The instant coffee, called Via, Starbuck's newest entry into supermarket-style purchases, is sold at its lowest price point, compared with its higher-end coffee ice creams and bottled Frappucinos and espresso shots. Despite initial criticism Via has kept the Starbucks name alive on store shelves and in consumer's minds who are not currently going to cafes, because these former patrons and Starbucks loyalists have lost their jobs or because their investments have been decimated.The current policy of keeping the prices high for only some of more elite types of coffee and drinks secures another facet of Starbuck's complex image -- namely, that of a luxury brand, without pricing all consumers out of the market across the board. "Price as an attribute, while relatively unimportant in affecting overall customer satisfaction, is certainly important in affecting the generation of a differentiating customer experience. That does not mean that customers are satisfied with Starbucks price. It means only that the premium price is one of the key differentiators of Starbucks from other brands. Theoretically speaking, if Starbucks cut prices, assuming other elements remained constant, the store would be less differentiated from its competitors" (Lee 2007).
Starbucks must also keep up the appearance of quality at its stores. Like American Girl Store or Nike Town, Starbucks is an experience, and consumers are buying a kind of self-image as they drink at one: "Customers seeking the Starbucks experience know they can get an acceptable cup of coffee elsewhere," but would find it difficult to replicate the experience of smells and music, and the way their beverage seems to define who they are (Smith 2009). This is especially true abroad, where Starbucks conveys a certain kind of 'Americanness' and also where similar coffee venues are lacking. Even in Japan, where coffee is seldom consumed, people come to Starbucks for tea and food.
The slashing of high-end drinks is not simply about adjusting dollar values -- it is also about positioning. In some neighborhoods of New York City that have undergone a rapid decline in fortunes: "Starbucks is adjusting the menus that hang in stores. Expensive specialty drinks like Frappucinos used to be front and center, but new menus will highlight $2 brewed and iced coffees instead. It is teaching servers that the majority of drinks are under $3, so they can tell [this to] consumers who complain about pricing" (Miller 2009). Frappucinos have been the beverages hardest-hit in terms of sales during the recession (Adamy & Wingfield 2009). Yet this downscaling is not all-pervasive, and in some less price-sensitive areas of the country, the two-pronged Starbucks strategy of affordability and luxury is evident. In Seattle, which has been less hard-hit by the credit crisis than New York, Starbucks is going back to its roots, opening a new chain of elite Starbucks, a "series of more sophisticated-looking stores that emphasize traditional coffee drinks. & #8230;Starbucks opened a store in downtown Seattle featuring wood decor that is reminiscent of the company's first location, at Seattle's Pike Place Market. It is an environmental design that features recycled materials, including a large wood table that once was used at a local restaurant and inside a Seattle home" (Adamy & Wingfield 2009). However, prices are not even listed on the menu -- customers must ask, or they only discover the real price at the end of the transaction. This is to encourage buying based on taste, not price, as a customer may be embarrassed to ask or reject a purchase, after experiencing sticker-shock.
As consumers hold onto their wallets in many areas of the country, though, many are more concerned about food than drink, hence Starbucks recent retooling of its menu in newly price-sensitive New York. In many markets Starbucks has introduced its own formulation of the McDonald's Extra Value meal of combined drinks and breakfast sandwiches. Starbucks calls these "breakfast pairings," and allows customers to save $1.20 if they bought the items separately (Miller 2009). Starbucks is so highly sensitive to the '$3 latte' taint in light of the recession, the breakfast pairing menu was deliberately priced not just for financial reasons, but also marketing reasons. "The $3.95 price point is a backhanded way to go at the four-buck perception -- it's less than four bucks, and it's not just a drink, but food to go with it," said Terry Davenport, Starbucks's chief marketing officer" (Miller 2009). Keeping quality high is a must but a challenge: although some Starbucks customers may be sopped up by McDonald's new premium line of roasts, Starbucks must give added value in terms of quality as well as price, to justify...
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