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Starbucks Pricing Strategy

Posted in NonTech at Monday, 28 August 2006 00:34 W. Europe Daylight Time

I've found an interesting article about the pricing strategy of Starbucks and similar brands. Simply put, they set the prices for their small-amount products like a 200 ml coffee so high that it appears to make sense buying a middle-sized one for a few more cents. Other products of the cheaper category are simply not advertised.

The difficulty is that if some of your products are cheap, you may lose money from customers who would willingly have paid more. So, businesses try to discourage their more lavish customers from trading down by making their cheap products look or sound unattractive, or, in the case of Starbucks, making the cheap product invisible.

The article explains that this pricing strategy is actually not a recent invention:

The practice is hundreds of years old. The French economist Emile Dupuit wrote about the early days of the railways, when third-class carriages were built without roofs, even though roofs were cheap: "What the company is trying to do is prevent the passengers who can pay the second-class fare from traveling third class; it hits the poor, not because it wants to hurt them, but to frighten the rich."

Seems like I've been hit by the marketing guys too, but now I know their evil plans.

Thursday, 23 April 2009 06:39:36 (W. Europe Daylight Time, UTC+02:00)
Wednesday, 23 December 2009 10:57:42 (W. Europe Standard Time, UTC+01:00)
I wonder if there is any chance to get any more information about the original article (pricing strategy) - name, author, date, etc... I wanna read it by myself. thanks.
Wednesday, 23 December 2009 11:09:40 (W. Europe Standard Time, UTC+01:00)
Duygu, please see the first link in the article above.
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