Part of my daily routine is a cup of delicious coffee at Starbucks. I pick one up on my way to work and then get a refill a couple of hours later for 50 cents (or free if you have a registered starbucks card). The staff by our office is extremely friendly and the experience is great.
Unfortunately, as of March 25, 2009, Starbucks is eliminating free refills (and 50 cent refills) unless you consume the coffee within 1 hours while at the store. The Staff at my local Starbucks broke the news to me last week.
I guess the company is trying to come up with ways to penalize its best customers. I was calculating that because of their prior refill policy I would go to a Starbucks about 50 times a month (2x per day, 25 days a month). Generally I would just buy a coffee (or get a refill) - but about 1/3 of the time I'd upgrade to a higher margin item like food or an espresso based drink.
Under the new policy, I have no incentive to come back in the store for a second time during a day, so I'll probably start going to Peet's in the afternoon. My visits to Starbucks will drop from 50 times a week to probably about 25 times a week. Starbucks will have 1/2 has many touchpoints and opportunities to sell me things.
Looking at these numbers I'm struck by two things. 1) Starbucks is penalizing their best customers who often evangelize about their brand. 2) I go to Starbucks way too often. I should cut back. Seriously.
Tuesday, March 24, 2009
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15 comments:
Lets think about the cost of running a coffee shop per month, say you have 15000 transactions per month, 500 per day.
monthly bills
rent: 4500
payroll: 21000
utiliies: 2500
=28000/15000= .53
.53 pays only for the store to be open and staffed, let alone stocked with product.
Thanks for your comment. Rather than guessing how accurate the 5 variables in your equation are, here's a better way to think about it:
Coffee (and anything else they sell) is a very high margin item (80-90%). Therefore their primary goal is to drive the throughput of customers. Just by a customer walking in the door, they are creating positive expected value for starbucks.
Anything that reduces transaction volume destroys value, anything that increases it creates value.
What a travesty! You're putting those baristas' kids through college, and that's how they thank you??
I know. I've already started shifting my coffee $$$ to Peet's and Blue Bottle.
A starbucks employee went through a whole explanation with me. It was really elaborate.
I just got the explanation from my local Starbucks. Well, I too will be visiting a whole lot less. I think I'm gonna resort to the free stuff at work. So there, now, they'll get none of my money.
I just got hired at Starbucks in August, and wasn't too familiar with the policy until my manager and I had a lengthy discussion about it. I hate the new policy. I'm very good at what I do, and when I lose a customer over something as stupid as Starbucks' new refill policy, it puts me in a very difficult place. The conversation is incredibly awkward. Not only am I creating enemies for myself, but also for Starbucks. I swear the top execs up in Seattle are morons.
The math could be much easier than what a previous post included. Only taking into account pure revenue, the comparison is $2.00 vs $0.50. For this to work out in Starbucks' favor, they would need 1 customer to pay full price for a "refill" for every 4 customers that would have paid the reduced price of $0.50 for a refill. If you are considering the profit associated with both comparison points, I'd guess that the ratio would be even more in favor of charging full price for a refill. Other posts have mentioned the value of having customers enter the store because they may buy other things. This is true, but I still wouldn't be so quick to say that Starbucks doesn't know what they are doing. As a customer, I'm with all of you in that they should stick with the $0.50 (or free) refill. The policy probably needed some refinement to limit those who have abused it (never paying the full price for a new cup of coffee).
When you say a delicious cup of coffee you should say a mediocre cup of coffee.
You need to learn more about coffee, Starbucks coffee tastes awful.
and when you say mediocre, you mean average... but I digress.
I too will be frequenting Peets instead of Starbucks from March, but that has more to do with the fact that I am moving to a new building w/ a Peets in the lobby instead of a Starbucks.
I think SiliconMBA's point is that the marginal cost of brewing one pot of coffee is so small as to be basically free, compared with Starbucks other operating costs... so it is almost certainly in their best interest to keep the foot traffic coming through the door for refills.
i love how everyone is switching to Peet's which is just another company owned by...you guessed it, STARBUCKS!! idiots.
HI Griffin, Peet's Coffee and Tea is an independent company.
http://www.google.com/finance?client=ob&q=NASDAQ:PEET
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After buying a "Clover brewed" coffee for $2.60 at one Starbucks in one location, and then getting refill later at another (free on my Gold Card), the store person hit me over the head with "oh, you can't do that, you have to buy the first one here". I was stunned as the whole point of the Starbucks Card is you can track purchases (you know, those things called "computers").
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