Peltzman goes to Starbucks

A random thought about starbucks. Why do they call their drinks “short”, “tall”, “grande”, “venti” and “trenta”? Why not extra small, small, medium, large and extra large?

Perhaps it has to do with the bell curve, in a round-a-bout way. Ask someone to pick a number between 1 and 10, and they will, on average, pick 5. Ask them to pick between 1 and 20, 10 will be the mean. What does this have to do with starbucks drinks? With little value placed on the current sizing monikors, customers are likely to land right in the middle – grande.

Now think about the value of the second set of options, from small to extra large. The relative value is more obvious than the difference between a venti and a trenta. So if you went to McDonalds and ordered an extra-large drink, you know that you are selecting the biggest beverage possible – you must make the concious decision that indeed, you desire the most amount of sugar that is possibly allotted by the food establishment you entered. Is the stigma attached to venti or trenta the same? I would argue that it’s not.

It’s a genius play by Starbucks. They’ve added in a new order option, theoretically raising the mean order size (think of the 1-10/1-20 thought experiment above). To counteract the possible stigma, and reverse of the above increase in mean order size, they’ve opted to make the names of their beverage sizes less obvious. This encourages customers to place orders relative to the number of drink options, and not the names attached to them.

Another thought experiment. Lets talk about likert scales. You could have a balanced 3 point scale – disagree, neutral, and agree. Or an asymetrical 4 point scale; disagree, neutral, agree, strongly agree. On a series of statements, what do you think the average answer would be? I would guess, since there are more options in the second set, answers would be more positive.

Furthermore, though 3 of the possible answers are identical in each set, the underlying meaning of, for example, neutral, is only obtained through the relative placement of other possible answers.

Can you think of any other examples of the above principle?