aerius

Wake Up and Smell the Coffee: Starbucks Still Doesn't Get It

While your article is interesting it contradicts itself. Why should you pay $5 for a coup of coffee when you can get it for cheaper? Why are McDonald premium coffee sales up 20% when they can pay less for the non-premium version? Does the 20% support your comment that "increasingly other folks" are not willing to pay more for coffee?

Since the inception of starbucks their strategy has been to provide a premium product with the associated perception (lifestyle/culture). Business 101, you create a competitive advantage through cost or differentiation; they chose the latter. While I agree that raising prices may reduce store traffic, I think it’s a bit more premature to declare that it is the losing strategy. In my opinion their problems is that competitors are branching out into their niche and they are doing a poor job of defending it. Why are people going to McD instead of Starbucks? Maybe the taste isn’t different enough, the brand isn’t powerful enough, the “random crap” that they sell is diluting the image, whatever. If Mercedes or BMW cut their prices today would that increase the number of people buying them? Probably, but it doesn’t mean that they are making more money or that investors are better off.