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Starbucks raises prices. Will it work?

August 24, 2009

Starbucks has tried everything: closing stores, new menu items and even combo meals. But, they’re still losing customers.

So the coffee giant is trying a new tactic to raise its sales. Raising prices.

Last Thursday, select markets took price hikes on more complex drinks like Frappucino (raising them around 15 cents on average). Although the retailer will cut the price of its brewed coffee and lattes, the majority of drink prices on the menu will still be higher. The price increase goes nationwide later this year.

I know most people’s first reaction is “WHAT ARE THEY THINKING?” It’s a recession. Who is going to spend more for coffee? The answer is: Probably the majority of their customers.

From a brand perspective, it actually makes sense. This is something that a premium brand can and should do. Starbucks is never going to out-deal McDonalds. Why even try. And, with sales dropping just 5%, it seems obvious that “McCafe” hasn’t stolen as many customers as the commercials would like you to believe.

And, to off-set this, giving consumers a price break on brewed coffee (for the first time in the company’s history) is a nice bonus.

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