Price:
Found in 1871, Starbucks has formed their brand as a premium coffee chain. Creating brand equity
by turning a daily beverage into a premium product and providing consumers with superior
experience of service, Starbucks has become one of the leaders in the coffee market. Rather than
competing with other fast-growing coffee chains that offer cheaper products, they use the premium
pricing strategy taking advantage of the behavioral tendency of people to purchase more expensive
products on the basis of the perceived correlation between high price and high value.
Starbucks is successful in building a perception of an affordable luxury beverage in their customer
mind and creating brand awareness. Therefore, their target customers are people from the mid to
high-income customers who do not mind paying a little higher if they are offered great product
quality and good service. Starbucks has made a name for themselves with their high service. The
price paid is not only for the product but partly also for the service and the environment at
Starbucks. In return, customers receive what they pay for, premium beverages, a wide range of food,
high service or enjoyable space. That can be explained why Starbucks has a huge amount of hardcore loyal customers.
With Starbucks, the price increases throughout the company’s history. Rather than trying to
compete with cheaper chains by decreasing the price, they use price hikes to separate itself from the
pack and reinforce the high-end specialty image and products. Starbucks says it's in line with
industry practices and inflation. A spokesperson for the brand told NBC News BETTER in an email:
“Evaluating prices periodically allows us to balance the need to run our business profitably while
continuing to provide value to our loyal customers and to attract new customers”
(https://www.nbcnews.com/better, June 11, 2018). Because of the customers' loyalty, the change in
price does not affect the consumption of Starbucks. The company still maintains a stable demand
for coffee. In addition, price hikes are also targeted to be applied to certain regions (mostly highincome urban areas, specific drinks and sizer instead of the whole lot. Customers are persuaded to
buy a bigger size to get more drinks at a cheaper price in comparison with small size. Therefore,
Starbuck still can enjoy the slight rise of profit margin from these customers.
However, the premium brand image with the high price does not work in some countries that coffee
has become one part of their culture. In these countries, the local coffee chains prevail in location,
people taste and price. For example, in Vietnam, when the first store of Starbucks was opened in Ho
Chi Minh City, one of the largest and busiest cities, it was expected to succeed brilliantly.
Nevertheless, Starbucks seemed to fail to tap into this potentially lucrative. It is said that the price
of Starbucks seems not to suit customers’ wallet due to the standard salary of Vietnamese people
who refer to other stores offering international products at a suitable price.
http://panmore.com/starbucks-coffee-marketing-mix-4ps-analysis
https://www.ukessays.com/essays/business/how-does-starbucks-create-brand-equity.php
https://news.starbucks.com/news/price-increases-2016
https://english.vov.vn/trade/starbucks-dominates-se-asia-but-not-in-vietnam-324669.vov
https://www.cheshnotes.com/2017/03/starbucks-marketing-mix