Starbucks price strategy

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This is my assigment for International Business subject. Tq

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Starbucks price strategy

  1. 1. StarbucksPricing Strategy
  2. 2. QuestionQ : Price as marketing strategy?A : Did not emphasize PRICE as Competitive AdvantageQ : Compare with competitor?A : No - price setter
  3. 3. INTERNATIONAL APPROACHBusiness Today, March 4,2012 : Starbucks enter IndiaMARKET-ORIENTED PRICINGSetting a price based upon analysis and research compiled from thetarget market. This means that marketers will set prices depending on theresults from the research. For instance if the competitors are pricing theirproducts at a lower price, then its up to them to either price their goodsat an above price or below, depending on what the company wants toachieve
  4. 4. CALIFORNIA, 2008HIGHER THAN COMPETITOR
  5. 5. HIGHER THAN COMPETITOR
  6. 6. LONDON, 2012HIGHER THAN COMPETITOR
  7. 7. http://www.humuch.com/prices/Starbucks-Cappuccino-grande/______/102
  8. 8. COMPARE TO PREMIUM COFFEE CHAINS Source : Reuters, Jan 3 2012
  9. 9. PRICING SUMMARY• Prices range from USD2.00-USD8.00 for drinksFor Premium outlet :• lower than its rivals, although not by much• Starbucks regular coffee was 4% less expensive and its iced blended drinks were as much as 30% less expensiveFor quick-service restaurants• Starbucks was more expensive. Dunkin’ Donuts’ 20-ounce latte is an average of 13% cheaper
  10. 10. LATEST PRICE INCREASE JAN 2012 (price skimming) - Source : Reuters, Jan 3 2012
  11. 11. WAY FORWARD STARBUCKS PRICING STRATEGY Source : Reuters, Jan 3 2012
  12. 12. PRICING STRATEGY MARKET ORIENTED PRICING (enter new market) PRICE SKIMMING - Premium Price for Premium Product goods are sold at higher prices so that fewer sales are needed tobreak even. Selling a product at a high price, sacrificing high sales to gain a high profit is therefore "skimming" the marketSECOND DEGREE PRICE DISCRIMINATIONprice varies according to quantity demanded. Larger quantities are available at a lower unit price. This is particularly widespread in sales to industrial customers, where bulk buyers enjoy higher discounts
  13. 13. Why the High Prices?• Increase pricing in Fuel/Energy• Fair-trade Movement• Starbucks Experience
  14. 14. FAIR TRADE WHY THE FAIR TRADE MOVEMENT? Help ensure that farmers receive an equitable price for their coffee and strengthen their farms for the future. -HOW IT WORKS? -Long term contracts (hedging) -Affordable credit for farmers -Direct purchasing -Investing in social projects in coffee communities Via Coffee And Farmer Equity (CAFÉ)
  15. 15. Fair Trade & the “Starbucks Effect”• Paying premium prices stimulates production of high quality coffee. – Allows farmers to increase income and reinvest in their farms and plan for the future. – Promotes steady and sustainable growth in a market with price fluctuations. – Upholds Starbucks commitment to purchase high- quality product in a socially responsible manner
  16. 16. EXPERIENCE• Premium Products• Prominent Image• Friendly Environment
  17. 17. Price-Quality Strategies• Philip Kotler identified 9 price-quality strategies High Price Low Price High Quality High Super Premium Value Value Over Mid Good Charging Value Value False Rip-off Economy Economy Low Quality 20

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