What is your price tier (level) relative to your competition? Discuss your reasoning.


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Watch Video: It’s Not Just Starbucks; These Brands Can Name Their Price – Newsy (2:00)

You are a small business person who plans to open a premium coffee shop, much like Starbucks. Your value proposition is premium blend coffee from small farmers around the globe, a fun, informal environment for college students and others who might enjoy televisions, a funky atmosphere (paintings on the walls, workers wearing tee-shirts and shorts, cement floors, and used furniture for seating.

1. Considering your unique brand position, the market, competition, and your goal of achieving brand awareness and premium image, how would you arrive at prices for your coffee? How important are the 4 Cs (costs, competition, customers, company strategy) for this product?

2. Consider the pricing objectives and strategies (attached) – what are your objectives as a new shop and what is your pricing strategy (long-term)? Explain your rationale.

3. What is your price tier (level) relative to your competition? Discuss your reasoning.

4. Assume the following factors – the average variable cost for all coffee sold is 15%; fixed costs = $30 K/ month; How much coffee do you need to sell, at the prices you’ve set, to breakeven (i.e., cover all fixed costs) for a month?

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