The profit-maximizing tactics Starbucks implements in its pricing strategy are vital components of a process anyone can use.
Here are some of the takeaways you can apply to your own business:
1. Study your customer personas:
Starbucks understands that the majority of their customer base is fairly insensitive to price, and uses small price increases that everyday consumers barely notice to boost margins.
Quantifying your buyer personas and the demand for your product or service will help you choose a price that captures the maximum amount your customers are willing to pay.
2. Justify the exchange rate for your product:
Communicating price increases effectively is crucial to a successful price hike, and managing customer perception is a key part of the Starbucks strategy.
Support your price increases using changes in the market such as higher commodity costs and ease the pain on the consumer by finding an attractive way to publicize the new prices.
3. Use product differentiation to put your company in the lead:
You can justify maximizing your profits using the fairest of reasons, but if the customers don’t value your service the way they value a delicious cup of coffee, then a decrease in demand is inevitable.
Build service or product that consumers can’t live without, and you’ll be able to implement price hikes without turning off your customers.
4. Don’t increase the prices of the products with the highest margins:
Raise the prices of the products surrounding them.
Price hikes for your lower-margin products can entice customers to upgrade to more expensive options, especially with respect to products and services that are tiered based on time usage and features. The goal is to use the price increases to guide the customer towards your most profitable product.
Also, we have an article about Starbucks which you can check out here:
