As described many times here at Neuromarketing, paying for a product activates the brain’s pain center, particularly if the price seems too high to the person making the buying decision. Starbucks is the company that taught us that $5 for a cup of coffee (or at least for a skinny mocha peppermint latte with an extra shot ) isn’t too much too pay. A simple cup of brewed coffee costs less, but the high cost of Starbucks beverages has made the $5 Starbucks coffee a staple of stand-up comedy routines. Now, new competitors like McDonalds are creeping in and showing consumers that maybe Starbucks actually IS kind of expensive for what you get. The buyer pain that Starbucks had suppressed over the years is in danger of returning.
Simply cutting prices might endanger Starbucks’ premium image and the perceived quality of the product – after all, we know that expensive wine tastes better, so it’s not a big leap to assume that high priced, premium brand coffee might taste better than the same product coffee served in a discount environment.
So what is Starbucks doing? First, they are actually raising prices on their broad line of coffee beverages. But, in Seattle, they are also testing a small cup of brewed coffee that will sell for a dollar but include free refills. I think the free refill concept is interesting from a neuromarketing standpoint, as it seems to change the percieved value of the purchase and, presumably, cut buying pain. Instead of the purchase price reflecting a single cup, now it offers (more or less) infinite possibilities. It’s likely that the volume of refills they pour won’t be gigantic, and hanging around the store a bit longer might encourage customers to make food or other purchases.
I like this strategy, both as a neuromarketer and coffee addict. Most of the coffee shops I frequent already let me top up/warm up my coffee, and they are already priced lower than Starbucks. (They also offer free WiFi and better-tasting coffee, but that’s another story.) As much as I seem to write about Starbucks, I’m not all that frequent of a customer. If they roll out this policy nationwide, they might see a bit more of me.