Starbucks Pricing Strategy Essay

Starbucks was conscious of China’s economic and financial challenges and the fact that the average Chinese earns $500 a month and drinks just three cups of coffee a year was a major challenge to overcome. How many $4 cups of coffee do they actually want or can they afford? The Chinese are among the toughest lot in the world to convince on the price-value relationship. They are very cost-conscious and look for value in whatever they pay for.

Changes in demand determines how much Starbucks should supply in the market. Competitors pricing strategies, customers income, economic conditions and advertising will cause the demand curve either to shift outwards or inwards. So Starbucks should always be ready to face these challenges and set its prices and supply according to market conditions. If Starbucks intends to focus only high income group then the demand for its coffee in middle and lower income group will be very less. But if Starbucks set prices which attract all the income groups then its demand will become elastic and slight change in price will cause a greater change in quantity

Legal Factor: It includes health and safety consideration, consumer law, trade law etc. Starbucks always ensure that it doesn’t violate trade law while importing coffee from others countries like Tanzania, Kenya etc (PEST analysis of Starbucks).

However, Starbucks also need to learn about the culture among the country. Starbucks is International product and well known. Some of the country most prefers tea compare than coffee. That means , that is one of the challenges for Starbucks to come out with variety of product.

On the other hand, Starbucks pricing strategy is based on, differentiation, quality and authority value. Starbucks deliver high value to the customer through buying quality coffee beans, assuring their staff to be well trained, and create an environment for customer to enjoy coffee. Although the price of a cup of coffee in Starbucks is higher than other coffee shop, but customers are ready to pay more for the coffee and luxurious image with all the facilities inside the store.

I think Starbucks certainly is a force for globalization, and already is, with presence not just in North America but Canada, Japan, Britain, Thailand, etc and not just because it offers a product (coffee) that is known and sold around the world very well, so it is easier to reach customers because people are familiar with drinking coffee, as a part of the daily basis, and plus the idea of a coffeehouse, a place to go and spend some time with friends, or studying, or even for business meetings is also a hit in a lot of cultures, these are regular activities for a good amount of people, so the market is there, the coffee culture is already there too, Starbucks will have to analyze other type of situations like competitors, or purchasing power of the specific country to determine if

McDonald’s, in addition to several other fast food vendors like Burger King, Dunkin’ Donuts, Panera Bread and independent coffee houses remain Starbuck’s toughest competition (Adamy). McDonald’s began introducing its espresso beverage products in 2001, and offers its product at a price between two and three dollars to compete with Starbucks between three and four dollars a cup coffee (Adamy). Similarly, Dunkin’ Donuts has recently implemented a plan to expand nationally (Adamy). On average, Dunkin’ Donuts coffee products cost approximately 20 percent less than Starbucks’ (Ball and Leung). In response, Starbucks has announced recent

A good coffee shop requires a varied menu to attract customers. No two people have the exact same taste in coffee, so a coffee shop needs to appeal to everyone’s tastes to attract enough business. Starbucks is certainly varied, with over 225 items on its menu ranging from plain, hot black coffee to cold, sweet frappucinos. These countless kinds of

Third reason is the developmental speed of China coffee market. Chinese marketplace is a low risk marketplace. Meanwhile, Chinese coffee market is growing at a speed of 30% per year, so the capacity of this market is very large. Coffee entered in China at 100 year ago, there was no cultural conflict between coffee and native drink. Coffee as an impact of a foreign culture and an elegant life style will become more and more popular in high-income people and young people. Using the data except from 2011-2015 status and development trend of China's coffee market research report, China's current annual per capita consumption of coffee is only 3 cups, comparing with the figure in the United States and other developed countries is hundreds of cups. The instant coffee occupies more than 70 percent in the whole coffee market. Nestle coffee sales amount in china is around 1.3 billion dollars of 2011, and it was stably be the largest share in china coffee market which occupy almost 50 percent.

China is a fast-changing market and it has paid off for Starbucks. The middle class citizens of mainland China consider Starbucks coffee a luxury. The customers are willing to pay the premium price just for the customer experience. The success of this strategy is due in part to the in-store training and people-development model used in China. This way, Starbucks ensures its brand positioning is consistent with customers’ expectancy of having the Starbucks experience that is provided in the United States.

Making their chain stores very traditional and fitting with the local culture. Surprisingly Starbucks charges as much as 50% more for some of its products in China than in the U.S., the U.K. and India, but yet it is still a huge success, this is because the business catered well for the needs and adapted. Carrying a Starbucks cup is seen as a status symbol, a way to demonstrate sophistication and the capability to afford a personal luxury for the up-and-coming middle class in China. This links into the brand recognition that Starbucks has created for itself and shows how they carefully targeted their products at the new middle class, it is estimated that it's more than 300 million, already larger than the entire population of the United States. This middle class is about 25% of the total Chinese population and as Starbucks has such a recognisable brand people are more liable to visit the store.

In some way shape or form every coffee shop is the same. They all offer coffee and treats to enjoy while having a fresh brewed cup of coffee. What some don’t offer that Starbucks does are many perks for

Starbucks follows a premium pricing strategy. This pricing strategy takes advantage of the behavioral pattern of people to purchase more expensive products on the basis of the perceived correlation between high price and high value. The company’s coffee products are more expensive than most competing products, such as McDonald’s Premium Roast. Through this pricing strategy, the company maintains its high-end specialty image (Greenspan, 2015).

Starbucks is competing in an industry where marketing principles has to follow the differentiator strategy or they will lose market share. The company goal is to create high value for its customers, or the customers will simply find another place to spend their money. Starbucks marketing principles are the basis of the company's competitive advantage within the coffee industry. Starbucks products are associated with high quality, and the company dedicates itself to producing high quality products. Because of this association with high quality, Starbucks has been able to charge a higher price or premium for its products. As long as the company can protect its reputation for high quality and strong values, it will be able to maintain its premium prices.

Starbucks extends their coffee experience to everyone: kids, teenagers and adults. Part of their success comes from their ability to create new products that fit the culture of the country. In Japan, for instance, Starbucks launched green tea lattes, which later became popular in other countries (Allison). Starbucks is well established in countries like Canada, Japan, and the United Kingdom. In the US alone, Starbucks sells 4 million cups of coffee per day (Horovitz). Their products and services have transformed the way customers view coffee. Changing the way customers order, Starbucks makes it very chic to purchase custom drinks. Starbucks is like no other coffee shop: the dimmed lights