Essay Instructions: Assignment: Consists of two tasks (1) an examination of the pricing aspects of Starbucks products and (2) the completion and submission of a Starbucks marketing audit.
(1) Review the pricing strategies described in the provided readings. Given the company's positioning and targeting strategy for their product, which of the pricing strategies described in the readings, makes the most sense? Why? (Be sure to reference the materials.).
(2) Discuss the role of discounts in this company's strategy. What would you advise the company that owns the product in terms of discounts and specials?
(3) Explain the Pricing Strengths and/or Weaknesses of your Product and Promotional Opportunities and/or Threats to the financial future of the product.
Analysis
Pricing
1. Overall strategy
2. Role of discounting
Main points:
5. Major Strengths of the Product/Brand's Pricing
6. Major Weaknesses of the Product/Brand's Pricing
7. Major Opportunities faced by the Product/Brand's Pricing
8. Major Threats faced by the Product/Brand's Pricing
As indicated above, the goal is a summary analysis and its translation into a short list of key success factors and concluding commentary.
Required reading:
Baird. Nikki, & Rosenblum, Paula (2011). Optimizing price in a transparent world. Miami, FL: Retail Systems Research (April).
Accessed 5/5/12 at
http://www.stores.org/sites/default/files/whitepaper/RSR_Optimizing_Price_in_a_Transparent_World.pdf
Bertini, Marco & Luc Wathieu (2010), How to stop customers from fixating on price. Harvard Business Review, 88:5(May):84-91. Available 5/5/12 through EBSCO database.
Burnsed, Brian (2009). In luxury sector, discounting can Be dangerous . Business Week, (July 23). Available 5/5/12 through EBSCO database.
Amid the diamond earrings and crystal picture frames that sit in a Tiffany display, one thing never appears: signs hawking discounts. That doesn't mean there are no bargains. Tiffany is trying to keep its iconic baby-blue box from losing its luster. For CEO Michael Kowalski, that means holding firm on the overall pricing strategy. It's about maintaining the long-term value of the enterprise, he says. If we were to abandon that, the consequences would be significant. The dilemma that Tiffany and other purveyors of luxury goods face is how to use price cuts to woo customers without tarnishing their brands.
Catan, Thomas, & Trachtenberg, Jeffrey A. (2012). US warns Apple, publishers. Wall Street Journal, 259:55(March 9):A1. Available 5/5/12 throughProQuest database.
The Justice Department believes that Apple and the publishers acted in concert to raise prices across the industry, and is prepared to sue them for violating federal antitrust laws, the people familiar with the matter said. William Lynch, chief executive of Barnes & Noble, gave a deposition to the Justice Department in which he testified that abandoning the agency pricing model would effectively result in a single player gaining even more market share than it has today, according to people familiar with the testimony
Christ, Paul (n.d.). Factors affecting pricing decisions. Know This. Accessed 5/5/12 at http://www.knowthis.com/principles-of-marketing-tutorials/pricing-decisions/factors-affecting-pricing-decision/
Cochran, Craig (2006). Building a balanced scorecard. Quality Digest. Accessed 5/5/12 at http://www.qualitydigest.com/sept05/articles/05_article.shtml
Florissen, Andreas; Maurer, Boris; Schmidt, Bernhard; & and Vahlenkamp, Thomas (2001). The race to the bottom. McKinsey Quarterly. Accessed 5/5/12 at http://www.mckinseyquarterly.com/Energy_Resources_Materials/Electric_Power/The_race_to_the_bottom_1078Requires
When established companies launch a price war, they generally believe that prices will eventually rise again. But psychologically and practically, price increases can be much trickier than price cuts. Throw a stubborn attacker into the mix, and incumbents can find themselves trapped in unsustainable price structures. This article from 2001 shows companies how to analyze the four main factors in pricing decisions: competitors? prices, switching rates, the value of customers, and costs to serve. These factors may seem obvious, but the authors? time-tested ideas about them are not.
Fontenot, R.J. (2007). Marketing arithmetic. Accessed 5/6/12 at
http://hercules.gcsu.edu/~rfonteno/Strategic/Marketing%20Arithmetic.pdf
Henricks, Mark (2010). Price-Cutting Peril: Do You Know What You?re Doing ? Really? CBSMoneyWatch (November 19). Accessed 5/5/12 at http://www.bnet.com/blog/business-myths/price-cutting-peril-do-you-know-what-you-8217re-doing-8212-really/477?promo=857&tag=nl.e857
Do you think that lowering prices will drive more customers to your business? Do this exercise on paper first to make sure you really know what you're doing. How many daily washes at $11.00 for each wash will you need to earn the dollar profit you are earning when you charge $12.50 for each wash?
Hess, Michael (2011). 5 Ways a Business Plan Can Come Back to Bite You. CBS MoneyWatch (December 8). Accessed 5/5/12 at
http://www.cbsnews.com/8301-505143_162-57338800/5-ways-a-business-plan-can-come-back-to-bite-you/?tag=nl.e857
Hill, Dan (2010). Seven reasons why leading with price will kill your advertising. Accessed 5/5/12 at
http://www.argylemarketing.com/blog/why-leading-with-price-will-kill-your-advertising-and-your-brand/
Hirsch, Jerry (2011). Honda in fight with TrueCar /javascript"> over prices displayed online. Los Angeles Times (December 15).
Available 5/5/12 through ProQuest database.
How to conduct a marketing audit(n.d.). MarketingTeacher.com. Accessed 5/6/12 at
http://marketingteacher.com/lesson-store/lesson-marketing-audit.html
Introduction to financial statements for marketing (n.d.). MarketingTeacher.com. Accessed 5/6/12 at
http://marketingteacher.com/lesson-store/lesson-marketing-and-finance.html
Martin, Andrew (2011). TV prices fall, squeezing most makers and sellers. New York Times (December 26). Available 5/5/12 through ProQuest database.
Mattioli, Dana (2012). Nordstrom lowers price of rewards. The Wall Street Journal (January 10). Available 5/5/12 through ProQuest database.
Nordstrom aims to add value to loyalty rewards Nordstrom has lowered the spending limits required for the 2.6 million members of its Fashion Rewards program to earn loyalty points to attract more aspirational shoppers. The program's perks range from $100 worth of free alterations to custom shopping parties and fashion-show tickets, and the retail er will also add new rewards at its Nordstrom Rack outlet stores.
Perner, Lars (n.d.). Pricing. Consumer Psychologist. Marshall School. USC.
Accessed 5/5/12 at
http://www.consumerpsychologist.com/intro_Pricing.html
Pricing decisions (n.d.). KnowThis.
Accessed 5/5/12 at
http://www.knowthis.com/principles-of-marketing-tutorials/pricing-decisions/
Pricing strategies (n.d.). Marketing Teacher.
Accessed 5/5/12 at
http://marketingteacher.com/lesson-store/lesson-pricing.html
Rafi, Mohammed (2011). Ditch the discounts. Harvard Business Review; 89:1/2(January/February):23-5. Available 5/5/12 through EBSCO database.
Ramsey, Mike (2012). Glut of small cars tests Ford resolve. Wall Street Journal (January 11): B1. Available 5/5/12 through ProQuest database.
Reardon, Skip (2011). Balanced scorecards and useful SWOT worksheets. Six Disciplines (February 9). Accessed 5/5/12 at
http://www.sixdisciplines.com/BlogRetrieve.aspx?BlogID=5880&PostID=107633
Talley, Karen (2011). Lower Cotton Prices Should Spin Higher Margins For Retailers Next Year. Capital.gr (December 15). Accessed 5/5/12 at http://english.capital.gr/news.asp?id=1357146
Retailers may see relief in their profit margins next year if cotton prices drop as much as merchants expect them to. Prices for the fiber rose to record highs this year, putting pressure on apparel merchants including American Eagle Outfitters and Old Navy, which found it more difficult to pass along higher prices at a time when customers were hunting bargains.
