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ANALYZING ELASTICITY OF DEMAND: STARBUCKS COFFEE

ANALYZING ELASTICITY OF DEMAND: STARBUCKS COFFEE

Starbucks is an American corporation that provides prepared coffee in many forms, most of which involve espresso. The company's products, however, are more than just coffee. Starbucks is a cultural icon that purports to sell coffee primarily, but some observers believe that coffee is simply a stalking horse and that following the stalking horse is the marketing of a cultural phenomenon (Jung, 2002). Jung (2002) contends that the company is marketing the "Starbucks experience" (p. 1). The "Starbucks experience" is a surrogate living room where customers the company attempts to instill what Starbucks executives refer to as a "club mentality" (Jung, 2002, p. 1). Starbucks executives say that customers want the company to "surprise and delight them" in this club atmosphere (Jung, 2002, p. 1). Cynics contend that Starbucks uses the Starbucks experience to persuade customers to pay $3 for a 50 cent cup of coffee.

Prices for the prepared coffee-based products sold at Starbucks retail stores are high in relation to a cup of coffee prepared at home, in the office, or in many other prepared coffee retail outlets. Further, Starbucks announced plans in late-September 2004 to raise prices in its retail outlets by an average of 11 cents per cup ("Starbucks to Raise Prices by 11 Cents A Cup", 2004). The company obviously does not expect the price increase to have an adverse impact on the sales of its products. Starbucks tends to view the price elasticity of the demand for its products as elastic, but a low level of elasticity. If the company's products were inelastic, it would place the products within the context of a necessity รน a good that people will find a way to obtain regardless of price because they (literally) cannot live without the product.

Starbucks coffees are not in the necessity category. The selling of Starbucks prepared coffee products as a lifestyle product, how...

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ANALYZING ELASTICITY OF DEMAND: STARBUCKS COFFEE. (1969, December 31). In LotsofEssays.com. Retrieved 09:12, March 28, 2024, from https://www.lotsofessays.com/viewpaper/1706198.html