More companies are moving to two-class business models — catering to a growing divide in income brackets. Essentially, it’s the difference between the dollar-menu and the deluxe package. Look no further than your local Starbucks, where they created an elite status for coffee drinkers. It’s called, “Starbucks Reserve.” Like our broader economy, it’s not made for everyone — intentionally.
Reserve drinks come in a black Starbucks drink sleeves which say, “Exotic, rare and exquisite coffee.” Today, I got to order one because I’m using a free drink reward from a 12oz bag of coffee. In a way, I’m circumventing the traditional class system of drinks.
Before choosing a Reserve coffee, the employee tells me she recommends the fancy-something-sundried-special-faraway-coffee. I’m out of my element, and gladly accept the suggestion. All I know is that I’m drinking something from Hawaii and it’ll be brewed on an $11,000 machine. It’s supposed to be good.
When I look up at the menu board above the employee, I gasp at the price: $3.95 for a tall (12oz) cup. At more than $4 per cup after taxes, the Kona Perry coffee is the most expensive coffee choice by far. A normal cup of coffee at Starbucks is half the price — about $2.
I’m was reeling at the exorbitant price. I thought, “How can someone spend $4 for a cup of coffee?” It’s then that I realize something stupidly simple. The economy is more divided than ever. Perhaps this an oversimplification, but the middle class is quickly disappearing. The popular buzzword is income inequality. Starbucks’s response is a new, atmospheric price structure that caters to the wealthy.
After a couple minutes, the barista says, “Sam, your tall Kona Perry coffee, brewed on the Clover machine, is ready.” I gingerly pick up the coffee and realize they’ve purposely advertised my status/drink to everyone in the building. While smart marketing, I’m frankly embarrassed by the complexity of my order. I feel like apologizing to those around me. “Sorry, it was free, I assure you I didn’t just pay more than $4 for black coffee!”
I take my first sip, and immediately notice how smooth it is. It tastes wonderful. For a moment, I imagine $4 being totally worth the expense (despite being more than my lunch on most days). I take another sip, and smile. I take another sip and realize how nice it is to pretend I’m wealthy for a day. This is the good life — for a moment.
As the drink disappears, it occurs to me that I don’t know how this compares to the lower priced Starbucks coffee. I’m not sure if I’m tasting class or actual quality. Is my mind playing a trick on me? Is the quality all psychological? Whatever the reality, I can’t afford this regularly. It’s a nice treat/aside from the everyday option. I see this as a growing business model for most industries (from airlines to restaurants to hotels). Unfortunately, as the economy becomes more polar and divided, so do consumables. Starbucks Reserve coffees are just a consequence of this income inequality.
So funny to read this right now, having just returned home listening to NPR. In “taste” tests, violinists couldn’t discern whether they were playing a Strad or a newer violin. The Strad is all about the mystique, the ancient ways, the raw materials, the workmanship, blah blah, blah.
http://www.opb.org/news/article/npr-episode-538-is-a-stradivarius-just-a-violin/
We all get mentally psyched up for what we think we are going to experience! Mad Men has tried to show us just a bit of this. I don’t know whether it existed before then. Not THAT old.
Adrienne,
What a perfect example of the brand name effect. Here we are, inherently affected by what other people think, and it makes us spend, consume, and buy more expensive items. It’s a wonderful win for business, but it definitely hurts the general public’s wallet.
The psychological psych-up is potent. And it definitely our experience. Spend more, and you might just think you had a better time! How funny is that?
Thanks for your comment,
Sam
A similar study found people given the exact same wine but with different (fake) prices thought the “more expensive” wine tasted better.
But then another study called strawberry yogurt chocolate (or was it vice versa?) and that fooled people too, so who knows what’s going on in our brains!
Ah, here it is: “In one recent test, psychologists asked 32 volunteers to sample strawberry yogurt. To make sure the testers made their judgments purely on the basis of taste, the researchers said, they needed to turn out the lights. Then they gave their subjects chocolate yogurt. Nineteen of the 32 praised the strawberry flavor. One said that strawberry was her favorite flavor and she planned to switch to this new brand.”
I am aware of how expensive each cup or tumbler of Starbucks coffee is that is why I don’t go to the place ever even if I am an avid coffee drinker. The only time I got to enjoy one tall tumbler was when I was rewarded with a GC by the company I used to work for. They can advertise all they want but because I simply cannot afford their price, I’ll be contented with sniffing the wonderful aroma as I pass by an outlet.
“The Emperor’s New Clothes!”
I used to work for three bosses who absolutely loved to get their Starbucks fix twice or three times a day. I’m sure they’re jumping all over this. They enjoyed anything that made them seem like status symbols. I do think there’s a certain psychological response behind it, though. They’re priming you for the experience and topping it off with a cherry by making the announcement (though I would have been embarrassed, too!). I tend to stay away from Starbucks mostly because their coffee is too strong for me.
Chevy vs Caddy at GM, nothing new happening
Is is about people’s need to use material things to differente themselves
It is not about income inequality, it happens in societies that are economically equal
No policies are going to change this human need to behave this way
Hey Sanity,
That’s a really good point. Starbucks’s Reserve coffees are a method for people to differentiate themselves, but there’s an important difference: the coffee is a consumable. Unlike the cars, Starbucks coffee is meant to be consumed in a short period of time. People are not as likely to buy to differentiate with such a short half-life. Just my two cents, though.
Thanks so much for your comment,
Sam
it is about people’s psychology, income difference, status, class and everything else.
if you do not have the money to differentiate yourself, where is the psychological effect comes from, maybe at that time you will just say their coffee is not that good.
then what about the people that actually grow the raw material? the workers that manufacture the cup? can they afford to buy a coffee, I do not know. it’s all deeply connected.
things are not one dimensional, everything is linked. People needs to differentiate themselves, but you cannot ignore the social and economic factor either.
by the way, I do not really think that there is a society that is economically equal
I would be pretty surprised if you were tasting quality. Have you ever read the Grey Goose story. How a good story and a reason to pay more gave people the feeling that they got the value they paid for. It’s amazing how much more people are willing to pay when they feel like they’re getting better quality; even though we all know that we generally don’t notice a quality change!
Josh,
I agree. Haha. I haven’t ever heard of they Grey Goose story, but that sounds very similar to the Starbucks Reserve coffees. You’re exactly right, most do not improve that much with the price increase. Better said: the Starbucks Reserve coffee is double the price of a regular cup, but it’s not two times the taste!
Thanks for your comment,
Sam
Have you heard of the price placebo effect? It’s essentially, the more you pay for something the more you enjoy it, even if it is low quality.
So you might think that $50 bottle of wine is a lot better than a $15 bottle, but in reality… It might not be.
As long as you think it’s better and you get pleasure out of it, even if it’s a placebo, it’s worth it.