BPMM 2023

MARKETING MANAGEMENT
FIRST SEMESTER SESSION
2020/2021 (A201)
GROUP A

ASSIGNMENT: CH 16 PRICING

PREPARE FOR:
PROF. MADYA DR. MARIA BINTI ABDUL RAHMAN

PREPARE BY:
LEE LAP MAN 262688
Identify a firm and explain specifically ONE way (OTHER than the 4 ways in the
slides) on how that firm initiate price increase.

Although price increases are commonly recognised as the only way to retain consumers
during rough times, the strategy is rarely focused on a deeper examination or research of an
individual consumer base. In the case of Starbucks, price rises have now deterred the most
price conscious consumers throughout the history of the brand, leaving a loyal, higher-income
user base that perceives these coffee drinks as an inexpensive pleasure. Starbucks increases
prices to increase profits from these price-insensitive consumers who now rely on their strong
gourmet coffee in order to compensate for the customers losing to cheaper options like Dunkin
Donuts.

Starbucks uses price increases to differentiate itself from the pack to strengthen the luxury
value of their name and goods instead of attempting to compete with cheaper chains like
Dunkin. Since their loyal base is not overly price sensitive, Starbucks coffee has a reasonably
inelastic demand curve, even without reducing demand for drinks, a slight price rise may have
a significant positive effect on their margins. Moreover, with a price rise, only those countries
are targeted, and prices differ across the U.S. based on the existing markets in certain areas.