In YanJie’s blog, found here https://blogs.ubc.ca/hyj1216/, Starbucks low prices are discussed.
I agree with YanJie in that Starbucks had no intention of degrading the brand by lowering their prices. Therefore they still charged a premium on their coffee, looking at the long run picture of their company.
However I disagree with the fact that starbucks is ‘differentiated’. Starbucks is slowly losing its competitive advantage. For example, baristas such as Blenz Coffee and Waves Coffee offer hand made lattes, not done with a press of a button like Starbucks. Blenz Coffe makes their hot chocolates from authentic belgium chocolate, whereas Starbucks still uses powder and milk.
I also disagree that Starbucks should be viewed as a cash cow. I believe they are almost at the mature stage of the product life cycle, and if they do not continue to innovate, improve, and deliver a more barista like experience, such as Waves Coffee or Blenz, their market share will begin to shrink.
One thing that Starbucks is ahead of than its competitors is their global expertise. They have expanded to many different countries, and they choose not to franchise. This helps reinforces standards, and assures alignment of products, services and promotions all across the globe.
Starbucks recently implemented a ‘rewards’ card, which enables customers to collect points. This is an example of lowering the price of their coffee. For ever 10 coffees you buy, you can receive 1 for free. As Starbucks is facing rivalry that it has never encountered before, it has to think of new ways to deliver their brand experience of ‘sharing great coffees with friends’, while justifying their high prices.