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10 ways Starbucks makes you spend more money — and how to resist

Starbucks is skilled at getting customers in the door repeatedly — and spending more while there. Here's how they do it, and how to save.
/ Source: TODAY

Treating yourself to a coffee drink may seem like a small indulgence, but the amount you spend on your java habit can add up quickly. And Starbucks is skilled at getting customers in the door repeatedly — and spending more while they are there.

TODAY talked to restaurant and spending experts to learn about the psychology behind how stores and menus are designed to urge you to spend more. If you’re looking to stay on a coffee budget, learn these strategies the company uses and you’re more likely to keep your spending in check.

Starbucks coffee

1. The rule of three

You know how when you’re prompted to tip on a tablet payment app in a restaurant you’re given three options? That’s because psychologists that help design tipping systems — and menus — know that you’re likely to go for the middle option because people don’t want to feel like cheapskates or big spenders.

William Poundstone, the author of “Priceless: The Myth of Fair Value (And How to Take Advantage of It),” compares it to a magician asking someone to pick a card from a deck — they will almost always go from one in the middle. Starbucks would like you to choose the 16-ounce grande size, Poundstone says, which may seem like the middle option between the 12-ounce "tall" and the 20-ounce Venti. Starbucks actually sells a “short” 8-ounce coffee, but if a customer asks for a small, they are sold a “tall” 12-ounce size. “You can get the 8-ounce coffee, but it’s almost like you have to know the code word,” Poundstone says. At our local Starbucks in New York, ordering a short coffee or latte will only save you 10 cents. But if you move between the next two sizes, “tall” and “grande,” you'll be spending 50 cents more for a brewed coffee and 80 cents more for a brewed latte. While the price differences may seem small, every bit counts, so it pays to order the smallest size.

Starbucks Unicorn Frappuccino
Starbucks' Unicorn FrappuccinoStarbucks

2. Those unicorn drinks

Sure, baristas hate making them, and the Unicorn Frappucino didn’t win a lot of rave reviews for great taste, but the drink was a genius move from a business perspective, says Julia Heyer, the founder of Heyer Performance, a restaurant consulting firm.

The drinks, like the Unicorn, Dragon, Mermaid and Pink Pegasus Frappuccinos accomplish a few different things — they bring in younger customers who might not already be Starbucks fans, they create a lot of media buzz and they draw people into the stores during off hours in the late afternoon, Heyer says.

The novelty drinks also are an opportunity for flexible pricing, Poundstone says. Customers have an idea what standard coffee drinks like a brewed coffee or a latte should cost because they’ve tried them before, but there isn’t a standard price for a unique color-changing drink.


3. Limited-time drinks

Those Pumpkin Spice Lattes and Toasted Coconut Cold Brews drive business because there’s a sense of urgency for the customer to get them while they can.

“Any limited-time offer gives customers an excuse to come in, because they think, ‘If I can’t get it in six weeks, I might as well get it now,’” Poundstone says. “But the thing is, in six weeks it will just be another type of novelty drink.”

4. No dollar signs

Studies indicate that people perceive prices as more expensive if dollar signs are used on menus, so Starbucks leaves them off their drinks menu. The last digit of prices matters, too, says Warren Ellish, the president of Ellish Marketing Group and a faculty member of Cornell University’s Johnson Graduate School of Management. Prices at restaurants tend to end in 0, 5 or 9. Ending prices in 5 or 9 lets restaurants make price adjustments that customers tend to notice less than if they were in whole or half dollars. (Customers also tend to associate 9 with fast-food restaurants, Ellish says, so it’s probably not an accident that every drink price in the Manhattan Starbucks outlets TODAY visited ends in a 5.)

5. Store design with a purpose

Everything in a Starbucks has been designed to feel familiar and cozy, including the natural construction materials, the warm lighting and the smell of coffee wafting through the air, says Ray Chung, the director of design at The Johnson Studio at Cooper Carry, which designs restaurants and hotels.

“In unfamiliar cities people can go to Starbucks, even if it’s not their favorite thing, and they know what they are going to get and it’s comfortable,” Chung says. That brand loyalty means that you're more likely to spend at Starbucks than at other coffee shops when you travel.

Depending on the city, the store has been designed to keep you there — or send you on your way. In highly-trafficked urban areas, the seating options are backless stools so customers that need to sit for a minute can, but won’t get too comfortable. This increases turnover, which means more paying customers are cycling through the store. In less trafficked locations, the stores tend to be cozier so you will linger, and hopefully buy that second drink, Chung says.

6. Food in the spotlight

The food case is frequently the best-lit area of the entire store, drawing you attention it. Snacks are also in a prime position for impulse buys, Chung says. Retail displays of packaged food often are used to help form the line, and there are lots of little grab-and-go items right by the register, like candy and cookies, which are low-cost add-ons that eventually add up.

7. All-day sales

Real estate is a huge cost for Starbucks, so maximizing hours people want to come in is key. There are only a few times a day that people want a caffeine fix, and offering food can “steal” a visit from a fast-food competitor, Ellish says. It doesn’t work for all locations, but Heyer says Starbucks in airports have also had success with adding wine and beer to menus to draw travelers in later in the day, becoming more of a lifestyle brand than just a place to get coffee.

8. More ways to buy

In congested areas, Starbucks has had success with app orders that shave off wait time when lines get long, getting more orders out with limited real estate. Delivery-only locations, like one in the Empire State building, save money because it allows Starbucks to pay cheaper rent on an upper floor of a building and still serve customers without street-level frontage, Heyer says.

9. Enticing photos and illustrations

Pictures and illustrations, like the chalk drawings of Toasted Coconut Cold Brew that have appeared in Starbucks recently, make a big impact, Ellish says. Menus are designed to draw our eyes to certain products, and anything that is bold, highlighted, or set apart in a separate box is something that the restaurant would like you to order, Ellish says. Often it’s an item that the restaurant makes a larger profit margin on, but that’s not always the case.

“Part of the reason is they would like you to try something new,” Ellish says. “The more things you like at a place increases your frequency of visitation, and the fact that it’s new and different means you might share it with other people.”

Starbucks Reserve Roastery in Seattle, Washington

10. Getting fancy

Back in the 1970s, Starbucks was created as a “third place” — a place for people to meet and hang out when they aren’t at work or at home. But as the chain got busier and became more like a fast-food outlet, a lot of the stores became spaces where customers didn't want to spend a lot of time.

To get back to its roots, the chain has started to introduce higher-end Reserve locations that sell more expensive drinks with a cushier interior. So far it's opened locations in New York, Los Angeles, Chicago and other major cities. It is also creating a few large Reserve Roasteries around the world where customers can come and learn about and see coffee being roasted and packaged, take tasting classes and get cocktails made with coffee. Heyer says it’s a smart move for the brand — even if these stores aren’t big money makers per customer visit, they help keep the brand relevant and more competitive with other hipper coffee chains.