Starbucks: Price and Place/ Distribution Plan

Starbucks has always adopted unique and effective pricing and distribution strategies. Currently, the company has adopted a premium pricing strategy. This has successfully attracted the middle and the upper class who have a disposable income needed by the frequency-dependent nature of coffeehouses. This pricing strategy has also been strengthened by the fact that the company offers quality products. This means that customers have been ready to pay more for what they think is a prestigious and quality product. Given that more and more cost-conscious customers are looking to save money on the coffee they purchase, Starbucks should consider revising its premium pricing strategy. Another element that Starbucks should consider improving is the distribution channel. A distribution channel is defined as the intermediaries through which goods and services pass until they reach the buyers (Dent, 2011). Currently, the company distributes its products through its stores, licensed stores, grocery, and national foodservice accounts. The plan that Starbucks could adopt include a plan on pricing, distribution, and positioning within channels.

Positioning Within Channels

Positioning within a channel refers to a marketing model that drafts what a firm should do to market its product or services to its customers. The strategy allows the company to create an image of the product, depending on the audience they intend to capture. This can either be achieved through price, place, promotion, or the product itself. Adopting a good positioning strategy allows the company to elevate its marketing effort and helps buyers move from beyond knowledge of the product to actual purchase. 

Starbucks could position itself through its stores. The coffeehouse needs to designs relevant stores that resonate with customers. The stores should not only offer a sit for customers to take their coffee or meal from but comfort. It should be the place anyone wants to spend their time. The stores should also reflect the local community who are expected to visit the stores. 

The company should be careful when adopting this strategy as designing hyper-localized, spacious, and comfort-centered stores can be expensive. The company cannot risk overspending on creating flagship stores in an entire market. The design of stores should balance with the projected income a store is going to earn.

Starbuck’s positioning by place could also mean designing drive-thru stores. However, drive-thrus can be characterized by poor communication that is limited to menu boards. When designing these stores, the company needs to identify each part of the drive-thru zones, such as entry, order, pre-order, pickup, and pay as well as exit zone. Moreover, understanding customer behavior in each zone and their needs can help improve their experience of Starbucks ‘ drive-thrus.

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Pricing

To increase its customers and accommodate those not captured by the premium pricing strategy, Starbucks should consider slightly reducing their prices. However, they should not lower their coffee outside the premium bracket. When McDonald introduced its lower-priced specialty coffee drinks ad Dunkin Donuts advertised their coffee as value-minded, Starbucks reacted by lowering its coffee products to one dollar in certain stores to counter its competitor’s stores sales (Gustavo, 2019). Critics of this reaction suggest that this might have done more harm than good. Consumers might have interpreted from the lowering of price, that Starbucks coffee is not as a quality-focused as they suggest it to be. Offering a cheap coffee product reduced the company to commodity status resulting in a price war. When faced with a price war in the future, Starbucks should lower its prices slightly to communicate that they cannot afford to offer their quality products at lower prices. Starbucks cannot afford to become a low price leader since this is likely to lower its brand image and ambiance they are known for. 

Starbucks can also rely on the market and competitive intelligence to define its pricing strategy. By examining the competitor’s current prices, market trends, and how consumers behave to those changes, Starbucks can react accordingly. Put differently; the company can utilize data in its pricing plan. 

Distribution

Starbucks should focus on intensive distribution. The company should partner with as many grocery stores and other outlets for their customers to access their products and services. The outlets should be spread out in high traffic and easily accessible locations. This ensures that consumers inconvenienced by Starbuck’s “class of appeal” can still access their packed coffee products. 

The company also uses a mobile payment business as part of its distribution channels. The enhancement of the mobile payment application will be important in boosting sales. Starbucks can improve on this distribution by employing artificial intelligence (AI). AI allows for the personalization of the customer’s buying from locating their choice, selection, and purchase. This strategy will be important in maximizing on the channels they have already established as well as exploiting other viable channels. 

Overall, Starbucks should adopt the three strategies on pricing, distribution, and posting within channels to cement and expand its market share. By avoiding lowering prices during price wars and relying on market and competitive intelligence, Starbucks can achieve optimum prices for all customer base while marinating premium pricing strategy. Moreover, involving AI and carefully designing its store will also have a positive impact.

References

Dent, J. (2011). Distribution Channels: Understanding and Managing Channels to Market. Kogan Page Publishers.

Gustavo, F. (2019). Latin American farmers face a coffee price crisis. Emerald Expert Briefings. https://doi.org/10.1108/oxan-db243870