printing business-AME

Glad I had the weekend for this topic! The company I chose for my project was Starbucks, specifically in regards to their Verismo product. This presented a challenge in regards to interviewing my current company. That said, I decided to base this discussion question off of our small business and discuss these pricing strategies with my husband aka the owner of Compass Rose Printing, a small mom and pop custom t-shirt business specializing in silk screening as well as custom vinyl heat transfer shirts. The target audience for this business varies from military and community groups to individuals and families seeking custom made shirts. I felt this was a great way to look at various aspects that we don’t typically think about in the day to day running of this business.

In addition, I am also attempting to answer these questions in regards to Starbucks as well via research so that I can utilize this information for my project.

1. What is the company’s pricing objective?

Compass Rose Printing. Dylan: “I would say we primarily fall somewhere between the survival pricing strategy category and the maximum current profit pricing strategy as this is a small business and we do not have a large or steady customer base. Custom orders are placed sporadically, and therefore prices are set to ensure costs are covered as well as competing with other custom shirt companies.”

Survival: if they are plagued with overcapacity, intense competition, or changing consumer wants. As long as prices cover variable costs and some fixed costs, the company stays in business (Kotler & Keller, 2016, pg. 468).

Maximum current profit: They estimate the demand and costs associated with alternative prices and choose the price that produces maximum current profit, cash flow, or rate of return on investment (Kotler & Keller, 2016, pg. 468).

Starbucks definitely utilizes the Product-quality leadership pricing strategy. They have positioned themselves as quality leaders in their categories, combining quality, luxury, and premium prices with an intensely loyal customer base. Starbucks drinks are an “affordable luxury” and the reason they are able to charge $5 for coffee based drinks as opposed to many other coffee brands. They fit this strategy to a T.

Product-quality leadership: Many brands strive to be “affordable luxuries”—products or services characterized by high levels of perceived quality, taste, and status with a price just high enough not to be out of consumers’ reach (Kotler & Keller, 2016, pg. 469).

2. How sensitive are the company’s target customers to changes in price?

Compass Rose Printing. Dylan: “ If choosing between those categories, I would say our customers would be considered to have moderately to low sensitivity to price changes. They typically have in mind a price range they would like to stay within in regards to what a custom shirt order should cost and for that reason, we typically research what our major competitors are charging and try to stay relatively close to that. Our customer are aware we are a small mom and pop business and therefore are willing to pay slightly more than what a large company would charge.”

Starbucks target customers would be considered to have a low sensitivity to price change. People love their coffee and the perceived status that comes along with drinking Starbucks. This has allowed the prices to increase and even allow for some Starbucks locations to charge upwards of $8-$10 for a specialty coffee drink in some areas which seems insane, but yet there are still people lining up at those locations for their cup of premium joe.

3. Do they have some target segments that are less price sensitive than others?

I’m not sure I completely understand what this question is answering so it was hard to address with the interviewee.

Compass Rose Printing. Dylan: “I believe this is asking if we have some target customers that are less price sensitive than others. If that is the case, I would say yes. Most of our military customers are less price sensitive than others. We are a veteran owned business so they want to support us over the big names and as a result will pay more for our services.”

Starbucks has such a loyal customer base that their target customers are not considered to be price sensitive. Other customers who just “drop in” and are not loyal would be more price sensitive.

4. How much consideration does the company give to competitors’ prices when setting their own?

Compass Rose Printing. Dylan: “We definitely base our prices off of the major competitors. We don’t have much experience with pricing therefore, say we are doing a large order of 100 shirts. Our base price is typically $10 per custom shirt and then increases from there, but if we are doing a large order like that we aren’t going to charge the customer $1000 for that order so we utilize a large online company and see what they would charge for the order and then base our price slightly above that. This way if the customer decides to research the price (especially in this day and age with technology), we are not far off price wise from the major names.”