Question

Identify a product that you think you have paid either too little for or too much for. Identify the pricing strategy you think the company is trying to implement (based on the assigned reading) and evaluate the effectiveness of the strategy. Use at least two sources to justify your answer. You should also use outside research (at least two sources), evaluate the effectiveness of the strategy, and address the competitors response to the pricing decision.

Answer 1

Starbucks coffee, sounds like reminded a fling of its taste . Well i was having "Starbucks Doubleshot on Ice", in midst of talk we just went through its menu , and realised they has been a slight change in it (not in the number of things they offer but on the prices they charge) wonder is that its price was different in another outlet just the other day of same week.

On a little research done, found that Company has raised its bewerage prices just by 1% over specific places .We may fail to notice the price change but it has increased companies net income over 25% of that very quarter in the past .

Effectiveness of Strategies:

Starbucks is a master of employing value based pricing to maximize profits, and they use research and customer analysis to formulate targeted price increases that capture the greatest amount consumers are willing to pay without driving them off. Starbucks claims the price increase is due to rising labor and non-coffee commodity costs, but with the significantly lower coffee costs already improving their profit margins . As said before, it only tallakes a 1% increase in prices to raise profits by an average of 11%.

It also uses Skimming pricing to enter new markets, it charges premium prices so that fewer sales are enough to breakeven.

It does Fair trade, allows farmers to increase income and it reinvests in farmers to plan for future. LIkewise it has a very high brand value.

Product Versioning & Price Communication -They also apply price increases to specific drinks and sizes rather than the whole lot. By raising the price of the tall size brewed coffee exclusively, The price hike might be based on an analysis of the customer’s willingness to pay.

Sources :

https://www.priceintelligently.com/blog/bid/184451/how-starbucks-uses-pricing-strategy-for-profit-maximization

https://www.goodmanlantern.com/blog/2015/03/18/brand-focus-starbucks-premium-pricing-strategy

Competitors Response :

Starbucks major competitors can be seen as below

https://www.marketing91.com/starbucks-competitors

1.Costa Coffee : This company reaches to its customers through its advertising slogan ‘a coffee for every mile’ whose aim is to have as many coffee shops as possible. Costa Coffee is also probably the only Starbucks Competitors on this list which exclusively deals and promotes its coffee. It has expanded stores to as many as possible , also invested millions of pounds.

2.Café Coffee Day: It is another global company ,CCD is now a world brand. The company is well known for vertically cutting down on costs; this is from owning Arabica coffee plantations, making furniture for its outlets and also making coffee machines. Even though it started in Asia, it has expanded to some countries in Africa, Czech Republic, and Nepal. Its initial marketing strategy was the change of original Logo with the new Logo showcasing the chain as a ‘place to hold talks’ leading to total revamp of interiors and addition of lounges.

Starbucks Indirect competitors would include KFC and Mc Donalds.