Are you buying coffee from Starbucks because they make a great cup of coffee? Because they have amazing baristas? Or because their Arabica beans taste better?
Actually, you are buying coffee from Starbucks for these reasons:
Brand Is Everything
We are all creatures of habit, so it shouldn't be a surprise that brand plays an essential role in our purchasing decisions. Does Apple make the best smartphone or laptop in the market? Arguably not, but most Apple consumers will continue to buy Apple products because they trust the brand and what it stands for.
The same can be said about Starbucks. Most consumers will continue to buy coffee from Starbucks because they are familiar with the brand; therefore, they know exactly what they are buying even if the coffee shop next door is serving better quality coffee at a lower price.
If you develop your brand, you don't have to compete on price, and this is precisely why building a brand is so important - "Starbucks" brand is currently valued at 44.5 billion dollars.
Starbucks also did a fantastic job associating their brand with the word "coffee." If we mention coffee to you, Starbucks will most likely be the first or second word that comes to your mind. Brand association is priceless because it is deeply seeded in your brain.
Perceived Value Is Not Of Utmost Importance
A home-brewed cup of coffee will cost you approximately 20 cents per cup. A cup of Starbucks coffee will cost you $2 - $6, so you are paying 10 times more for a similar experience. Is Starbucks 10 times better than your home-brewed coffee? Of course not. What you are paying for is the brand, experience, and convenience that Starbucks provides.
Price is not of utmost importance in this case, and that's ok. For most people convenience is more important, so that's where the real value is.
Consciously or subconsciously you will happily pay more for a product if it saves you time - arguably the most valuable resource.
The real estate mantra "location, location, location" applies to coffee as well. Most people will not go out of their way to buy a cup of coffee, and this is especially true for coffee drinkers who are primarily looking for caffeine content (something to kick-start their day).
With over 28,000 locations (14,000+ in the US) Starbucks makes it very convenient to buy coffee.
If Starbucks only focused on financials, they would try to get their customers in-and-out of the store as quickly as possible; instead, they do the complete opposite. They understand that convenience is not enough, so they invest heavily in customer experience.
Friendly staff, good WiFi, large windows (natural light), open spaces, clean restrooms, and comfortable seating all add up to an enjoyable experience. Starbucks understood early on that we live in the Experience Economy, where customer loyalty cannot be built without an excellent customer experience - precisely why so many of us choose to work or study from Starbucks.
Starbucks coffee will never win a blind test, and that is ok because we don't turn to Starbucks for outstanding coffee or great value. Instead, we buy from Starbucks because of convenience, customer experience, and brand recognition.
What we can all learn from Starbucks is that you don't always have to compete on quality, price, or perceived value. In some cases, brand, customer experience, and convenience really drive the purchasing behavior.
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