Why Starbucks Can Charge $12 for Coffee

What does Starbucks sell? Quick economics review. If you were selling coffee beans, you would have little price differentiation, and as a result, relatively little price leverage. It's a commodity. If you took those coffee beans and you put them in a bag, now you have a product, not a commodity. More differentiation, more price leverage. If you brew the coffee and serve it in a cup, At a McDonald's or a Waffle House, now you have a service, yet more differentiation, yet more price leverage. If you kept going and you opened a coffee shop and you put in comfy lounge seating and you created a Spotify playlist every week of mediocre lounge music, then you have an experience. So the question really isn't, what does Starbucks sell? Because for some it's like, okay, well, they sell a cup of coffee. and a place to charge my phone. For some, it's a cup of coffee and beginner Italian lessons. For me, Starbucks is a global network of restrooms. The question isn't, what does Starbucks sell? The question is, what does Starbucks offer? And what Starbucks offers is the experience of relaxing and recharging. The coffee is somewhat incidental. What does Amazon sell? 20 years ago, easy answer: sells books. 20 years later, today, you could say that Amazon sells whatever Jeff Bezos wants. Because nobody puts Bezos in the corner, especially now that we know he's been Vin Diesel this whole time. So the question isn't what does Amazon sell, what does Amazon offer? What Amazon offers is the ability to look up product ratings and reviews, put your order in, maniacally track the package all the way through as it goes through smack over Arkansas, which is the place, and like winds up at your doorstep. It doesn't matter what Amazon sells, what they offer is the experience. experience of buying things. What does HubSpot sell? Easy answer, we sell software, or more specifically, software as a service. But what HubSpot offers is success as a service. Yes, we invest tens of millions of dollars in R&D. I could not be more proud of the product team at HubSpot. But we also spend millions of dollars on training and education and community and hosting events like Inbound. So what HubSpot offers is the experience of growing better. That's our mission. The lesson here is to grow better, you need to offer a delightful, differentiated experience that customers love.