Wake Up People, Coffee Does Not Cost $5!

I have recently been haunted by the misconception that coffee is $5, when in reality that is not true. For some reason really smart people love to state this time and time again. I even hear this in casual conversations with friends and family as they recall the days when coffee didn't cost $5 - what the heck are they drinking these days?! A Venti Frappuccino with whipped cream, chocolate sauce, and an extra shot of espresso is not coffee.


Let me begin with citing a few (of many) recent examples I have come across...

In his spectacular book Predictably Irrational: The Hidden Forces that Shape Our Decisions, Dan Ariely discusses how people create price anchors that help them determine the value of comparable products based off their initial experience with a competing brand. He reminds us of our first Starbucks experience after having been use to Dunkin' Donuts coffee prices (whatever that may be). "The prices of the coffee (at Starbucks) are a shock... and (we) are now curious about what coffee at this price might taste like... you don't know how you got into this price bracket in the first place." He however states a Tall (aka small) cup of coffee at Starbucks costs $2.20 which to me does not sound unreasonable. I read it's priced different geographically; for me it use to be $1.70 but I noticed last week a small now costs $2.00.

On http://www.ted.com/ there is a talk by Joseph Pine called What do consumers really want? He discusses how people want to feel that what they buy is authentic, but that being authentic is difficult for brands to achieve. He sites a few examples that are perceived not to be authentic where the brand is still able to make money. He says that when you treat coffee as an authentic experience, which Starbucks proves to do, this allows them to charge you "2,3,4, even $5 for a cup of coffee" - oh brother.

There is this article on Forbes.com written in 2003 about 7-Eleven ramping up their coffee offering. They state that "The drinks will cost about $1 per cup instead of the typical coffee house prices hovering between $3 and $4."

Anyways, I'm sure you have all either said the $5 cup of coffee lie or heard it before. I read an article recently (I can't recall where) that said Starbucks is ready to challenge this false misconception and I could not be any happier.

A small cup of coffee at Starbucks is $2 (give or take). A Starbucks cup of coffee is considered to be of greater quality than coffee in the past, or even coffee at your local mini-mart. Also, I recall when coffee came in those small styrofoam cups that were 8 ounces whereas a small cup of Starbucks is 12 ounces. Also, remember those gross dairy-free powder creams? Starbucks allows you to use as much fresh milk as you would like, which of course costs money. While paying for the experience exists to a degree, some of us grab our coffee and get out of the door having spent $2 which to me, does not sound unreasonable. I wish Starbucks all the best in refuting this myth.

At the end of the day, I think the coffee war is simple - provide a variety of offerings with customization and high quality at a fair and competitive price. Oh yeah, and a special experience. We would have never imagined that something so simple could become so complicated.