s not such a bad thing for me to pay someone else to make the drink for me if I’m already out and near a Starbucks (in other words, if the trip only takes me 2-3 minutes, not 20). I’d like to hear what others think–is the decision to purchase a frappucino over drip coffee really a matter of price sensitivity?

  3. Be aware that not all Starbucks will give you the benefits from the card. For example the one in my local grocery store. Fortunately I do have a regular store locally. Also a benefit of the card is occasional email offers for freebies.

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