Rather than trying to compete with cheaper chains,
Starbucks uses price hikes to separate itself from the pack and reinforce the premium image of
their brand and
products. Since their loyal following isn’t especially price sensitive,
Starbucks coffee maintains a fairly inelastic demand curve, and a small price increase can have a huge
positive impact on their margins without decreasing demand for beverages.
This approach is known as price skimming. In India, the Java Chip
Frappuccino is offered in three glass sizes- Tall, Grande and Venti, priced at
Rs. 140, Rs. 160 and Rs. 180 respectively.
