The Secrets of Starbucks’ Success : 4- You Get What You Pay For

One of the major critiques that has always circulated around Starbucks is that it is overpriced. To be fair, Starbucks does have some of the most expensive prices for coffee on the market, particularly its high-end,Starbucks original drinks, like Frappuccino’s. However, the company also has mid-range pricing and a variety of sizes to accommodate more price- sensitive customers. Many critics have pointed towards McDonalds and Dunkin Donuts, at least in American markets, that are stealing many of the more frugal consumers from Starbucks’ ranks, yet Starbucks has remained steadfast in its profit margins and pricing for years. Furthermore, with the exception of the occasional seasonal drink release or a very limited time offer, Starbucks doesn’t offer sales or special deals, nor do they have “value menus” or “saver specials”. There is a very simple reason for this – Starbucks is a luxury brand.

Despite the earlier sections of this book that discussed Starbucks’ ability to fit into any situation, adapt to different cultures, blend into communities, and appeal to a vast range of consumers, there is no denying that Starbucks has established itself as a luxury brand in the world of coffee. Just as with luxury brands of cars, purses, and watches, they offerhigh-quality, consistent, recognizable, and elite products that cost more than competitors’ products. There are countless theories about luxury culture and competition, as well as why it exists in consumer culture. Basically, having a luxury class of products helps to fill out the market, as many consumers enjoy having “the best”. While millions of people might go to McDonalds for a daily cup of coffee for less than $1, there are millions of other people who actually enjoy spending $4 for a fancier cup of coffee in a recognizable cup, in addition to knowing that the coffee will be of the highest quality. You truly do get what you pay for, and Starbucks understands that it has a large swath of loyal customers who want to patronize a luxury brand every morning.

By offering sales, discounts, special offers, or punch cards (1 free coffee after every ten!), Starbucks would be cheapening their brand reputation, which would make it far easier for competitors to take over more of their market share. Starbucks is confident that they can maintain their client base and quality level, despite their higher prices, because they are selling more than a cup of coffee. They are selling an experience, a comfortable space, a worktop, a community meeting point, and a sense of familiarity. In essence, Starbucks is selling a lifestyle, and their $15 billion in revenue clearly shows that there are plenty of people willing to pony up some extra money to get a slice of that life.

Now, with all that being said, Starbucks is still not a stubborn or foolish brand, and given specific economic indicators, they are willing to make a change if necessary. Since 2013, Starbucks has done something that has surprised and confused some competitors and market analysts, but it has clearly worked for the company, which continues to enjoy record profits and growth. Their least expensive coffee drinks are gradually dropping in price, while their more complex, Starbucks-original drinks are actually increasing in price. While this seems counterproductive to attracting consumers in a struggling economy, this is actually Starbucks’ newest strategy to increase their market dominance. By maintaining the exclusivity and luxury level of their specialty drinks, Starbucks doesn’t risk becoming associated with discount brands, coupons, or mid-levelretailers. However, in an effort to protect their younger client base and more frugal fans, they are offering some lower-priced options, particularly on tea, iced drinks, and other products that aren’t directly associated with coffee itself.

The company is able to maintain its image as a luxury coffee brand, and is counting on customer loyalty to remain strong as they move into this next chapter of their history. The company has been stretching itself considerably in recent years with their massive Asian-Pacific expansions, company acquisitions, retail space renovations, and innovative new café launches; the last thing they want to do is see a fall-off in customer loyalty. The key demographic to maintaining their luxury brand aura is the high-endcoffee drinkers, but the foundation of their company may be shifting to quantity over quality. Targeting massive international markets and spreading their reach seems to suggest that Starbucks is becoming more flexible within their own identity, realizing that to compete with everyone in the beverage market, they will need to balance a number of “corporate personalities”. Attempting to wear so many different hats in so many different markets is undoubtedly a challenge, but the leadership, tradition, vision, loyalty, and reputation of Starbucks will surely carry them through.

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