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Several factors influence pricing decisions in a business. These include the cost of production, market demand, competition, and the perceived value of the product or service. For instance, a company like Starbucks can increase prices due to the premium perception of its brand and the fact that its most loyal customers are not price sensitive. Other factors can include the economic environment, government regulations, and the company's overall pricing strategy and objectives.
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Instead of trying to compete with more affordable chains, such as Dunkin, Starbucks uses price hikes to distinct its brand from others and reinforce the premium perception of it. Considering Starbucks' most loyal customers are not price sensitive, Starbucks coffee drinks remain in demand and a slight increase in price actually has a huge positive impact on the company's margins without affecting the demand.
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Take the most advantageous pricing approach to increase profitability of your organization. Use our Pricing Strategies presentation to outline factors...
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