Starbuck’s Use of Pricing Power to Influence Consumer Behavior Whitney S. Boozer North Greenville University

History Established on March 31, 1971 in Seattle, WA Cofounders: Gordon Bowker & Terry Heckler First CEO: Howard Schultz More than 20,891 stores across 62 countries Variety of over 30 blends

Howard Schultz’s Vision Redesign European café into an American coffee shop Create a balance of home & work environment Founded the term “service design”

Starbucks’ 2 Main Competitors

Market Demand Starbucks’ consumers don’t hesitate to pay a few more bucks for a delicious, high-quality cup of coffee Customers want more which leads to expansion of stores.

Technological Innovations Free high-speed Wi-Fi in all stores Starbucks App (free) Partnership with Spotify & Lyft Upstanders- web-series created Starbucks Rewards Program

Price Elasticity of Demand Starbucks’ increases prices by 1% to pay for labor, rent, and other business costs Prices on beverages increase 5-20 cents to help balance out business costs Consumer volume still continues to increase

Macroeconomic Factors Political factors: Sourcing of raw materials, regulatory pressures, employment laws & tax policies Socio-cultural factors: adapting to target consumers over time Legal factors: careful not to violate laws or health regulations

Cost Structure Cost driver: price spend per pound on coffee beans Massive market capitalization Strong operating cash flows High capital expenditures

Recommendations Consider selling wine Add a top-level to stores for a mini-library Hand more modern wall art paintings

Conclusion Starbucks use of pricing power keeps customers coming back for more! Technological innovations helped to generate more business Starbucks wins “coffee war” against Dunkin’ Donuts & McDonald’s

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