Strategies: A Starbucks Price Increase, to a Not-So-Round Final Number

On Jan. 3, my first working day of the year, I got a jolt all right. So did hundreds of other Starbucks customers in Manhattan.

Until that morning, a “tall” cup of coffee — 12 ounces of joe — cost less than $2. In that blissful, prelapsarian time, you would hand over two $1 bills and get back coffee and some small change — 9 cents, actually, but it seemed inconsequential. I usually dropped the coins into the tip jar, not so much out of generosity but selfishness. Why carry those annoying coins in my pocket?

That was so naïve.

Now Starbucks is making a certain class of New Yorkers count pennies. On Jan. 3, without warning, it set the net price of a tall cup of coffee in Manhattan at precisely $2.01, including tax.

Starbucks menu boards list the new price as $1.85. But when it’s time to pay, and when local taxes are added to the bill, a tall cup of coffee comes to $2.01.

Libby Schmais, a novelist who works part-time as a researcher at JPMorgan Chase, confronted the new price at the cash register of a Starbucks on Park Avenue near 48th Street.

“I didn’t have the penny,” she said. The barista reached into the tip jar — into which Ms. Schmais had intended to put her change — took out a penny, and put it in the cash register. This also happened to me when I offered the barista an extra dollar in Times Square. She wouldn’t take it, and dipped into her tip jar instead — a practice that would cut the baristas’ income, if it continued.

Ms. Schmais wasn’t especially irked by the price increase, which comes to 10 cents for a tall cup. But that orphaned penny had her fuming.

“It’s the stupidity of it,” she said, “It’s what I’d call ‘the annoyance factor.’ It’s ridiculous. Why the extra penny? Who has pennies? Didn’t anyone think this through? Couldn’t they round down or even up? Why leave it at a penny?”

When David Turnbull presented two $1 bills for coffee at the Starbucks on Astor Place, he met the same problem. He wasn’t carrying any pennies. “I can’t believe it,” he said. “Now I need to walk around with pennies? Who could possibly think a price of $2.01 makes sense?”

Ari Melber, a Seattle native who writes for The Nation, was forced to fumble for change at a Starbucks on the Lower East Side — and the new price tag also struck him as puzzling.

“Growing up in Seattle, I feel I know the company well,” he said. “This is a scientific company that studies everything it does very carefully. They tend to know what they’re doing. So I wonder, how could this absurd price happen? Is it an oversight, or a really smart, invasive strategy to encourage people to carry change — or maybe shift to plastic?”

I tried to find out.

In a cordial telephone conversation, Jim Olson, Starbucks’ vice president for global corporate communications, said the company’s prices vary from place to place, but for competitive reasons it chooses not to list them. He assured me that Starbucks “thinks holistically about prices and about the total value it provides its customers,” and said it certainly was aware that it was raising the tall coffee price in Manhattan to $2.01. “It wasn’t an accident,” he said.

While he wouldn’t provide numbers, he said that only a small proportion of customers buy just a tall coffee when they visit a Starbucks, and that an even smaller proportion pay in cash.

“If you bought a coffee and, say, a bagel, you might not notice the price so much,” he said. People who pay with credit and debit cards, or with Starbucks prepaid cards or iPhone apps or reward cards are likewise insulated from the penny shock. And many popular items — including larger coffees, as well as lattes and Frappuccinos — haven’t gone up in price, he said.

Moreover, prices didn’t go up nationwide, only in Starbucks stores in the Northeast and much of the Sun Belt. And as it turns out, the $2.01 price for a cup of coffee may not exist anywhere but Manhattan. Mr. Olson wouldn’t say.

Article source: http://feeds.nytimes.com/click.phdo?i=48919425ca2f1ea5057e7521d71e8810