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Price Strategy for Starbucks

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I am writing about Starbucks and the new product that I proposed for the firm is Energy Bar. I'm asked to analyze and identify the appropriate price strategy for this product and I'm stuck. The minimum word counts should be at least 400 to 700.

Identify the appropriate price strategy that should be used for the product or service.

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Solution Summary

This solution discusses a price strategy concerning the product proposed for Starbucks. It also explains a number of pricing strategies and when they should be used to be most effective.

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1. I am writing about Starbucks and the new product that I proposed for the firm is Energy Bar. I'm asked to analyze and identify the appropriate price strategy for this product and I'm stuck. The minimum word counts should be at least 400 to 700. Identify the appropriate price strategy that should be used for the product or service.

Price planning considers factors such as a firm's overall marketing objectives, consumer demand, product attributes, competitors' pricing, and market and economic trends (http://www.businessdictionary.com/definition/pricing-strategy.html).

If Starbucks has decided to launch the product, there likely is at least a basic understanding of the costs involved; otherwise, there might be no profit to be made. The unit cost of the Energy bar sets the lower limit of what Starbucks can charge, and determines the profit margin at higher prices. The total unit cost of a producing a product is composed of the variable cost of producing each additional unit and fixed costs that are incurred regardless of the quantity produced. The pricing policy should consider both types of costs. There are four main pricing policies/strategies: premium pricing, penetration pricing, economy pricing, and price skimming (http://www.netmba.com/marketing/pricing/). The ceiling price is the highest price the market will bear; however, survey experts and customers determine pricing limits. The highest price in the market may not be the ceiling price (http://sbinformation.about.com/cs/bestpractices/a/aa112402a.htm).

The Energy Bar is a new product, and for new products, the pricing objective often is either to maximize profit margin or to maximize quantity (market share). To meet these objectives, skim pricing and penetration pricing strategies often are employed. For example, Joel Dean discussed these pricing policies in his classic HBR article entitled, Pricing Policies for New Products.

1. Skim pricing ...

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