Low Margin Economics — A Starbucks Example
Posted on January 8, 2006
Filed Under Something to Think about |
Starbucks Economics - Solving the mystery of the elusive “short” cappuccino
I have long noticed this practise in various markets, especially the grocery store. Tim Harford does a great job summerising the practise of making low margin products appear less desireable, or in the case of Starbucks, less purchasable.
What makes the Starbucks case different, is usually the low margin product is a lower quality product, but usually not nearly as much as the price difference reflects. Not with the short cappuccino, which I can vouch for, is much better than any larger cup that has more filler and less espresso by volume. Thus, the reason Starbucks “hides” this product instead of relagating it to an ugly package in the corner of the bottom shelf.
Update: Julien has more on Starbucks, in the Fair Trade coffee challenge here.
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