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Starbucks Management and Pricing Essay

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Updated: Apr 27th, 2022

Blonde Roasted Light Coffee

For many years, Starbucks spent its time brewing black coffee to its consumers. The company promoted dark roasted coffee with rich and highly caffeinated taste than other coffee varieties found in retail stores, which consumers had become accustomed.

The company has been promoting black coffee for many years, but a significant number of “coffee consumers (nearly 40 percent) insisted that they preferred lightly roasted coffee” (Satran 1).

Starbucks noted that most of these coffee consumers were coffee connoisseurs who had experiences with coffee for many years. This implies that this segment of coffee consumers consisted of opinion leaders, who could possibly influence other coffee consumers. They also held the view that dark roasted coffee lost its flavor during roasting (Satran 1).

The company hoped that by introducing its Blonde Roast, it would gain a significant market share with a potential of over one billion USD in revenues (Satran 1).

When Starbucks introduced the Blonde Roast coffee, it was targeting a segment of coffee consumers who did not prefer dark roasted coffee. Berfield noted that Starbucks executives believed that there were “more than 40 percent of coffee drinkers in the US, or some 54 million potential customers, who preferred a mild roast coffee” (Berfield 1).

The company believed that this segment of coffee consumers did not prefer the original black roasted coffee of Starbucks. Obviously, this was a strategy to fight for the market share and increase competition for customers, who took their light roasted coffee at Dunkin’ Donuts and McDonald’s.

Starbucks has promoted its new Blonde Roast coffee through various ways. First, the company encouraged coffee consumers to taste its Blonde Roast coffee by “offering free samples in several venues for a limited time” (Satran 1). This free offer consisted of the new Vanilla Blonde Roast coffee too. Second, Starbucks used social media, Facebook to promote its new brand.

It offered, a free “tall cups of Blonde and Vanilla Blonde coffee via a new Facebook app for the purchase of eGifts” (Satran 1). Customers had to sign up for the app and get an electronic coupon, which they would then redeem for a free cup of the new Blonde Coffee.

Finally, the company opened strategic pop-up stores in “Boston, New York, Washington D.C., Philadelphia, Chicago, and Dallas that offered free cups of Blonde and Vanilla Blonde coffee, together with coupons for a dollar of packaged beans of the two varieties” (Satran 1).

A Price Premium Coffee Shop

Starbucks continues to dominate the retail coffee business with relatively premium prices yet its coffee products are almost like other coffee products from competitors. The company is a high-priced coffee retail outlet because it offers value, quality, and authority in the retail coffee market.

Over the years, Starbucks has managed to differentiate itself from other coffee shops. Customers can easily note the differences in terms of coffee shop design, music, coffee machine, and Wi-Fi among others. The company uses latest technologies to promote its products and maintain premium prices (O’Farrell 1).

The company started with black roasted coffee and positioned itself as the leader and authority in coffee retailing.

This strategy has allowed Starbucks to charge its coffee at premium prices relative to competitors. On this note, when the company introduces a new coffee product at relatively higher prices, coffee consumers are willing to pay premium prices because they relate Starbucks coffee with quality and as the best coffee brand in the market.

Starbucks believes in high value at slightly high prices. This makes consumers to believe that they receive quality products at Starbucks than at other coffee shops. The company maintains quality processes throughout its supply chain. Moreover, customer service has touted Starbucks as the best coffee shop. These realizations make Starbucks to maintain high prices.

Finally, Starbucks uses a pricing strategy based on relative value. The company provides premium coffee products, as well as low-end coffee products. Although many customers would prefer low priced coffee products, the company believes that highly priced coffee products have distinct advantages in terms of quality relative to other products in the market.

Starbucks’ growth strategy in India

Coffee consumption in India has surged significantly. India is a part of the BRIC countries (Brazil, Russia, India, and China) with high growth potential for Starbucks (Loeb 1). This is a long-term growth strategy of Starbucks in emerging economies where it hopes to take the advantage of the huge growing middle class (Allison 1). However, Starbucks’ entry into India had its challenges.

First, the company took into account the local taste of Indian coffee consumers. Starbucks had to localize its coffee to account for local tastes, which no Western brand has been able to escape” (Parameswran 1). For instance, when McDonald’s and Taco Bell entered India, they had to adapt some of their menus to account for the local market.

In fact, they also adjusted prices downwards considerably. In addition, many coffee outlets in India also offer food items alongside coffee in order to draw traffic. On this note, the company has customized its coffee products, practices, and adjusted its prices to meet prevailing Indian market conditions and introduce some tea products (Allison 1).

Starbuck did not face fierce competition in India as expected. In fact, long-term coffee retailers, such as Cafe Coffee Day and Costa Coffee, had to rethinking their strategies. However, these competitors believe that coffee market in India is huge and has high potential to grow.

Starbuck had to improve on socialization and strategize the coffee shop as a meeting place. The company exploited its high quality products, excellent customer service, relaxed ambiance, and other competitive advantages to attract many coffee consumers.

Indian culture is not about materialism or consumerism, which is common in the US and other western countries (Allison 1). Starbuck realized that it could not transform that culture. Hence, the company introduced lower prices as a “part of a long-term plan to operate stores beyond a handful of the major urban area” (Allison 1). This also gave the company an advantage to overcome high price fears among its potential customers.

Happy employees at Starbucks actually lead to greater sales

Since its inception, Starbucks management has focused on making its employees happy by paying higher wages than others have paid and providing benefits, which employees cannot find in other coffee shops or retail stores. This was a strategy of attracting well-educated employees, who could communicate the company’s passion for coffee to its customers (Hartley 29).

Starbucks has used this concept to create happy employees who love their jobs and would like to grow with the company as Jinlong Wang, the President of Starbucks, Asia-Pacific notes (Veach 1). In turn, these employees communicate the company’s passion for coffee through superior customer service. Hence, Starbucks has managed to keep loyal consumers who generate high volumes of sales.

Works Cited

Allison, Melissa. Starbucks brews following in India where tea is supreme. 2013. Web.

Berfield, Susan. No Jokes, Please: Starbucks Says Blonde Is Catching On. 2013. Web.

Hartley, Bob. Management Mistakes and Successes, 10th Ed. New York: Wiley, 2011. Print.

Loeb, Walter. Starbucks: Global Coffee Giant Has New Growth Plans. 2013. Web.

O’Farrell, Renee. Starbucks Pricing Strategy. Web.

Parameswran, Prashanth. India is Starbucks’ cup of tea. 2011. Web.

Satran, Joe. . 2013. Web.

Veach, Emily. Good Brew: Happy Employees, Local Flair. 2012. Web.

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