Starbuck Pricing Strategy

In: Business and Management

Submitted By bank159
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What pricing strategies is the seller using? (rule of thumb pricing, price discrimination, two-part pricing, etc.?) Starbucks positions itself as a specialty premium coffee retailer and has a strong and well-known brand image. As Starbucks is a premium coffee brand, its target market has always been middle and upper class with the disposable income needed to frequent the coffeehouse. One of the main reasons Starbucks has been so successful is because they focus on quality and experience rather than price. The Starbucks’ image and experience has been one of the key elements to their success. Starbucks has succeeded in giving coffee a new cachet and established themselves as a price setter through product differentiation. Consumers have been willing to pay for what they consider an elite lifestyle and many believe that the higher the price, the better the quality. Although premium brand coffee makers have some market power to set prices above the generic value brands, Starbucks operates under monopolistic completion where there are many small firms that sell similar products, therefore they do not exert complete market power in the industry.
Starbucks is more than a high price coffee shops, Starbucks offers a combination of quality, authority and relative value. Quality: Starbucks sets its prices on a simple idea: high value at moderate cost. Quality is key. Starbucks has to maintain strict quality controls in its coffee sourcing as well as in its customer service and peripheral products to justify its costs. Differentiation: Starbucks also spends a lot of time and energy differentiating itself from the competition For example, Starbucks was one of the first companies to adopt location-based promotions and mobile payments.…...

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