Why It Works: How Costa Coffee uses behavioural science to entice consumers

Published in Marketing Week, June 2025.

A trip to Costa Coffee reveals multiple behavioural science biases that can make a significant difference to your bottom line.

Fancy a coffee?

This article is going to be a bit different from the usual. I want to take a look at one coffee shop chain – in this case Costa Coffee – and examine some of the behavioural biases they use to encourage purchasing. There are more than you might expect and each of them could be utilised by your brand. Let’s get started.

The right price

Before we even step inside, we can spot one of retail’s most long-standing tactics.

Looks like an appealing offer, right? That’s partly because of charm pricing. By setting the price at £4.99 rather than £5, the expense feels much smaller than the 1p difference it actually represents.

There’s a large body of evidence to show that charm pricing works well. In 2023, Eve Sarah Troll at Leuphana University of Lüneburg carried out a review of 69 studies into the practice, spanning 40,541 participants. She found that charm pricing was a robust phenomenon and that across many studies, prices ending in nine were reliably perceived as significantly better value, and led to higher purchase intention.

One explanation for this is the left digit effect — we read left to right — so we focus on the figure we see first, in this case £4. So even though the price is just 1p less than £5, it seems significantly lower than this.

Costa’s sign is using another tactic too, by making it clear that upgrading to a large drink will cost an extra 35p. This taps into a bias known as differential price framing, which describes the phenomenon that higher priced items are more appealing when the differential price is shown rather than the cost (which, in this case, would be £5.34).

Evidence for this comes from a study in 2019 by David Hardisty at the University of British Columbia and his colleagues. They showed 253 participants two subscription options for The New York Times:

• $9.99/month for access to web and app

• $16.99/ month for access to web, app, print, podcast, and crossword

Half the participants saw the headline prices for each option, as above. For the other half, the premium subscription was simply described as “+$7.00/month for access to….” The headline price was not shown — only the differential.

When asked which they would choose, those who’d seen the differential price were more than twice as likely to go for the premium option than those who’d seen the headline price (47% vs 23%). The authors reasoned that this happens because the price difference (+$7.00) is numerically smaller than the total price (i.e. $16.99). Again, we can’t help but focus on the number we see before our eyes, even though the maths needed to work out the actual price is simple.

So, the way Costa describes the upgrade to large coffee makes it far more likely you’ll go for it. Let’s head inside and see what other behavioural devices we notice.

The comfortable middle ground

We’ll start by perusing the menu above the counter.

If you’re going to order a coffee, what size will you pick? I’d probably go for a medium, and I would be in the majority. Because Costa makes good use of a simple bias called extremeness aversion: when faced with three prices we tend to pick the middle one.

Our perceptions of value are always relative, not absolute. We naturally judge prices by comparing them to other, similar things.

Yes, in absolute terms, £4.50 may seem pricey for a medium coffee. But perhaps less so when compared to a large one, at £4.90. In fact, that’s a 40p saving! Plus, it’s just 20p more than a small — so why not?

This is a simple approach for any brand — always showcase a higher-priced premium product to make the middle ground more comfortable. If you can shift the benchmark, you can shift the acceptable price. It seems so obvious that surely everyone does it?

Well, no, not yet. The menu from Café Nero, for example, has just two sizes: small and large.

It’s worth noting that any time a solid behavioural bias has been proven, there are often related observations based on satellite studies that brands can use too. So even if you’re already using extremeness aversion, there may be more you can do.

For example, our inability to judge absolute value leaves us open to another bias called the order effect of anchoring. This describes the observation that the first number we see in a list sets the benchmark against which we make decisions.

In one study by Kwanho Suk from Korea University, Jiheon Lee at Samsung and Donald Lichtenstein from Colorado University, when beers were listed low to high, average customer spend on a pint was $5.78. But when listed high to low, spend was more, at $6.02. That’s a 4% difference — enough to make a significant impact to a business.

Costa doesn’t seem to know about this one. If they did, the highest priced items would be at the top of this drinks menu.

And they’re not alone in missing this trick. The point is that even if the effect of a tiny tweak like this is insignificant, altogether, these nudges can translate into big gains. And they are often free for a brand to execute.

We haven’t even got our drinks yet and we’ve identified three biases in play, plus another that Costa could use. There are, of course, hundreds more ways that brands can put behavioural science to work. Next time you’re out for a coffee, see how many you catch.