Starbucks Plans to Beat the Competition with Product Pricing Strategy

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Here is some good news for coffee enthusiasts: Starbucks will continue to beat the competition with an updated product pricing strategy. Since May 10, Starbucks lowered their prices on bagged coffee by 10 percent. The 12-ounce bag of coffee dropped from $9.99 to $8.99. This price modification is for the U.S. market only. And although it doesn’t include single-serve coffee packets, it’s expected to be an aggressive move to beat the competition. (For more ways to beat the competition, click here.)

America is known for its “melting pot culture,” yet some will argue it should be called a coffee pot culture instead. It may seem strange, but most Americans can’t possibly say ‘no’ to a cup of coffee as 54% of all them drink at least one cup of coffee a day. 

Using a defensive product pricing strategy is common among big companies, but what triggered the coffee industry leader to make this strategic decision? Starbucks spokesman John Olson told Bloomberg News that the price cut “allow us to both enhance the value that we’re providing our existing packaged-coffee customers, and hopefully increase the frequency in which they purchase Starbucks and Seattle’s Best coffee, as well as attract new customers.”

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This strategic decision also helps them beat the competition, including Dunkin’ Donuts, Folgers and Maxwell. But how does their product pricing strategy fit into Starbuck’s plan for long-term success?

While they may be a leader in the coffee industry and control several times more market share than any of their competitors, Starbucks knows that they’re still vulnerable. This product pricing strategy decision to lower prices comes after Maxwell House, Folgers, Dunkin’ Donuts and Millstone coffee dropped their prices on packaged coffee earlier this year. Starbucks realizes that at-home coffee brewing, along with the popularity of the Keurig system, is only growing stronger. They needed to reevaluate their pricing strategy if they want to continue to beat the competition and align with consumer behaviors.

Like any company, Starbucks relied on market and competitive intelligence to determine their product pricing strategy. Examining competitors’ current prices and when they changed, as well as sharing this information quickly, helped Starbucks make a decision shortly after competitors lowered their prices this past February. Without using competitive intelligence software to monitor pricing changes and market trends, companies like Starbucks wouldn’t be able to capture or distribute this data to decision makers when it mattered. In the end, Starbucks quickly responded to their competitors’ moves and made a proactive decision.

There are many ways to implement data management and competitive intelligence software to a company’s department functions. To learn how to gain a competitive advantage using business intelligence and competitor monitoring software in your department, download clearCi’s helpful competitive guides.

What do you think? How else can Starbucks continue to be a market leader?

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Comments: 2

  • Joe – I think you make a great point here, if companies are not proactively monitoring the competitive landscape they are likely to be surprised by competitor moves such as changes in pricing strategies or new products. I agree that a good competitive intelligence technology platform is beneficial in providing the intelligence needed to make good business decisions. I would also suggest that companies can take it one step further; leveraging PRIMARY research, companies can actually gain insight into what competitors are planning to do, weeks, months and even years in advance. If they combine this with a good tech platform they are definitely setting themselves up for success.

    • Hi Heath, thanks for your comment!

      I agree, primary research provides a deeper insight that should be paired with competitive intelligence software to collate all information found.

      If you’re interested in reading more about pricing strategies you can reference our blog article “What Product Marketing Teams Must Do to Beat the Competition”.

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