I just had a Starbucks grande coffee from their $11,000 Clover coffee machine. It was very good. Because the Clover makes individual cups, Starbucks can let the customer choose the bean. More choice, elite beans, and you have a recipe for higher prices. Interesting.

According to a Wired article, when Starbucks’ founder, Howard Schultz experienced the Clover, he said it was, “the best cup of brewed coffee I have ever tasted.” So he bought the company that makes the machine.

How are competitors responding?

The Economic Lesson

I suspect Starbucks is very good at thinking at the margin. They start with their basic tall cup of coffee for the frugal customer. Then though, extras are pricey. Order a red eye (a shot of espresso in the coffee), an extra flavor, or a Clover, and the price pops.