starbucks price increase? nooo

Aloha,

I try to convince my friends that the reason to use twitter is learn about all this amazing insightful stuff on business, psychology, latest health studies by scientists, etc. Yes I follow Conan as well for comedy relief. I mean it’s what you want it to be – entertainment or learning, if you choose to follow the right people.

I came across a tweet by Ramit Sethi on Starbucks raising prices.  You can check out the article by clicking here.

There are some fancy words in the article, but this part right here caught my eye:

A key attribute of those practicing value based pricing is never explicitly saying that they are practicing value based pricing. There are always other reasons and you never say pricing at customer willingness to pay. A key part of practicing effective pricing is effective pricing communication and managing customer perception. Failing that you will face backlash as some brands recently did.

Its true, its all about elasticity of pricing and the lack of concern by Starbucks coffee drinkers.  They’ll pay whatever asked for their favorite cup of coffee.

These caffeine addicts almost want a reason by the company so that they themselves can justify paying more to themselves and there friends!

This won’t work with, say Bank of Montreal, because they don’t offer a premium service that consumers know them for.  Instead, they offer standard banking services, which gives consumers very low switching costs.  Starbucks is about the feel you get when you walk out of the store holding their brand in your hand.  Bank of Montreal is about getting the best ROI (a pretty poor one).

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