Price elasticity to go
Many marketing managers first learned from the deserving Herrmann Simon what every economist has always known: it is very worthwhile to understand the price elasticity of demand. This is often lower than assumed - not least because many consumers don't know the prices of their favorite products very well, but they do know exactly how much a week's shopping will cost them. And so many brands give away margins because they cannot bring themselves to make moderate price increases. Starbucks never had a problem with this, even though the price of the Flat White and the Macha Latte never disappeared from the shopping cart. This was because the brand had managed to make price elasticity as inelastic as possible: There was no real alternative from the customer's point of view, the product was somehow essential, and the brand created a sense of familiarity and belonging. Starbucks was the little luxury that people indulged in.
But no brand is an island, and a brand fortress does not last forever. Inflation may only be a statistic - for many people, its effect is pure emotion: stress, helplessness, fear. And fear turns "affordable luxury" into overpriced coffee. Fear turns the "third place" into the place where your bank account continues to shrink. Fear turns brand experience into a guilty conscience. But fear also makes people active: it makes them look for a way out. And it's suddenly there. Delicious coffee for more than half price at Lap Coffee - a Berlin chain that is currently causing full sidewalks and long queues. The blue cups are popping up as a social media accessory, almost like an urban statement. At the same time, the brand is attracting criticism: protests, calls for a boycott, accusations of displacement and commercialization. LAP Coffee is therefore not only a price alternative, but also a culturally controversial topic - which is precisely why it is visible.
And good coffee for one euro - one euro! - at Cotti Coffee. From China, of course. From China? No problem if you already order your stuff from Temu anyway ... Starbucks is therefore in danger of permanently losing some of its customers - the part whose price elasticity they misjudged. Will it still end well, with high prices, just fewer customers? Quite possibly.
Or what do you think?
Here are the links to the articles:
Leave a Reply