Behavioral Economics and Starbuck’s Cup Problem
Introduction:
US-based Starbucks Coffee Company is one of the largest and most prestigious and
leading coffee beverage restaurant business. Even in the face of extreme competition from
competing multinational companies, the corporation stands firm on the honours of its loyal
customer base, top tier consumption products and noble rand loyalty. However the largest
coffee chain in the world, generated 4 billion single-serve cups as waste each year that ended
up in landfills or as litter. Recycling also posed some serious problems as the existing
ecosystem was not 'designed to take the individual Starbucks cups' due to the presence of a
plastic coating inside the cup. The company took various initiatives to curb the waste
including offering a long-standing discount of 10 cents to any customer who brought along a
reusable cup but with little success. In 2013, Starbucks introduced a US$1 reusable cup in its
stores. Further most, it must remain in touch with consumer demands, maintain a high level
of service quality and have a strong profitability components in order to survive and grow.
Starbucks is one of the largest and most prestigious and leading coffee beverage restaurant
businesses. Even in the face of fierce competition from competing coffee multinationals, the
corporation stands firm on the honours of its loyal customer base, top-tier
consumption
products, and noble brand loyalty. However, each year, the business generated 4
billion
single-serve cups as waste, which ended up in landfills or as litter. Recycling also presented
significant challenges because the existing ecosystem was not "built to handle the individual
Starbucks cups" due to the existence of a plastic covering within the cup. To reduce waste,
the company implemented a number of measures, including a long-standing discount of 10
cents for any customer who brought a reusable cup, followed by the introduction of a US$1
reusable cup in its stores. Furthermore, it must remain in touch with consumer demands,
maintain a high level of service quality, and have a strong profitability component in order to
survive and grow.
Problem Statement:
Was the 10 cent discount incentive enough to drive behaviour change of its customers? how
can starbucks encourage customers to take responsibility for their actions, and what
alternative solution can improve the business in the long term
Case Analysis – score card
Perspective Objective Measures KPI Target Initiatives
Customer Observe the Conduct Reduce cost of Providing
changes in the customer 3% in the special benefits
customer review through production and rewards to
behavior surveys. process customers
bringing the
Monitor repeat Increases the reusable cups.
purchases. percentage of
repeat customer Provide
by 10% or customers with
more. additional
reward points
and purchase
discount
alternatives.
Starbucks
introduced 1$
reusable cups at
its café in 2013.
Financial Increase profit Track new 20% of the Increase the
margin and customers share overall market availability of
share in the price share increase. the reusable
market cups
Increase sales Launched
Reduce cost per but cost not couple of new Set up front of
unit and increased products and door recycling
enhance asset opened 7 new stores.
utilization Make the stores globally.
effective use of Collaboration
the asset with suppliers.
available.
Reward goof
behaviour with
discount
Internal mployee Reduction in It is understood Make the
processes training and paper cups that 60% post – resuabke cups
retention waste consumer more available
Implement fiber in sleeves
effective Reduction in 10% post Set up front of
environment fiber waste consumer fiber. door recycling
policies and in stores
programs Plastic waste 15% less plastic
reduction and Supplier
Developing an increase use in collaboration
organization reusable cups
that is profitable and ceramic Reward good
and responsible cups. behavior with
discount on
beverages.
Learning & employee Introducing Increase the Employees take
Growth training and rewards usage of online an active role in
retention. program applications of environmental
20% campaigns.
Motivating Monitoring
customers and employees From the start Encourage
employees on training of their job with employees to
environmental the company, educate and
awareness. employees are motivate clients
given 100% about proper
training before plastic and
task assignment paper cups
recycling
Conclusion
Starbucks should offer rewards program for adopting reusable cups in order to achieve
greater success in its efforts to sustain the impact on the environment produced by its
customers disposal of countless paper cups. An added price will cause a shift in customer
behavior urging them to remember to carry their recycling cups and bags with them while
visiting the firm stores.
Recommendation
Encourage customers to adopt appropriate disposal methods and strive to create a sense of
environmental responsibility in them.