#Pricing strategy based on competition plus

Their branding is pretty big, and they have placed all of their stores in a way that makes sense for the people they want to reach. Starbucks has been able to keep making money because it has kept its services and menu the same. For example, Starbucks might charge $0.60 for a small coffee in Seattle, $0.70 for a small coffee in New York City, and $0.80 for a small coffee in Los Angeles. Starbucks offers different prices in different geographical locations. Once more, this type of pricing can be effectively applied by Starbucks because they have a lot of control over their costs. For example, Starbucks might charge $0.60 for a small coffee, $0.70 for a medium coffee, and $0.80 for a large coffee. Starbuck offers different prices for different products in the same product line. Again, this type of pricing is often used by companies with a lot of control over their costs. This is a great way of increasing sales.įor example, Starbucks might offer a small coffee and a muffin for $0.80. Starbucks also uses this strategy where two or three items are bundled and sold as a combo meal. Its promotional strategy has undoubtedly boosted its brand’s value while lowering operational costs. Because this item is only available in the fall, the extra expense is eliminated because pumpkin is commonly accessible throughout the fall. The pumpkin spices are the only thing missing.

These seasonal goods increase the worth of their brand.Īnd these items do not need additional costs since they already have the machinery to produce a latte. They only provide seasonal staples like pumpkin spiced lattes to their customers throughout the fall. Seasonal products are also added to the menu. During the Christmas season, for example, they usually provide unique beverages. Starbucks offers discounts or special pricing on certain products or services. As the cost-plus pricing strategy, menu-based pricing is often used by companies with a lot of control over their costs. Starbucks offers different prices for different menu items. Companies often use this type of pricing in a highly competitive market. For example, if all the other coffee shops in town charge $0.50 for a cup of coffee, Starbucks might charge $0.60 to be perceived as a premium option. Starbucks sets its prices based on what the competition is charging. This type of value-based pricing is often used by companies with a unique product or service. For example, Starbucks might charge $0.60 for a cup of coffee because they know that customers will be willing to pay that price for the taste and experience. Starbuck sets its prices based on the perceived value of the product. So, Starbucks does not change its prices based on how much its raw materials cost. Even if Starbucks raises the price of their Americano from $2.25 to $3, people will still buy it because of the brand. Starbucks’ customers have given the brand a high value. Instead, it is based only on what consumers want.

This shows that their pricing strategy has nothing to do with the supply of raw materials. They raise the prices of some things based on how much people want them.įor example, when coffee beans went down, many coffee shops lowered their prices to bring in more customers.īut Starbucks’ prices had not gone down. Starbucks also sets prices based on what people want. This type of pricing is often used by companies with a lot of control over their costs.

#Pricing strategy based on competition plus

Starbucks uses this strategy by setting its prices based on the cost of making the product plus the desired profit margin.įor example, if it costs Starbucks $0.50 to make a cup of coffee and they want to earn a 20% profit, they would charge $0.60 per cup. Here are a few of the ways that Starbucks sets its prices. They pay a lot of attention to their marketing efforts, especially around events and holidays. But their prices and brands are geared toward their customers.Įven though their products aren’t cheap, their brand identity is very beautiful, which helps to boost sales. When it comes to branding and marketing, they take a premium approach. When it comes to how it sets prices, Starbucks is brilliant. What are the key lessons of Starbucks’ pricing strategy?.Why is Starbucks Pricing Strategy So Effective?.What Pricing Strategy Does Starbuck Use?.