The End Of The 'Latte Factor'.

By: The Wastrel Show Wednesday, July 02, 2008 2:12 PM

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I hope David Bach is happy. He finally got his way. David's constant pounding to the masses that the best way to save money and become a millionaire was to give up the 'latte factor'. You know the scenario: stop buying those $5 frappuccino's from Starbucks, invest the five bucks instead and become The Automatic Millionaire.

David Bach changed what he considered to be the 'latte factor' over the years. He was concerned about probable lawsuits. But we all knew who he was targeting. It was Starbucks. Today Starbucks announced that they are closing 600 stores in the US and laying off over 12,000 employees of it's 172,000 total employed people. Twelve thousand people are now out of a job because some financial guru concocted a scheme to create millionaires by just simply giving up a five dollar cup of coffee. As if?

I wonder how many millionaires are really out there because they stopped drinking their $5 cup of joe? Are any of those 12,ooo unemployed people millionaires? How about the remaining 160,000? Are they millionaires yet? If they own Starbucks stocks, they're not.

Starbucks CEO Howard Schultz knew his company was on the downswing. Foreclosures and a tightening economy made many wallets tighter across the nation. Schultz's preposterous solution was to come out with another flavor of coffee, Pike Place. No, Mr. Schultz. Lower the price of a cup of coffee to $1.50 and watch the big bucks roll in. It's far better to make a little money than no money at all. Even Frugal Me would have stopped in a Starbucks and imbibed in a buck-fifty-soy-venti-place-of-pike. (Did I get the java lingo correct?)

Starbucks tried to reinvent the coffee wheel by using pseudo-Italian names for the sizes of their designer cups (tall, grande, venti vs small, medium, large). Fail to order your cup of coffee using these ridiculous brain-twisting names and you would be ignored by both the barista and the cashier. Starbucks justified their prices by presenting a 'whole experience'. Indulge in a grande cafe' au lait with a double shot, linger as long as you wanted amongst the Starbucks' ambiance, surf the web, listen to funky music, chat with your hip friends, be part of the in-crowd. It was all a plot. All a scheme. To make a consumer think that an actual few pennies of coffee could be anything more than what it is: "A cup of coffee. Small. With milk and sugar. Please. To go."

And so it goes.

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7/3/2008 4:11:02 PM God Bless You, Mr. Schultz by Nicko I find Starbucks to be a very interesting company, and I greatly enjoyed your Vonnegut reference, but I found some inaccurate assumptions in your article I think may be worth pointing out. Firstly, Starbucks was having growth problems long before our current recession worries. Their stock price began to dip in late 2006 - long before anyone was worried about our economy. A company can only grow so much before it begins to plateau, and Starbucks was feeling this common affect. Secondly, Schultz's solution to this downturn in growth wasn't just to "add a new flavor". It was a HUGE "back-to-basic" strategy. He instituted that coffee be ground in stores to enhance a coffee auroma; espressos were made using state of the art machines; and in-store cups were promoted to reduce eco-impacts and provide customers with a quality experience. These were all strategies that contributed to Starbucks' early success, but had been discarded in the past years. Similarly, the Pike Place Blend was introduced in 2003 to commemorate the original Starbucks store - not in 2008 to solve shrinking sales. Contrary to popular opinion, charging less for coffee isn't a successful business strategy. Early in 2008, Starbucks ran a trial plan to offer drip coffee for $1. The program, which took place throughout Seattle, didn't increase revenue, and was abandoned. So much for that logic! Lastly, Starbucks may be a step ahead of you on your suggestion; as a cup of coffee can already be purchased for $1.50 (plus tax, of course). Reply Rating: (0) (0)
7/7/2008 9:12:50 PM lATTE FACTOR by BOBBI Obviously the author of this article does not realize that the Latte Factor is a METAPHOR for all the little ways that people spend money without thinking how it adds up to big dollars. Read the book and learn more! Reply Rating: (0) (0)
7/3/2008 4:11:02 PM God Bless You, Mr. Schultz by Nicko I find Starbucks to be a very interesting company, and I greatly enjoyed your Vonnegut reference, but I found some inaccurate assumptions in your article I think may be worth pointing out. Firstly, Starbucks was having growth problems long before our current recession worries. Their stock price began to dip in late 2006 - long before anyone was worried about our economy. A company can only grow so much before it begins to plateau, and Starbucks was feeling this common affect. Secondly, Schultz's solution to this downturn in growth wasn't just to "add a new flavor". It was a HUGE "back-to-basic" strategy. He instituted that coffee be ground in stores to enhance a coffee auroma; espressos were made using state of the art machines; and in-store cups were promoted to reduce eco-impacts and provide customers with a quality experience. These were all strategies that contributed to Starbucks' early success, but had been discarded in the past years. Similarly, the Pike Place Blend was introduced in 2003 to commemorate the original Starbucks store - not in 2008 to solve shrinking sales. Contrary to popular opinion, charging less for coffee isn't a successful business strategy. Early in 2008, Starbucks ran a trial plan to offer drip coffee for $1. The program, which took place throughout Seattle, didn't increase revenue, and was abandoned. So much for that logic! Lastly, Starbucks may be a step ahead of you on your suggestion; as a cup of coffee can already be purchased for $1.50 (plus tax, of course). Reply Rating: (0) (0)
7/7/2008 9:12:50 PM lATTE FACTOR by BOBBI Obviously the author of this article does not realize that the Latte Factor is a METAPHOR for all the little ways that people spend money without thinking how it adds up to big dollars. Read the book and learn more! Reply Rating: (0) (0)

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