Starbucks uses several pricing strategies depending on the market. [1] In new international markets, it uses market-oriented pricing, setting prices based on research of local competitors. [2] Domestically, it generally prices higher than competitors like Dunkin' Donuts, positioning itself as a premium brand offering an "experience." [3] It also employs techniques like price skimming, where new products are priced high to gain profit, and second-degree price discrimination, offering volume discounts to large buyers.

1. Starbucks
Pricing Strategy

2. Question
Q : Price as marketing strategy?
A : Did not emphasize PRICE as Competitive
Advantage
Q : Compare with competitor?
A : No - price setter

4. INTERNATIONAL APPROACH
Business Today, March 4,2012 : Starbucks enter India
MARKET-ORIENTED PRICING
Setting a price based upon analysis and research compiled from the
target market. This means that marketers will set prices depending on the
results from the research. For instance if the competitors are pricing their
products at a lower price, then it's up to them to either price their goods
at an above price or below, depending on what the company wants to
achieve

5. CALIFORNIA, 2008
HIGHER THAN COMPETITOR

6. HIGHER THAN COMPETITOR

7. LONDON, 2012
HIGHER THAN COMPETITOR

8. http://www.humuch.com/prices/Starbucks-Cappuccino-grande/______/102

9. COMPARE TO PREMIUM COFFEE CHAINS
Source : Reuters, Jan 3 2012

10. PRICING SUMMARY
• Prices range from USD2.00-USD8.00 for drinks
For 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 expensive
For quick-service restaurants
• Starbucks was more expensive. Dunkin’ Donuts’ 20-ounce latte is an
average of 13% cheaper

11. LATEST PRICE INCREASE JAN 2012
(price skimming) -
Source : Reuters, Jan 3 2012

12. WAY FORWARD STARBUCKS PRICING STRATEGY
Source : Reuters, Jan 3 2012

13. 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 to
break even. Selling a product at a high price, sacrificing high sales
to gain a high profit is therefore "skimming" the market
SECOND DEGREE PRICE DISCRIMINATION
price 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

14. Why the High Prices?
• Increase pricing in Fuel/Energy
• Fair-trade Movement
• Starbucks Experience

15. 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)

18. 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

19. EXPERIENCE
• Premium
Products
• Prominent
Image
• Friendly
Environment

20. 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