Question
When deciding on the most suitable pricing options, several factors should be considered. These include the cost of production, the perceived value of the product or service, the target audience and their willingness to pay, the pricing strategies of competitors, and market conditions. It's also important to consider the company's overall business goals and how the pricing strategy aligns with them. For instance, a company may choose a higher price point to position their product as premium or choose a lower price point to penetrate a competitive market.
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The company also applies price increases to certain drinks and sizes rather than the whole product line. "By raising the price of the tall size brewed coffee exclusively, Starbucks is able to capture consumer surplus from the customers who find more value in upgrading to grande after witnessing the price of a small drip with tax climb over the $2 mark. By versioning the product in this way, the company can enjoy a slightly higher margin from these customers who were persuaded by the price hike to purchase larger sizes," Price Intelligently experts say.
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