Starbucks Corporation (NASDAQ:SBUX)’s Latest Move To Increase Price Will Have No Impact On Sales, Says Analysts


Starbucks Corporation (NASDAQ:SBUX) is unlikely to suffer a dip in sales just because it has hiked the price of a coffee cup by some cents. The reason is that Starbucks enjoys strong brand loyalty and the convenience of buying from the store means that customers aren’t going to dwell so much on prices going up by $0.05 to $0.20.

According to Kenneth Leung of Avaya, the reason people queue at Starbucks is that they just love the brand and they also enjoy the flavors that Starbucks stores offer. The other issue is that caffeine addition gets them coming back for more at Starbucks.

What is interesting is that Starbucks is raising prices at a time when its rivals are lowering prices to entice customers into their stores.

Starbucks offers experience

Commenting on price hikes by Starbucks, Steve Montgomery, of B2B Solutions, noted that raising prices won’t adversely impact customer traffic to Starbucks. Montgomery backs his argument by citing that Starbucks doesn’t actually sell coffee, but an experience. He thinks of the company offers more in terms of value to its customers, which is why they keep coming back.

Buying at Starbucks Corporation (NASDAQ:SBUX) is associated with aura and halo image, which have essentially set the store apart from competition in the coffee market.

Starbucks are ready to spend more for value and experience

Given how Starbucks has differentiated itself, those customers feeling they want to save some money on coffee know where to go. But for the vast majority of Starbucks community, price hike is something that they won’t even realize or bother them. These customers have trusted the value they get from the company and that also means they are willing to pay the price to stick with the value they get.

Starbucks should know when to stop

While price hike is unlikely to shake up Starbucks Corporation (NASDAQ:SBUX) sales, there is a fair chance that the company might be tempted to make another hike. However, that is when things are likely to get complicated for the company.

Neha Gupta

Neha Gupta has been in the financial space for over six years now. Gupta earned her MBA degree from Symbiosis Centre of Distance Learning in 2009 and her passion for finance led her to pursue Chartered Financial Analyst (CFA) course. She has successfully completed Level II of her CFA. She is a veteran in article writing, which is depicted in her numerous pieces published on SeekingAlpha, Nextiphonenews, InsiderMonkey, MarketWatch, and Techinsider. Her crisp and eloquent writing finds its best place in Researchcows, where emphasis is given on developing rich content for various websites, products, business plans, trainings, and book writing.

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