How Starbucks Turns A $4 Coffee Into A $26 Purchase (and you can too)

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Starbucks doesn’t just sell coffee anymore. It’s actually become a sort of “convenience store” for some people. Starbucks realizes they don’t just have customers, they have an audience. They continually look for ways to serve their audience, even if it isn’t with coffee.

Let’s face it, when you run your own business or you “work from home” half the time you’re actually sitting in a coffee shop. You’re cranking out something awesome that the world can’t wait to get their hands on.

Most days I use the Starbucks app to do a mobile order before I arrive. This saves A TON of time by not having to wait in line. However, one day their app was having issues so I was forced to wait in line like it’s 2015 or something. This was a very long line of people who had not yet had their daily dose of caffeine.

So I looked around at the other things Starbucks had to offer- mugs, tumblers, gift cards, chips, salads, sandwiches, and headphones.

Headphones?

Yes, headphones. At first I was as surprised as you are. I’m here to buy coffee, why are they selling me headphones?

The reason Starbucks sells headphones soon became very clear to me. The thinking behind it is a tactic that you can incorporate into your online business too. This tactic can help you boost your profit by just offering something simple.

Starbucks found a way to turn a $5 coffee purchase into a $26 coffee and headphones purchase, by doing almost nothing at all.

However, before they could make the easy money with headphones they first had to do one thing that isn’t always so easy.

What did Starbucks do behind the scenes that spurred them into electronics? Keep reading to find out.

Would You Like Headphones With That?

Starbucks had a problem if they wanted to keep growing their profit- people only drink so much coffee, and they will only pay so much for that coffee. In a world already dominated by Starbucks, just selling coffee has limited profit growth.

What could Starbucks do to continue growing? Sell something else.

That’s one of the reasons they started selling more food- sandwiches, salads, chips, desserts. That’s typical coffee shop fare, and certainly eats into Panera’s profits (pun most definitely intended).

Then Starbucks had an epiphany. They discovered something that had been in front of them all along- their customers! 

How Starbucks Turns A $4 Coffee Into A $26 Purchase (and you can too)

Starbucks looked at the needs of their most frequent customers. Many of them are people who bring their laptops and tablets with them. They don’t just get coffee and leave, these people get coffee and stick around a few hours to get some work done or just kill some time.

Starbucks had become home to the entrepreneur, home to the “work from home” person, home to the digital nomad, home away from home.

Even as I write this for you right now I’m sitting comfortably inside a Starbucks, sipping a Blonde Roast coffee, and listening to music on my headphones. I feel at home.

That’s it! Starbucks realized that when a person is hanging out at one of their locations but forgot their headphones, that customer has an immediate need.

The Embarrassment Epiphany

Nobody wants to sit in Starbucks and rock out their music over speakers that everyone can hear. People want to sit in Starbucks, scroll through Facebook or YouTube, and watch whatever they want without everyone else hearing it.

By offering headphones Starbucks isn’t just meeting an external need. In fact, you could argue they’re not meeting any external need. After all, nearly every device has speakers. You don’t NEED headphones.

Starbucks is meeting an internal need. They are rescuing people from the embarrassment of listening to something out loud, and then having other customers scowl at them for not having headphones.

They’re also meeting the internal need of boredom. If a person just had headphones they could listen to anything they want, entertain themselves for hours, drinking and eating at Starbucks the entire time.

Headphones not only increase profits from headphones, they increase profits by selling more food and drink. People who forget their headphones now don’t have a reason to leave. They could buy a cheap pair at Starbucks, and entertain themselves for hours without getting hungry or thirsty.

No new drinks had to be invented. Baristas didn’t have to learn a new machine or technique. All Starbucks had to do was place headphones on a 5 inch by 5 inch piece of shelf space.

It all started with Starbucks understanding their customers.

People already showed up for coffee, so that wasn’t a problem. Starbucks had to do the hard work of discovering what problems their customers encountered AFTER they got their coffee. Headphones is just one solution.

How Your Business Can Have An Epiphany

Probably the best thing about what Starbucks did is that anyone can do something similar with their own business.

External needs are something usually tangible. It’s a need that we tend to recognize with our senses. These needs are usually easily recognized and talked about.

External example: A person buys headphones to listen to music or movies, or watch videos on YouTube.

Internal needs are more driven by what we think about or feel, usually having to do with fear or love. It’s typically something we won’t talk about openly with others but it’s actually a much stronger need for us.

Internal example: A person buys headphones to avoid embarrassment while watching YouTube videos.

By now you’re probably wondering how you can help your customers in unexpected ways? It’s going to take a little digging into your customer’s experience, but it’s definitely worth the work.

Give yourself some time to fully answer the questions below to discover how you can better serve your unique customers (and increase your profit in the process).

  1. What does your customer ultimately want to accomplish?
  2. What problems are they encountering (or they may encounter) along the way?
  3. How can you solve these problems?
  4. What external needs can you meet with add-ons?
  5. What internal needs can you meet with add-ons?
  6. How will your customer feel if they don’t buy your add-on?
  7. How will your customer feel when they do buy your add-on?

Note: don’t answer these questions based on what makes you a lot of money. That will likely end poorly. Truly think about what your customers need and they will thank you for it.