The Starbucks Paradox

I would say in the past month I had been going to Starbucks an average of 4 times per week. One visit of $4.25 is easy enough to swallow, but when I started running the numbers, I was surprised to learn that $4.25 x 4 days per week x 52 weeks per year = are you telling me I spend almost $900/year sipping a latte?

I long ago realized that the value proposition of Starbucks is much more than just coffee. Howard Schultz’s original vision was not to “make premium coffee and earn a profit,” but to transport the community-ness of espresso cafes he saw in Italy to the USA, where he felt our society had only grown more isolated over time.

Abstract as it may be, I think the stores do ultimately deliver on that concept. I don’t go to Starbucks solely because I like the taste of my drink. I go with a colleague, we know the baristas, we see people we know, it’s close by, it takes about 15 minutes…and so on. Basically, it’s just kind of a nice way to take a break!

Nevertheless, I needed to cut down the frequency. So here’s the strange part.

Not knowing my intention to reduce the Starbucks visits, one of my colleagues and closest friends independently suggested that I buy a $50 Starbucks card and use that for all my purchases. The main rationale was that it’s a reasonable business expense since we’re often working late and the card has certain benefits.

That did seem to make sense, but $50 on Starbucks? Well, I did buy the card and here’s the Starbucks Paradox: Now that I have pre-paid credit I can use to buy Starbucks drinks, I’ve cut my visits from 4 per week to 1 per week — a 75% reduction.

My friend and I laughed about this because, it turns out, he experienced the same thing! He bought a Starbucks Card for $50 and now he hardly goes. What’s going on here?

I think this is actually an example of how psychologically, certain decisions appear to be so insignificant that they fly under the radar. Should I spend 5 bucks on a drink? Eh, sure. Should I buy a new computer for $1,000…whoah, I need to think about that one. So, basically, each Starbucks visit is just cheap enough that it doesn’t give you too much pause.

But the $50 card changes that. $50 can buy many wonderful things in modern society. Is $50 on overpriced lattes really the best way to spend it? That’s what the Starbucks Card has done. It serves as a constant reminder that when that card is used up I will have spent $50 on lattes. That makes each purchase almost painful since each one brings me closer to the $50 of decision-making defeat.

After thinking about it, I realized the “some decisions are small enough to fly under the radar” phenomenon exists in business, too. Except this time the numbers change. At Omedix, the least expensive website package we sell is called the “Basic Package” and it runs $2,000 – $5,000 depending on a few options.

For some groups, that is so cheap as not even warrant a group decision. One or two people make it and that’s that. But when we quote anything over $10,000, we enter another world where committees of multiple people must ponder, evaluate, and ultimately make an official decision (sounds intense) on what they’d like to do. Is this the “Starbucks Card” of websites and patient portals?

I maintain the same forces are at work.

I love taking simple phenomena from everyday life and seeing how far you can extend out the implications of it. Looking forward to writing about it the next time it happens!