What Starbucks Teaches Us About Commoditisation

Written by Sean McPheat | Linkedin thumb

Starbucks cupOn a recent trip to London, I called in at a Starbucks for  a refreshment before visiting a prospect. I was in a great mood (I nearly always am!) and just wanted to have a drink while I prepared myself for the meeting.

I got my computer out and started going over my presentation. Then I looked at the menu and saw the tall, grande and vendi sizes of the drink I wanted. The prices were fairly similar, so I asked the lady who was serving what the different sizes were. I was surprised to find that the tall was 12 oz, but the vendi was 20 oz.

The difference in price was only about 20-25%, but the difference in size was nearly 70%.

It made me realise that companies like Starbucks are appealing to our sense of greed in relation to our refreshment. They are making the largest size more appealing to customers by making the price relatively lower when compared to the ‘tall’ version. It makes it appear the vendi is good value.

But it only appears good value when compared to the ‘tall’. What most people don’t ask is why the ‘tall’ is so expensive compared to the ‘vendi’.

If we consider the psychology behind this, we begin to recognise that most people are comparative and relative creatures. We try to get a benchmark by looking at a number of choices we may have, then we determine how good ‘value’ something is by comparing it against something we know. The relativity of the prices then become clear to us, so we are able to compare and rationalise the prices.

This is mainly true when we are comparing commodities. The only thing we can compare if something is a commodity is the price. When we have our products and services to sell, we need to take the emphasis off what it is, and help the prospect compare what it will do for their business, and how the results will improve their status in their market place. This will stop us being compared with others as a commodity.

I had the medium coffee, as the biggest one would have proved too much for the time I had available. So I saved myself 20 pence over the bigger size, but the comparison made me feel a little unsettled, as the comparison seemed out of place with the difference in size. I’m sure I’m not the only one to realise the difference in size is not matched by the difference in price!

Happy Selling

Sean McPheat
Managing Director

MTD Sales Training | Sales Blog | Image courtesy of Ivana Di Carlo at FreeDigitalPhotos.net

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Originally published: 20 June, 2013