7 October 2014
The Dynamic Duo of Starbucks and Disney
Recently, the Walt Disney Company has been criticized for partnering with Starbucks in the addition a few new stores in the Disney parks. Through this trade-off, Disney benefits in the expansion of food and beverage options available to customers, which also opens Starbucks up to a whole new market of customers. While some are excited about this new business partnership, others believe that the addition of a Starbucks will ruin the overall feel. No matter the perspective though, the addition of Starbucks at Disney World is sure to increase prices due to the novelty and experience of both companies’ brand names.
Because of the way our economy works, consumers often times have a direct influence on the decision making process of which products should be produced. This can be seen directly in the example of the Starbucks-Disney partnership in that Maribeth Bisienere, vice president of the food and beverage line of business for Walt Disney Parks and Resorts reported that, “many of [their] guests have shared [a] passion for Starbucks with [them]." Clearly, consumers are an integral part of the economy and in deciding what to produce based on what is popular.
An experience economy, a term coined by Joseph Pine and James GIlmore in their book The Experience Economy, is one in which consumers pay for not only the good, but also the work that has gone into it and the experience they get while purchasing it. In this “experience economy”, prices increase as a good proceeds through four stages: commodities, products, service, and experience. In this case, the plain coffee beans are the commodity, and would be the cheaper compared to after they have been processed. As the beans become a product, ground coffee, the price increases. Once someone makes the coffee and then sells it - the service element- price continues to increase. Finally, once the coffee is associated with an experience or a brand name, the price increases as people are willing to pay more and more for essentially the same product.
Not only are consumers paying for the coffee, but also the experience of Starbucks AND Disney, making prices much higher than they would normally be a few miles away off of Disney property. For example, mouseplanet.com states that, “outside the gates of Walt Disney World, a Venti Caramel Ribbon Crunch Frappuccino costs you $4.95. Add organic soymilk for 59 cents. Now the soymilk addition is more than what a cup of coffee cost a few years back.”
An example of the effects this new Starbucks has on the economy of Disneyland can be seen at one of their other food service locations. The Tomorrowland Terrace has been serving coffee and other breakfast items this past summer. The substitution effect can be seen in the longer lines at the Tomorrowland Terrace compared to at the nearby Starbucks. Due to the lower prices, consumers choose Tomorrowland Terrace over the higher priced coffee at Starbucks.
Although a great business partnership in which both Disney and Starbucks benefit, the negative externality to the consumer is the resulting raised prices across the board in exchange for this experience.
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